Despite receiving $5.9 billion in emergency government aid to help alleviate pandemic-related financial hardships, it appears that Air Canada’s top executives still received their 2020 bonuses. However, it was only after Ottawa signalled its annoyance with the situation did the executives agree to return their generous compensation.
The Covid-19 pandemic brought domestic and international air travel to a standstill, decimating Canada’s airline companies. Air Canada was among the worst affected, and was forced to furlough thousands of employees, cut vital routes, and even refrain from reimbursing passengers for cancelled flights. After a series of discussions with Ottawa, the federal government finally agreed to step in and provide a financial lifeline to the struggling company.
Back in April 2021, the federal government agreed to provide a loan package worth $5.9 billion, including funds for passenger ticket refunds. The government also purchased a 6% stake worth $500 million in the airline, as a means of recouping taxpayers once revenues rise and travel demand resumes. In exchange for the deal, Air Canada’s compensation for its top executives was to be capped at $1 million for the twelve months until the loan is repaid in full.
However, despite losing billions of dollars worth of revenue and cutting thousands of jobs, it appears that Air Canada’s top executives and managers still received Covid-19 pandemic-related bonuses— for all of their hard work, of course! Indeed, last week it was revealed that the airline paid out a combined $10 million worth of bonuses in 2020, which came with special stock rewards aimed at compensating those senior executives and middle managers who previously underwent salary cuts in response to the financial devastation caused by the pandemic crisis.
The airline hastily justified the bonuses and stock rewards by saying its executive team “reacted urgently, decisively and skillfully to mitigate the impact of the COVID-19 pandemic on the company”— or, in layman’s terms, furloughing more than 20,000 employees and cancelling hundreds of routes. The Canadian airline also received $656 million via the Canada Emergency Wage Subsidy (CEWS) program to help keep what was left of its workforce on the payroll.
Air Canada’s operating revenue dropped 70% from $19.1 billion in 2019 to $5.8 billion by the end of last year. At the same time, the airline’s shares plummeted by more than 50%. “We believe we must retain and motivate our senior leaders to help Air Canada recover as quickly as possible,” explained the airline, adding that the bonuses would help reach that goal.
With respect to “management’s exceptional performance” in reaching the company’s goals throughout the pandemic, Air Canada’s board approved a whooping $20 million compensation package for its top management and executives. However, only $10 million was actually paid out, including $723,000 to former president and CEO Calin Rovinescu, and a combined $1.116 million to the other four executives.
The bonuses, which were outlined in Air Canada’s proxy circular to shareholders, were met with public ire and annoyance from the country’s federal government. On Wednesday, Finance Minister Chrystia Freeland expressed her disapproval over the multi-million dollar handout, calling the bonuses “inappropriate.”
Now, it appears that the public backlash may have hit a nerve, prompting Air Canada’s senior execs to return the bonuses. In a statement published Sunday, the company said that its current and former CEO and president, as well as its vice-presidents have all voluntarily agreed to return their compensation and share appreciation units. “Unfortunately, there is now public disappointment around the actions relating to these 2020 executive compensation outcomes,” the news release said.
Information for this briefing was found via Air Canada. Thee author has no securities or affiliations related to this organization. Not a recommendation to buy or sell. Always do additional research and consult a professional before purchasing a security. The author holds no licenses.