Air Canada, restricted by government, cuts executive compensation

Air Canada AC-T held its top executives to $1-million in compensation apiece last year to abide by the terms of a deal with the government – but it plans to return to its normal compensation programs this year.

The airline created a firestorm of controversy in May of last year when it revealed it paid top managers $10-million in “COVID-19 pandemic mitigation bonuses” for 2020 as it negotiated a multibillion-dollar bailout with the federal government. The $5.9-billion COVID-19 rescue plan for the airline, announced in April, 2021, included limits on executive compensation in the future, but didn’t require rollbacks of past pay.

The bonuses drew widespread public criticism, including choice comments from Prime Minister Justin Trudeau and Finance Minister Chrystia Freeland, and a formal denunciation from the House of Commons. Chastened, the very top of the Air Canada executive team gave back $2-million in bonuses and some of their stock awards.

In new compensation disclosure released on Friday, Air Canada said chief executive officer Michael Rousseau and four other top executives made $1-million in salary and stock awards for 2021, with zero bonuses. The salaries ranged from $462,000 to $525,000, with Mr. Rousseau making $500,000. The value of stock awards made up the difference.

Canadian public companies are generally required to disclose compensation for the CEO and four others, so pay for other top executives is not revealed.

Air Canada estimated Mr. Rousseau’s total compensation for 2021 at $3.72-million, including an estimate of $2.72-million of the increased cost to fund his pension, which was not covered by the government restrictions. Companies must estimate the change in executives’ ultimate pension value each year, and because the airline promoted Mr. Rousseau to CEO in 2021, it began to put CEO-level pay into the formula. There were no enhancements to executives’ pension formulas in 2021, Air Canada said.

Air Canada was able to exit the financial support agreement in November, so the airline says it is returning to normal compensation in 2022.

Mr. Rousseau was slated to earn $1.15-million in salary in 2021. In 2022, he will have a bonus opportunity with a target of $1.43-million, with the chance of an even higher payout if Air Canada exceeds its financial metrics. He is also in line for stock awards; in 2021, they were to be worth five times his annual salary, or more than $5.5-million.

Air Canada plans to use pre-tax income, a measure of indebtedness, and a cost-per-available-seat-mile as the financial metrics for the annual cash bonus, it said.

Your time is valuable. Have the Top Business Headlines newsletter conveniently delivered to your inbox in the morning or evening. Sign up today.