Canada Markets closed
  • S&P/TSX

    +197.64 (+0.96%)
  • S&P 500

    +105.34 (+2.43%)
  • DOW

    +564.69 (+1.65%)

    -0.0019 (-0.2428%)

    +0.68 (+0.79%)

    +1,408.07 (+2.99%)
  • CMC Crypto 200

    +21.37 (+2.54%)

    -2.70 (-0.15%)
  • RUSSELL 2000

    +37.22 (+1.93%)
  • 10-Yr Bond

    -0.0250 (-1.38%)

    +417.79 (+3.13%)

    -2.83 (-9.28%)
  • FTSE

    -88.24 (-1.17%)
  • NIKKEI 225

    +547.04 (+2.09%)

    -0.0020 (-0.28%)
  • Oops!
    Something went wrong.
    Please try again later.

Air Canada executives return bonuses after 'public disappointment'

·3 min read
In this article:
  • Oops!
    Something went wrong.
    Please try again later.

Air Canada says its top executives will return the bonuses they received through the COVID-19 pandemic following "public disappointment" over the pay plan. 

The Montreal-based airline had previously approved a "COVID-19 Pandemic Mitigation Bonus" for its management team, awarding $10 million "to those individuals who were instrumental in the survival of the company during the COVID-19 pandemic." The compensation plan, which was outlined in its 2020 proxy circular, also provided executives with share appreciation units (SAUs).

Despite saying the compensation scheme was "consistent with outcomes at companies that also suffered significantly during the pandemic," the airline has decided to scrap the plan. 

"Unfortunately, there is now public disappointment around the actions relating to these 2020 executive compensation outcomes," the airline said in a statement released Sunday. 

"As an acknowledgement of this, and in order to help address this unintended consequence, the current executive vice-presidents and the president and CEO of Air Canada have chosen to voluntarily return their 2020 bonuses and share appreciation units." 

Air Canada also noted that the $10 million bonus program was distributed to more than 900 employees, with more than $8 million of the total awarded to "middle management." 

When the COVID-19 pandemic hit, Air Canada's then-CEO Calin Rovinescu and then-chief financial officer Michael Rousseau each agreed to forgo their salaries between April 2020 and June 2020, representing a reduction of $490,000 and $245,000, respectively. Other executives agreed to a 50 per cent salary reduction during that same period. 

The new bonus plan was introduced in part to "address the impact of the COVID-19 pandemic on performance-based long-term incentives. The company said in its proxy circular that it chose to approve the bonus plan "considering management's exceptional performance during this unprecedented period." 

Rovinescu, who retired in February, said on Sunday that he will donate the value of his 2020 bonus and SAUs to the Air Canada Foundation, citing "considerable confusion, misinformation and public disappointment regarding these compensation plans." 

"I know the funds will be put to good and appropriate use during these difficult times,” Rovinescu said in a separate statement.

Air Canada found itself at the centre of public backlash over the bonus plan, which was doled out as the company negotiated a $5.9 billion financial aid package from the federal government. The airline industry has been devastated by the COVID-19 pandemic, prompting Air Canada to cut capacity, suspend routes and lay off thousands of employees. 

Last week, Finance Minister Chrystia Freeland signalled her disappointment over the multi-million dollar packages, calling the bonuses "inappropriate." 

Under the terms of the financial aid package from Ottawa, Air Canada agreed to restrict dividends, share buybacks and executive compensation. Senior executive total compensation at the airline is capped at $1 million for each as long as Air Canada is using the loan facilities. 

Freeland and Transport Minister Omar Alghabra said Canadians "are right to expect responsible corporate behaviour — particularly with respect to executive compensation — from companies receiving government financial support during the pandemic."

"While this situation could have been entirely avoided by Air Canada, we acknowledge this step in the right direction by the top five executives to repay 2020 bonuses and share appreciation units they received," they said in a joint statement Sunday night.

With files from the Canadian Press

Alicja Siekierska is a senior reporter at Yahoo Finance Canada. Follow her on Twitter @alicjawithaj.

Download the Yahoo Finance app, available for Apple and Android.

Our goal is to create a safe and engaging place for users to connect over interests and passions. In order to improve our community experience, we are temporarily suspending article commenting