Senate recommends government stop charging airport rent

Discussion in 'Air Canada | Aeroplan' started by canucklehead, Jun 5, 2012.  |  Print Topic

  1. canucklehead
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    canucklehead Gold Member

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    A Senate committee is urging Ottawa to phase out rent charged to large Canadian airports to make them more competitive with U.S. border terminals that have been luring passengers from north of the border.

    read more here....
     
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  2. mevlannen
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    mevlannen Silver Member

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    Being the hopeful cynic that I am, can I really believe that any significant portion of such hoped-for savings would in fact be passed along to us, the end-users, or would the airlines simply capture the savings for themselves?
     
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  3. canucklehead
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    canucklehead Gold Member

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    I think if the airlines charged more it would defeat their argument that they are being losing traffic because of all the extra fees and taxes they have to levy that the US does not, but then again, who says logic is part of the argument! ;)
     
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  4. mevlannen
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    Perhaps the whole object of that argument was to cry 'poverty' for long enough that the airport rents would be reduced if not altogether foresworn?

    My kids followed a similar tactic when they were each two years old, but that didn't work for them, then, either.
     
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  5. tomh009
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    tomh009 Gold Member

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    If the airlines kept the savings to themselves ... at least they'd stay in business a little longer!

    Personally I think air travel should cost 10% or 20% more, give us healthy airlines and get rid of these rules contortions we deal with today.
     
  6. global_happy_traveller
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    global_happy_traveller Silver Member

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    Or they honor bigger bonuses to their execs. Seriously 15-45% in executive bonuses while the company isn't even profitable.
     
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  7. The Lev
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    The Lev Silver Member

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    Nah, the airports themselves would just spend the savings on more terminal and runway expansions to keep their sponsors - the construction companies and local politicians happy.
     
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  8. Depends on how you define profit. AC last year increased their cash flow, in other words cash in the bank, by approximately $500MM to $2.5BB. Income statement losses and cash flow are different animals. Losses may stem from high depreciation and other non cash items but the Company still has more free cash at year end.
     
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  9. tomh009
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    tomh009 Gold Member

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    A very good point. But I personally think AC is still uncomfortably close to the precipice -- as are many other airlines.
     
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  10. global_happy_traveller
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    global_happy_traveller Silver Member

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    Regardless, don't cry poor to airports and employees when you give yourselves bonuses
     
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  11. AC's precipice is the albatross of pension support. The rest of their business is ok and runs pretty well in the black.
     
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  12. QSG
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    QSG Gold Member

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    Last time I checked pensions were a part of doing business, of course all the baby-boomer's want to keep theirs while screwing the younger generations out of theirs.....:p
     
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  13. Typical socialist garbage.........I have saved for my own pension because I'm not a unionized leper:rolleyes: .
     
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  14. QSG
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    QSG Gold Member

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    So why stop at taking away those who have yet to receive theirs (but have paid in ) and why not include all those who are receiving and are retired?
     
  15. Well that's a no brainer. Those who are retired cannot be clawed back just on basic logic. They fulfilled their requirements but those still can be adjusted because they have flexibilty
     
  16. tomh009
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    tomh009 Gold Member

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    You and I have built retirement plans around RRSPs and RPPs etc, but people with defined-benefit plans are counting on those plans to fund their retirements -- if you and I had such plans, we likely would have, too. And if you are 50+, starting retirement savings from scratch (if the defined-benefit plan disappears) is a pretty tall order.

    I do agree that defined-benefit plans are folly in this day and age, but people who have participated in such plans as part of their total compensation, for much of their working lives, have had legal contractual agreements entitling them to those plans, and have planned for their retirements in good faith. Why should we be able to retroactively take away their retirement savings?

    I may be old-fashioned but I still believe that once you have signed a contract it should be a contract even if you figure out later that you made a big mistake. And that's why I don't agree with the canceling of pension obligations -- or with Chapter11 in general.
     
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  17. YULtide

    YULtide Gold Member

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    There is a cost to having a DB plan, and that is that one's RRSP contribution limit is curtailed. I actually have several thousand dollars of negative RRSP room.

    In the short term, and perhaps for the foreseeable future, DB plans are having difficult, but if they are well-managed with sensible assumptions and a focus on the long term, they can still work. The trouble is that too many have been poorly managed in the last decade or more.
     
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  18. global_happy_traveller
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    If I read this correctly, DB's downfall is due to a combination of fiscal mismanagement of the pension (by financial decision makers) and bad market timing (ie. the recessionary challenges we are facing right now?)
     
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  19. YULtide

    YULtide Gold Member

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    In a nutshell, yes.

    Pensions are very complex. One factor is the assumed return on investment. In the tech bubble, when returns were insane, some pension plans operated on the assumption of double-digit returns forever. So, if you assume that your plan will return, say, 14% year in and year out, then you can assume that contributions to the plan can be suspended. It's what was called a "contribution holiday". And it means that the cost of employment is reduced, which means higher productivity and higher profits and higher CEO bonuses. Which only feeds the bubble. And when the bubble bursts, it means that the 14% return is no longer possible. Which means the pension contributions have to rise.... (a reasonable assumption is more like 6% long term.)

    Another factor is the investment returns. Which suck these days.

    And a third factor is interest rates. There is a test of pension plan solvency that is required to be done every three years (I speak here of Canadian law), which depends ultimately on interest rates. With low interest rates, the cost of solvency is high. Basically the question is "based on current interest rates, how much money would be required to pay current pension obligations?" Not enough money in the pot? Then the pension plan is insolvent. Which means higher pension contributions to make up the difference.

    There are many other factors.

    Bottom line: either higher investment returns or higher interest rates would help. Both would be brilliant. But the root of the problem, and not just for Air Canada, began with ridiculous assumptions of returns during the tech bubble. Companies got greedy and now the chickens are home to roost.
     
  20. The Lev
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    The Lev Silver Member

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    In a nutshell, the low interest environment over the last few years has completely gutted the pension system and done collateral damage to the insurance industry. Take a look at the stock returns of investing in say Manulife or Sun Life versus the big five banks to get some idea.
     
  21. The Lev
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    The Lev Silver Member

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    When DB plans are wound down, the beneficiaries (i.e. current and future retirees) receive a lump sum payment that can be rolled into a RRSP/RRIF. It's not like they start from zero.
     
  22. The amount of ignorance surrounding pension plans is almost beyond belief. I've spoken with DB plan employees from differetn industries and it astonished me how little thye knew about convertability and other issues thye should be aware of.
     
  23. YULtide

    YULtide Gold Member

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    Which is yet another argument against DC plans. DC plans require some knowledge and active involvement in investment decisions, but the vast majority of people simply don't have the skill set / understanding / interest in involving themselves.

    DC plans are even more of a ticking time bomb than DB.
     
  24. global_happy_traveller
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    global_happy_traveller Silver Member

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    Or you can end up like me putting all my savings in a tin cookie box that is dug n hidden somewhere
     
  25. So, what you are suggesting is that the taxpayer be on the hook for any defaults deficits of DB plans. That is the ultimate result of failed DB plans. DC plans can easily be managed by investment advisors that the Company would engage on a non recourse basis. As some Companies do now, they match the employee's contribution and hand off the funds to an advisor which ends their responsibility to the employee.
     

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