After several days of intense public backlash, top Air Canada executives have returned bonuses they received in 2020. The airline released a statement saying the decision to return the money was voluntary. Approximately 900 Air Canada employees have kept their end-of-year bonuses and stock options.
Air Canada has been at the center of controversy surrounding its 2020 bonus program. 2020 was an unprecedentedly challenging year, with many airlines having to make cuts and lay off staff, including Air Canada. However, on May 31st, Air Canada announced it would give CA$10 million ($8.29 million) in bonuses and stock options.
The airline revealed that around half of this had been paid out to employees at the end of 2020. However, the public was quick to point out that while some employees were receiving a bonus, others within the company were losing their jobs. After days of public outcry and the Canadian Government condemning the action, key figures in the airline are handing back the money.
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Who gets to keep the money, and who doesn’t?
In a statement, Air Canada confirmed that the current executive vice presidents, and president and CEO Michael Rousseau, would all return their bonuses. In addition, former CEO Calin Rovinescu, who retired in February 2021, will also return his portion of the bonus program. Mr Rovinescu is donating his 2020 bonus to the Air Canada Foundation.
According to the airline’s statement, around CA$8 million ($6.6 million) of the total bonus program was given to around 900 middle management employees who will keep their bonuses and shares. In addition, lists on the company website suggest that four executive vice presidents will keep their bonuses while six will return the bonus money and the shares.
Justification for Air Canada
In the statement announcing the return of the bonus money, Air Canada attempted to provide some justification for the bonus program. Although it received a government loan, the airline confirmed that none of this money was used to fund the bonus program. Instead, the airline raised CA$8 billion ($6.7 billion) during the pandemic to help keep finances afloat.
Furthermore, Air Canada highlighted that several senior employees, including Mr Rovinescu and Mr Rousseau, took salary cuts last year. Both men waived their entire salaries during April, May, and June of 2020 to help with cash flow. In addition, several other management employees took salary cuts reducing salary cash flow by CA$11.5 million ($9.5 million), more than the total bonus amount.
Confusion and misinformation
By giving out stock options, Air Canada intended to allow executives to recover some of the salaries they lost during 2020. As stock options appreciate in value, executives wouldn’t be out of pocket in the long run. If the stock value falls because the airline struggles, executives would not get additional financial benefits.
In a separate statement, Mr Rovinescu said there was “considerable confusion” and “misinformation” regarding the bonus program.
However, many still regard the bonus program as a bad move by the airline. In April, the airline was negotiating a CA$5.9 billion ($4.8 billion) rescue plan with the Canadian government. Last year the airline also benefitted from the Canada Emergency Wage Subsidy program to the tune of CA$656 million ($542 million). In addition, the airlines’ revenues fell by around 70% and it laid off over half its workforce. This has left many feeling the bonus program was out of touch and insensitive.
Do you think the executives have done the right thing? Was Air Canada wrong to give out bonuses last year? Let us know your thoughts in the comments.