Achi news desk-
Federal loans cost Transat AT Inc. nearly half a million dollars in compensation for the tour operator’s CEO last year, thanks to conditions on the pandemic funding.
Strings attached to $743 million in emergency loans deprived Ottawa chief executive Annick Guerard of $489,500 in cash in 2023, according to a document prepared by the Montreal-based company for its shareholders.
Transat secured loans under Ottawa’s Large Employer Emergency Financing Facility (LEEFF) program in 2021 and 2022 as the COVID-19 border closure battered the airline industry and pushed the travel outfit to suspend operations for six months.
The loans required companies, including Air Canada, Porter Airlines and Sunwing Vacations, to cap total compensation for senior executives at 2019 levels, or $1 million if they joined the top ranks after that time.
To encourage executives to stay on board at a shaky time, Transat offered them three-year deferred bonuses in 2020. But because the loan has not yet been repaid, its restrictions still apply, leaving Guerard with total damages of $1.9 million.
“In the case of Ms. Guerard, since the LEEFF loan had still not been repaid, the 2020 payment (long-term incentive plan) due in January 2023 in the amount of $489,523 was inconsistent with the consequences and compensation limitations set under LEEFF loan. Therefore he was unable to receive this amount,” says the circular to the shareholders, ahead of their annual meeting on April 23.
The cash bonus is payable “if the objectives related to operational and strategic priorities and financial performance are achieved,” it states.
Transat has struggled to get off the ground smoothly after the pandemic, as fears of a flight attendant strike and several Airbus planes grounded due to an engine recall ate away at last quarter’s bookings .
Transat swung to a $61 million loss in the three months ended Jan. 31, worse than the $56.6 million loss from the same period a year earlier. Transat has only cleared a profit twice in the last 17 quarters.
Even so, its five senior executives took home a total compensation of $4.47 million in 2023, 16 percent more than the $3.86 million the previous year.
Meanwhile, the grounded aircraft and high price tags on new aircraft leases drove a decision to curtail growth plans. Instead of bolstering seat capacity by 19 percent this year, the CEO opted instead for a more modest 13 percent increase and eliminated some domestic and Canada-US routes as a result.
The vast majority of Transat’s emergency loans are still outstanding. A $78 million tranche becomes due in April 2025. Another $312 million tranche of debt, whose interest rate rose to eight percent from five percent in January, matures in April 2026.
– This report was first published by The Canadian Press on March 21, 2024.
