Government Operations Committee on May 31st, 2022

[Rindala El-Hage]

Absolutely. For Canada Post, as I said, the safety of our employees is paramount—for themselves, the communities they serve and their families.

To your point, we probably were the ones footing the bill, I could say, and ensuring we covered their leave. We offered child care leave, elderly care leave and quarantine leave, whether they were isolating or had been in contact. It does create a pressure on our expenses compared to other companies. You're absolutely right. It does, but we still think those expenses were extremely important and well worth investing in for the safety of our employees. They are our number one asset and the face of Canada Post. Their safety is absolutely paramount. They proved to Canadians, especially during the pandemic, what an essential service we provide. It is probably an increased cost to us compared to other companies, but one that is very well worth it and important to invest in.

[Gord Johns, NDP, Courtenay—Alberni, BC]

I really appreciate your acknowledging the important role that the workers played, especially through the pandemic.

The pandemic experience is really a mix of challenges and successes for Canada Post. For instance, there was the impact on parcel volume and the extent to which households appreciated their reliance on the service, which may be tied into the fact that Canada Post returned to higher rankings in the Gustavson Brand Trust Index.

Can you speak about some of your successes and adaptations?

[Rindala El-Hage]

Absolutely.

Again, our COO, Manon Fortin, was here in February and perfectly laid out all of the great work, from a service perspective, that our amazing team of 68,000 employees did throughout the pandemic.

From a finance perspective, what I can offer is that in 2020, we absolutely did see parcel volumes surge as things essentially shut down. However, we saw a complete decline, or a halt, in our transaction mail and direct marketing businesses. Those completely went to a standstill during the pandemic. We did see volume surge and revenues in terms of parcels, but again, we saw increased cost: It was important for us to invest in our employees and in health and safety.

Overall, as I mentioned before, I think what the pandemic really brought to our attention is that we are an essential service to Canadians. Canadians rely on us. Canadians are evolving. We are very well aware that 48% of them are buying more online since the pandemic, and we need to be there.

They were patient with us when we had increased volumes and we were over capacity during the pandemic. However, we need to do better, and that is why it's critical that we implement our transformation plan, geared around increasing that capacity and increasing the service they expect from us. That is really what the pandemic taught us.

We are the only company that serves 17,000 residential and—

[Gord Johns, NDP, Courtenay—Alberni, BC]

Thank you so much.

As the federal government considers when to launch a mandate review, when do you project that Canada Post will return to a stable baseline financial situation, so that the mandate review and its financial aspects can be in a position to look to the future and the long term and not be biased by a financial situation that still reflects the turmoil of the coronavirus pandemic?

[Rindala El-Hage]

I cannot speak about the timing of a mandate review, but I can tell you that our goal is to be financially self-sustainable, and to get there, now more than ever, we realize the need to invest in our business in order to improve our service and expand our capacity.

I don't have a time frame for you, but it's paramount, more than ever now. As online shopping and e-commerce continue to expand, we have to capitalize on that.

[The Chair, Conservative, Robert Gordon Kitchen]

Thank you.

We'll now go to Mr. McCauley for five minutes.

[Kelly McCauley, Conservative, Edmonton West, AB]

Thanks, Chair.

Thanks for your comments so far.

Regarding your plans for long-term financial sustainability, have these items been put in your corporate plan and presented to the government?

[Rindala El-Hage]

I can tell you, Mr. McCauley, that we have submitted our corporate plan to our shareholder, and we are working with our shareholder on a path to financial sustainability.

[Kelly McCauley, Conservative, Edmonton West, AB]

Was the plan accepted?

[Rindala El-Hage]

To my knowledge, not yet. We are working with our shareholder on that path to financial sustainability.

[Kelly McCauley, Conservative, Edmonton West, AB]

When was the last time Canada Post's corporate plan was accepted by the government?

[Rindala El-Hage]

If I were to go by memory, and I could be mistaken, it was 2019.

[Kelly McCauley, Conservative, Edmonton West, AB]

What happened in 2020 and 2021, that the plan was not accepted?

[Rindala El-Hage]

Our focus remained.... As we were working with our shareholder on a path to financial sustainability, we never took our eyes off the prize. We need to continue focusing on serving Canadians across our country. We are the only company that serves 17 million addresses—

[Kelly McCauley, Conservative, Edmonton West, AB]

Thanks. We are aware of that, but we're also aware that your executive summary states that there is a risk to the financial sustainability of Canada Post. It's a bit concerning.

It's been three years now since your plan was accepted by the government, and I am curious about what's going on that the government is not accepting your plan.

[Rindala El-Hage]

We have submitted it, and we are working with them on the path to financial sustainability. Our focus, like I said, is on the transformation plan that we launched in 2021.

[Kelly McCauley, Conservative, Edmonton West, AB]

When was the most recent corporate plan submitted to the government?

[Rindala El-Hage]

We submitted it last fall, and I believe it was in our annual report. We submitted our corporate plan to the shareholders in the annual report of 2021.

[Kelly McCauley, Conservative, Edmonton West, AB]

What's the pension solvency deficit right now?

[Rindala El-Hage]

As of Q1 of 2022, if we look only at the market value of the solvency deficit—and, again, the solvency deficit looks at—

[Kelly McCauley, Conservative, Edmonton West, AB]

I know what the solvency deficit is. Can you just provide the number, please?

[Rindala El-Hage]

For sure. For Q1 of 2022, it was a deficit of $400 million. That is on a market basis. It is not the three-year average that is calculated only on an annual basis.

[Kelly McCauley, Conservative, Edmonton West, AB]

The pension solvency had been $8 billion. Are you telling me that now it's down to $400 million?

[Rindala El-Hage]

Yes. Again, that is a product of the volatility of the discount rate and the changes. As you're very well aware, we saw the discount rate reduced for many, many years. It was decreasing. In 2021, those discount rates were increasing. For example, at the end of 2020, our discount rate, I believe, was a -0.1% to calculate the solvency deficit. At the end of 2021, the discount rate was 0.5% to calculate, and that is a product of an increase in the discount rate.

The discount rate is calculated by our actuary based on accounting standards.

[Kelly McCauley, Conservative, Edmonton West, AB]

It's a significantly different discount rate than the one the public service uses. That's interesting. Thanks very much.

Canada Post has moved from a negative equity position to a positive one. Can you explain how that's happened over the last couple of years and how this was achieved in light of the financial losses?