After a four-month race to save his airline, Calin Rovinescu now embarks on a mission he expects will take five years.
The challenges at Air Canada AC.B-T , as he sees it, are to win back disgruntled travellers, “re-engage” employees and overhaul the corporate culture.
In the short term, the chief executive officer said in an hour-long interview, Canada's biggest airline will cut costs even further, beyond the $250-million in expenses that he originally targeted. Ambitious money-saving measures could include grounding some planes amid the slowdown that traditionally follows Labour Day and temporarily paring more staff during the economic slump.
The Montreal-based carrier, he said, must improve its competitive position or risk facing another near-meltdown within a couple of years.
“We're in a mode now where we have the breathing room to restore the airline to profitability,” said Mr. Rovinescu, a lawyer by training and co-founder of investment bank Genuity Capital Markets.
In his second stint at Air Canada, Mr. Rovinescu has now struck new labour pacts that freeze wages among five unions, persuaded unions and retirees to back a pension funding moratorium, won Ottawa's support for the pension relief, and talked lenders into injecting money into the cash-strapped carrier, walking away with $1-billion in financing.
“My objective when I came back was to hit the ground running because it became clear to me how little time there was to do the things that we needed to do,” Mr. Rovinescu said. “This was a Rubik's cube of massive proportions. We could not have done this on Day 1. Impossible. Nobody was going to lend us money if the requirement was to put these payments into the pension plan.”
His task over the past four months was complex, to say the least.
After more than two decades at law firm Stikeman Elliott in Montreal, Mr. Rovinescu first joined Air Canada in 2000. As chief restructuring officer, he oversaw a streamlining under bankruptcy protection in 2003-04.
Having then co-founded Genuity, Mr. Rovinescu, 53, was pressed back into service in early April to take over from Montie Brewer as Air Canada's CEO.
On July 24, Ottawa granted 21 months of pension relief, allowing Air Canada to cancel a $100-million payment that was due on July 30 and $60-million due on Aug. 14.
With the pension moratorium approved, the airline announced its financial package July 29, including $600-million from a syndicate of lenders: $150-million from Export Development Canada's corporate account, $100-million from the federal government's Canada Account, $50-million from GE Canada Finance Holding Co., $150-million from customer loyalty program Groupe Aeroplan Inc. and $150-million from ACE Aviation Holdings Inc., which owns 75 per cent of Air Canada.
In June, Mr. Rovinescu was juggling several issues at his Montreal office near Trudeau International Airport, and the last thing on his mind was to attend the Paris Air Show. But the airline's financial advisers, led by Seabury Group LLC, urged the new CEO to go to France and negotiate face-to-face with top officials from Boeing Co. and GE.
Norman Liu had been appointed CEO of GE Capital Aviation Services on June 12, and days later, Mr. Rovinescu flew to Paris for a 24-hour visit. The key meeting with Mr. Liu at the air show would be a turning point. Firms affiliated with the aircraft leasing company agreed to manage the lending facility on behalf of the syndicate.
GE Capital Aviation Services also agreed to buy three of Air Canada's Boeing 777s in a $122-million deal, and lease them back to the airline.
“We had a breakthrough meeting with GE, and GE became the lead in the club loan. The secured credit facility was sealed in principle at that meeting in Paris,” Mr. Rovinescu said, adding that finance teams in Toronto, New York and London hammered out the details.
Filing for bankruptcy protection through the Companies' Creditors Arrangement Act was seen as an efficient way by some analysts to slash costs, but Mr. Rovinescu said obtaining debtor-in-possession financing would have been difficult, not to even mention lining up loans for exiting bankruptcy protection.
