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Air Canada CEO Calin Rovinescu (Paul Chiasson)
Air Canada CEO Calin Rovinescu (Paul Chiasson)

Air Canada catches updraft Add to ...

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 , 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.

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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.

"CCAA also would have virtually guaranteed that the pension plans would have to be terminated. I did not want to see the pension plans be put in peril," he said.

Chief financial officer Michael Rousseau and Kevin Howlett, senior vice-president of employee relations, answered questions from labour leaders during contract talks, while chief operating officer Duncan Dee was the point man in discussions with Ottawa over pension relief and financing.

In its renewed focus on customer relations, Air Canada plans to give its staff more decision-making powers.

"One of things that I feel very strongly about is the entrepreneurial drive to move quickly," Mr. Rovinescu said. "If we can behave and act like a smaller company, and make decisions quickly and empower front-line people, that will be a major achievement for us."

Mr. Rovinescu is under no illusions about the challenges in revamping the carrier's corporate culture to be more nimble, emphasizing that it will be a gradual process.

"It's the just-do-it approach. Give more authority to more of the front-line people to make exceptions where exceptions can be made," he said. "Can you get 100 per cent of the people to move in that direction? Probably not. But you can get a large number."

He said it will help to have unions owning 15 per cent of Air Canada's equity. The unions are slated to receive their shares by the end of this year in return for supporting the funding moratorium on the carrier's $2.9-billion pension solvency deficit.

Winning over consumers will also be challenging and, despite much skepticism, Mr. Rovinescu is forging ahead in his quest to create a kinder and gentler Air Canada.

"What are the chances of having a good flight and a high level of service? They're certainly, I would say, better than 90 per cent. Less than 10 per cent of the time, people may have less than happy experiences," he said.

Air Canada is scrutinizing the extra fees that it charges, with a view to cancelling some of the "irritants," he said. An optional travel assistance fee of $25 to $35 each way, named On My Way, is under review, for instance. A $25 service fee charged to customers who booked through the airline's call centre has already been scrapped.

As well, regular pillows and better-quality blankets could be reinstated for red-eye flights on longer-haul routes within North America. For pet lovers, Air Canada began allowing smaller cats and dogs back in the cabin last month.

Air Canada further reduced its costs by rewriting its contract last week with regional affiliate Jazz Air Income Fund, and the larger carrier is now working with Aeroplan to defend against Calgary-based WestJet Airlines Ltd.'s plans to launch its own frequent-flier program by the end of 2009.

WestJet has been aggressively slashing fares on some routes this summer, placing pressure on Air Canada to match prices.

"We have no appetite to participate in a freefall of fares. We're not going to match any irrational pricing from anyone. Having said that, if there are markets that are critical to us, we certainly don't intend to concede market share," Mr. Rovinescu said.

Mr. Rovinescu, who served as an adviser to Air Canada when it transitioned from a Crown corporation to the private sector in 1988-89, served notice that he's in it for the long haul. He quashed speculation among some industry observers that he's an interim CEO who has already completed his primary task to stabilize the carrier.

"My expectation is to be around for quite a while, and see some of the benefits from the hard work. I would not have given up other things that I had been doing to come here for a short period of time," he said.

"It's certainly too early to put up my feet."

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