Making a surprising change at the top as it struggles to survive the recession, Air Canada [AC.A-T] has abruptly appointed Calin Rovinescu as president and chief executive officer.
Mr. Rovinescu will take over the controls of the country's largest airline on Wednesday. Resigning is Montie Brewer, an American who joined the Montreal-based airline in 2002 and became president and CEO in 2004. Air Canada is facing a cash crunch, and some industry analysts have speculated that it could be forced to file for bankruptcy protection for the second time in six years.
Mounting debts, a growing pension deficit, weakening travel demand, expiring labour contracts and stiff competition from WestJet Airlines Ltd. are among the challenges awaiting Mr. Rovinescu, a Canadian lawyer who helped restructure the carrier in 2003-04. Calgary-based WestJet, which is launching an aggressive seat sale today, has been stealing domestic market share from Air Canada.
"While the challenges in front of us are large, we will continue to build upon the successes of the airline to date and deliver a quality product for our customers, employees and shareholders," Mr. Rovinescu said in a statement.
Research Capital Corp. analyst Jacques Kavafian said Mr. Rovinescu's cost-cutting expertise will be all too familiar to Air Canada's unionized employees. "Calin is a restructuring expert. He will be able to lead Air Canada, and his appointment could be a signal of a possible bankruptcy protection filing," Mr. Kavafian said, noting that the airline's stock price has plunged.
The newly appointed CEO is a senior executive and co-founder of Genuity Capital Markets, an investment bank, and a former managing partner at law firm Stikeman Elliott. He obtained his law degree from the University of Ottawa in 1980.
In an interview this month, Mr. Brewer indicated that he was committed to Air Canada and wanted to devote his energy to finding ways to ease the cash pressure, including lobbying Ottawa to relax rules on pension plans.
Since emerging from bankruptcy protection in 2004, Air Canada has reduced certain services on basic fares that were formerly free, scrapping complimentary hot meals on North American flights and charging for items such as an inflatable pillow and polyester blanket. For the cheapest fares, collecting Aeroplan points is harder than before, frustrating travellers trying to save up for free flights.
While scaling back service has helped Air Canada compete against WestJet on price, the smaller rival's domestic market share has risen steadily, in part taking advantage of consumer discontent over Air Canada's leaner in-flight offerings, industry analysts have said.
In a statement Monday night, Air Canada chairman David Richardson welcomed Mr. Rovinescu to his new job and to the company's board of directors.
"Calin is no stranger to Air Canada, having been a senior member of the executive team from 2000 to 2004. Calin's reputation as a proven leader and his wealth of experience in corporate strategy will serve Air Canada well during this particularly challenging period for the world's airline industry," Mr. Richardson said.
Mr. Brewer couldn't be reached for comment Monday night, but in a news release issued by the airline, he said he was proud of leading Air Canada for more than four years.
"It has been an honour to lead this great airline and I am confident Calin is the right person to take the company forward at this time," said Mr. Brewer, who replaced Robert Milton in the top executive job in late 2004.
Air Canada also named Michael Green to its board of directors, effective immediately. Mr. Green is already the lead director of ACE Aviation Holdings Inc., which owns 75 per cent of Air Canada.
Mr. Rovinescu's appointment marks the first time that a Canadian has led Air Canada since 1992, when Claude Taylor was in charge.
One of the top priorities will be addressing Air Canada's pension shortfall, which stood at $3.2-billion on Jan. 1, 2009, up 174 per cent from a $1.17-billion deficit at the start of 2008. Air Canada warns that it could be forced to contribute up to $866-million to its pension plan this year under current federal rules, up from $456-million last year.
Other key issues to tackle include six-year labour contracts that will expire at the end of May and the end of June. The airline's union leaders are upset that employees had to make wage sacrifices over the years, and now face another round of fiscal restraint.
Nine years ago, Air Canada controlled 77 per cent of the domestic market while WestJet held just 7 per cent. But Air Canada decided to devote greater attention to routes into the U.S. and overseas — both deemed more profitable pursuits than domestic service.
At the same time, WestJet introduced new Canadian destinations, tapping into places neglected or underserved by Air Canada and its regional affiliate, Jazz. By last fall, the competitive gap had narrowed: Air Canada's domestic market share stood at 57 per cent while WestJet's had grown to 36 per cent.
Air Canada plans to further shrink its network after losing $1-billion last year, raising concerns about its ability to combat the recession.
http://business.theglobeandmail.com/.../Business/home 
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