Air Canada CEO Montie Brewer, who had been with the struggling airline since 2002, resigned from his position as CEO on April 1 and has been replaced by Calvin Rovinescu.
The move is seen as a possible pre-cursor to bankruptcy filing.
For the last couple of years Rovinescu has worked in investment banking, but was a senior executive at the airline from 2000 to 2004, during which time he helped Air Canada successfully restructure after it filed for bankruptcy in 2003.
It remains to be seen whether he can once again rescue the airline, which lost more than $1 billion last year and is facing mounting debts, labor issues and a $3.2 billion pension deficit amid the deep economic downturn.
Rovinescu has a tough job ahead because the problems the airline is facing now are different from those that drove it into bankruptcy five years ago. In 2003 the SARS epidemic caused traffic to plunge, which hurt an already badly-run and debt-ridden airline that was going through a difficult merger with Canadian Airlines.
Under Brewer’s leadership, the airline developed new pricing models and became more innovative and efficient, which puts it in a better economic position and with less debt than it had in 2003. This means the airline could possibly stave off bankruptcy if it can weather the recession.
That fact that fuel prices have come down considerably from last year is also a factor in the airline’s favor. However, the global credit crisis has made it difficult for Air Canada to get the loans it needs to keep it afloat. A badly-needed $400 million line of credit was recently suspended, and the airline is awaiting word from Ottawa on whether the government will grant it relief from some of its pension obligations.
Some airline industry analysts say that dramatic cutbacks are what is needed to make the airline profitable again. Cutting the size of its fleet by half, reducing the number of routes and laying off up to 20 percent of the workforce are some of the ideas that have been proposed.
Others think that Air Canada should stop trying to compete with smaller regional carriers such as Jazz, WestJet and Porter concentrate more on large hubs such as Toronto and Vancouver. One prominent analyst gives Air Canada only a 50-50 chance of making it through the current crisis without filing for bankruptcy.
Unlike U.S.-based airlines, Air Canada is reconsidering its à la carte fee pricing strategy in light of the new economic reality. Officials at the airline say that the fees are not bringing in as much revenue as they had hoped. Huge backlash from passengers has already caused the airline to scrap some of the fees.
The airline’s multi-trip air pass program may also be on the chopping block, because though it is popular with frequent fliers, it is not proving to be very profitable.
By Karen Elowitt for PeterGreenberg.com.
Related links: Wall Street Journal, Globe and Mail, Canada.com, Toronto Star, Vancouver Sun
Related links on Canada on PeterGreenberg.com:
- Peter’s Interview With Montie Brewer at the NBTA’s Airline CEO Panel
- Peter’s Blog: Flying In the Rain, Airline CEOs and the Olympics
- Getaway to Canada’s Treasures Slideshow
- Canadian Supreme Court Rules in Big Airline Case
- Canadian Airlines’ Tush-Test Criticized
- Olympics 2010: Travel Planning for Vancouver
