CALINROVINESCU

AIR CANADA’S STOCK HAS SOARED SINCE DEALING WITH ITS FINANCIAL ISSUES. NOWIT JUST HAS TO KEEP FLYING STRAIGHT BY KRISTINE OWRAM

The airline industry is a notoriously cyclical business and the resulting swings in stock price can leave investors with white knuckles. But Air Canada’s shares over the last two years have had a steady ascent thanks to a corporate restructuring that could also limit any stomach-churning drops in the future, says CEO Calin Rovinescu. “I think Air Canada is probably better positioned for a recession than we ever have been in the past,” says Rovinescu, who rejoined Air Canada as CEO in 2009 following an earlier stint as executive vice-president of corporate development and strategy from 2000-2004. He also oversaw the airline’s 2003-2004 trip through bankruptcy court as chief restructuring officer.

Only two years ago, it seemed like Air Canada might be unable to avoid a second round in bankruptcy court. The airline was coping with serious labour strife, rising fuel costs and a $4- billion pension shortfall. The uncertainty sent shares into penny-stock territory in the first half of 2012. But Air Canada proved its detractors wrong through a combination of hard work and sheer luck, and the airline’s shares have soared nearly seven-fold over the past two years. “We had a very comprehensive cost-transformation program designed to take out about $50 million on a steady-state basis and we exceeded that target,” Rovinescu says. “The marketplace needed to see that, see that it was done and it was sustainable.”

Air Canada took a multi-faceted approach to cost cutting, finding savings in everything from a revamped Aeroplan loyalty program to tough new labour agreements. As a result, the airline was able to cut its net debt by $1.3 billion over the past five years and it had $2.6 billion of cash on its balance sheet at the end of the second quarter.

But perhaps the most remarkable and unexpected turnaround was in Air Canada’s pension plan, which reported a small surplus at the beginning of 2014, compared to a $3.7- billion deficit a year