A SAVIOUR TAKES HIS LEAVE
He took over an Air Canada in crisis and turned it around. Now Calin Rovinescu readies his exit in an even more turbulent time.
Air Canada on Friday said chief executive Calin Rovinescu will retire in February, following a long-term stint at the top that started with him turning the company around after the global financial crisis, but likely ending with the coronavirus pandemic continuing to hammer airlines.
Rovinescu has a long history with Air Canada, starting when he was a young corporate lawyer working on the once government-owned airline’s privatization. He officially joined the company in 2000, and served as its chief restructuring officer before departing in 2004 and co-founding independent investment bank Genuity Capital Markets, which is now part of Canaccord Genuity Group Inc.
Rovinescu then returned in 2009 to take the CEO job, steering the airline away from near- bankruptcy and turning it into a company that racked up more than $ 1.4 billion in profit last year. Air Canada shares, even after being punished by the pandemic this year, have still grown well over 1,000 per cent since he became chief executive.
“But, more than anything else in my career, I am especially proud of the company’s transformation over the last dozen years during which we built Air Canada into one of the world’s leading carriers and a global champion for Canada,” he said in a press release on Friday.
However, Rovinescu is leaving as the air travel industry is being hit hard by the coronavirus and its future prospects remain uncertain.
The International Air Transport Association recently estimated that industry revenues will fall at least 50 per cent this year, to approximately US$ 419 billion in 2020 from US$838 billion in 2019.
Canadian airlines haven’t been immune to those forces. Air traffic controller Nav Canada on Friday announced that traffic in September dropped by an average of 62.6 per cent compared to a year earlier.
And Air Canada booked a $ 1.75- billion loss in its second quarter, while Westjet Airlines Ltd. this week announced it will cut almost 80 per cent of seat capacity from its Atlantic Canada flights, with its chief executive saying it was “out of runway” to maintain certain routes.
The pressure being put on airlines by both the pandemic and the travel restrictions meant to curb the spread of COVID-19 has in turn prompted airline executives to push governments to tweak those safety measures and to seek financial support.
Rovinescu has called for replacing “blanket” travel restrictions and quarantines with “targeted evidence-based measures.”
That said, Air Canada has been taking steps to shore up its financial position, raising roughly $ 6 billion in additional liquidity and cutting costs where it can, its departing chief executive noted.
Moreover, the airline recently announced it had amended i ts proposed transaction of smaller rival Transat A.T. Inc., dropping the value of the deal to around $ 190 million from $720 million.
“The pandemic has devastated the global airline and broader travel industry, but should the deal close, we see the potential for revenue and cost synergies over time,” National Bank Financial analyst Cameron Doerksen said in an Oct. 13 note.
“Recall that pre-pandemic Transat was the second- largest player on routes between Canada and Europe ( after AC) and held a strong market position to sun destinations.”
But “in the midst of the worst crisis in aviation history, worse than SARS and 9/ 11,” Karl Moore, a professor at Mcgill University’s Desautels Faculty of Management, said Air Canada is in relatively good shape compared to other global carriers.
Rovinescu said the airline will be extremely well- positioned when borders reopen, travel restrictions are lifted and the broader economy is functioning again
“While COVID- 19 has decimated the global airline industry, fortunately we entered the pandemic much healthier than almost any other airline in the world as a result of our strong balance sheet, track record and engaged workforce,” he said in the release.
Continuity at the top could also be helpful. Succeeding Rovinescu will be current deputy CEO and chief financial officer Michael Rousseau, the former president of retailer Hudson’s Bay Co.
“Mike Rousseau joined Air Canada as CFO in 2007 and was also instrumental in the turnaround and growth of the company and has been heavily involved in all the strategic decisions over that same timeframe,” National Bank Financial’s Doerksen said in a note to clients Friday morning.
“As such, he is the obvious choice to take over the CEO role, in our view.”
Rovinescu isn’t leaving Air Canada until Feb. 15, giving him time to push for further government aid. It’s a job he is well- suited for, given he used to be a managing partner at law firm Stikeman Elliott LLP and is “one of Canada’s top lawyers and negotiators,” according to Moore.
But the decision to announce Rovinescu’s departure now could reflect the fact that the airline industry’s current situation could persist for some time.
“This is a multiple- year project ,” Moore s aid. “They’ve got through the darkest part of the night, but it’s going to be night for a couple more years, relatively.”