Analysts not worried after exit of Air Canada’s No.2exec
Air Canada has a succession gap now that its No. 2 executive is leaving to run Europe’s largest airline. But the carrier has a deep management bench that will minimize disruption, say Cowen & Co. and RBC Capital Markets.
Chief operating officer Ben Smith will leave Air Canada Aug. 31 to take charge at Air France-KLM, the companies said late Thursday. Smith was widely seen by analysts as a likely successor to Air Canada CEO Calin Rovinescu, who will turn 63 next month.
Smith is leaving Air Canada after the carrier reported records last year for sales and a broad measure of earnings. During a decade-long revamp under Rovinescu, the airline has added more fuel-efficient aircraft such as the Boeing Co. 787 Dreamliner, expanded the Rouge discount unit and cut costs with a 2016 debt financing.
“Ben will be missed, but Air Canada remains well positioned to drive profitability over the next several years,” Cowen’s Helane Becker said in a note to clients. “Air Canada has good bench strength to replace Ben with an internal candidate. We do not expect there will be much deviation from current plans.”
Over the last few years, Smith spearheaded the expansion of Air Canada’s network to more than 200 destinations worldwide with a fleet of about 350 planes. He also worked to develop Toronto’s Lester B. Pearson International Airport as the carrier’s main global hub under a so-called “sixth freedom” strategy designed to entice U.S. passengers to fly through Canada on their way to Europe and Asia.
Smith’s departure is “a negative” for Air Canada in the near term, said Walter Spracklin, an analyst at RBC Capital Markets in Toronto. “We had considered Mr. Smith to be the airline’s next CEO and therefore his departure leaves a gap in terms of succession,” Spracklin said in a report.
“Nevertheless, while Mr. Smith had been a key member of senior management, we highlight that Air Canada is a large organization with a number of experienced managers.”
At his new employer, meanwhile, Smith is walking into a potential hornet’s nest. For the unions, it’s not just that the 46-year-old Smith isn’t French, it’s also that he’s a representative of cold-hearted capitalism. That’s the view of Vincent Salles of the CGT union, who said Friday that investors’ support for Smith’s appointment was a red flag.
“He has the favour of the financial markets because when his name appeared in the press Wednesday the share price of Air FranceKLM finished higher,” Salles said in an interview on France Info radio. “For us it’s a worry.”
It’s the issue that he isn’t local that stuck the most. Most European airlines are run by local CEOs,
His credentials as a dealmaker were touted by the government, which owns a 14-per-cent stake, pointing to the task that lies ahead for Smith: pacify unions, rebuild trust from customers and catch up with rivals.