Guest b52er Posted February 9, 2003 Share Posted February 9, 2003 Writing is on the wall; Air Canada's CEO must go Charles Frank Calgary Herald Saturday, February 08, 2003 CREDIT: Calgary Herald Archive Air Canada CEO Robert Milton faces a staggering, $12.7-billion debt. ADVERTISEMENT Sifting through the debris of Air Canada's latest financial results leads to a singular inescapable conclusion: president and chief executive Robert Milton must go. If that doesn't happen, Canada's biggest air carrier is a sure bet to end up in bankruptcy court. Milton, who has been calling all the shots at Air Canada since May of 1999 has run out of time -- and more important, credibility -- in his quest to return the troubled airline to profitability. Employees and customers have lost confidence in his abilities, a double whammy that is daunting for a corporate leader at any time, but which will be virtually impossible to overcome in the current, topsy-turvy economic environment that has caused Air Canada's shares to dip to their lowest point in years. The company's horrendous $364-million fourth-quarter loss, which was the chief component in the $428-million annual loss reported this week only exacerbated that descent and is a clear signal that Milton's controversial game plan for flying Air Canada out of the red and into fiscal respectability is doomed. That plan, which saw the creation of three new Air Canada brands -- Zip, Jazz and Tango -- aimed at allowing the carrier to win greater market share in discount, short-haul and regional markets -- has been literally cobbled together on a wing and a prayer over the last two years. That it isn't working, is self evident. Jazz is for sale. Zip is furiously discounting fares and flying at slightly more than half capacity -- a money- losing proposition by any standard. And no-frills, high-cost Tango has yet to show it can significantly contribute to Air Canada's bottom line. If that isn't bad enough, the once widely respected company has become the butt of jokes from coast to coast and its workers are almost universally reviled. To hear Milton tell it, Air Canada's woes are the result of (a) the international decline in air traffic since Sept. 11 2001; ( egregious cost structures at his airline due largely to overpaid union employees; © the low-cost operating advantages enjoyed by competitors like WestJet, and (d) bad decision-making by the federal government. He's partly right. All of the above issues are factors in Air Canada's ongoing abysmal financial showing, a situation that has left the air carrier with a staggering $12.7-billion debt to pay off; a debt incidentally, that is more than twice that of the province of Alberta. (And things are only going to get worse if the U.S. and its allies go to war with Iraq, a scenario that is almost certain to unfold within the next six weeks.) But Milton must be held accountable for another series of issues that also play a key role in Air Canada's current woes. His single-minded insistence, for example, on driving all competitors out of virtually every market segment in which the airline flies -- starting with ill-fated Canadian Airlines International back in the 1990s -- has been the single most defining business principle of his tenure. Damning evidence of Air Canada's efforts to put a host of carriers from short-lived Greyhound to thorn-in-the-side WestJet down for the count emerged this week in competition bureau documents. Not only has Air Canada incurred millions of dollars in extraneous costs as a result of Milton's blind determination to obliterate any and all competitors, but the confusion created within his own organization in the wake of 1999's ill-fated merger with Canadian Airlines has left the airline with an operational and public relations black eye that will take years to overcome. Any time you are in a service industry and leave customers stranded, cancel flights without notice, and lose bags indiscriminately, there are bound to be business repercussions. If you do it repeatedly, you risk losing your franchise. That explains why many Canadians have been so derisive -- and vocal -- about Air Canada's ability to competently manage its own business affairs. One need only look at the overwhelming volume and nature of complaints about Air Canada to the air travel complaints' commissioner to understand the depth of antipathy that exists towards the company that Milton has crafted. Clearly it is time to clear the air. Milton's Air Canada is a critically wounded, trapped, corporate animal that is fighting for its life. Unfortunately, without a new game plan -- and a new leader to craft and implement that plan -- the odds of Air Canada surviving the turbulence ahead are slim and none. Charles Frank is the Herald's Business Editor. He can be reached at frankc@theherald.southam.ca or 235-7370 © Copyright 2003 Calgary Herald MARKET NEWS » Debt/Money Markets » Energy/Resources » Mutual Fund News » Commodities » Money Rates PORTFOLIO » Login/Register STOCK QUOTES TSE -11.510 6477.740 Dow -65.07 7864.23 S&P 500 -8.46 829.69 Nasdaq -19.26 1282.47 C$ (in U$) -0.0016 0.6576 updated 10:38 ET Link to comment Share on other sites More sharing options...
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