Calin Rovinescu on the successful turnaround of Air Canada
Calin Rovinescu on the successful turnaround of Air Canada and what it takes to succeed in a rapidly changing business world.
Since he was appointed CEO in 2009, Air Canada’s share price has risen over 1600%. Calin describes lessons learned on disruption, prioritization, and shifting an employee culture.
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– Calin Rovinescu, Medisys Client for 25 years
Q: Describe “disruption” in your industry.
A: The word “disruption” is thrown around often these days. When people use the term they think about the technology sector, artificial intelligence, they think about businesses like Uber or Netflix which drove transformational change within their industries. Other sectors, like the airline industry, have also been hugely disrupted over the past 20 years by low cost competitors, online travel agencies and flight booking websites, globalization, and by 911. The world is constantly changing – if you want to be a leader in today’s market you better find a way to disrupt or cannibalize your own business before somebody else does.
Q: When you were appointed CEO in 2009 Air Canada had been suffering 5 years of consecutive losses. Now, 5 years later, your share price has risen over 1600%. How did you do it and what advice do you have to share?
A: In 2009, everyone had an opinion about how Air Canada should reinvent itself. Analysts would make statements like, “For Air Canada to survive it needs to get rid of 50% of its domestic business and focus purely on international operations”. 2009 was a “perfect storm” so to speak – fuel costs were high (for a business that spends about $3.5 billion annually on fuel, that hurts), the financial crisis made it virtually impossible to borrow money or raise equity, and we were still managing the restructuring requirements of a post 911 world. I learned a few things from this:
- Never waste a burning platform. A lot of creativity comes from being forced to make tough decisions in real time, in crisis you can very quickly create a “just do it” culture.
- Identify the strengths of your legacy and exploit them. Air Canada has an 80 year legacy, that’s not something that can or should be ignored – reinventing yourself in a legacy environment isn’t like starting with a blank sheet of paper. Legacy can be a burden, in our case 88% of our workforce was unionized, we had legacy technology systems in place to deal with, and a significant pension deficit. On the flip side, through our 80 year history we’d built root rights to every important aviation market in the world and we had tremendous brand recognition on a global scale. In 2009, we really looked at which aspects of our legacy were strengths and which were weaknesses and exploited the strengths without compromising our core business values. Air Canada Rouge was one of the products of this exercise which has been a huge success from a profit standpoint.
- Get your priorities straight. We declared that Air Canada was going to become a global champion after surviving its “near death” experience, and then we defined this in four straight forward ways: cost transformation, international expansion, customer product and service and culture change. An organization of over 30,000 employees at the time couldn’t know or support 40 different objectives, but they could get behind a few key strategic priorities. Strategic priorities aren’t a ‘flavor of the month’ situation – they don’t change, they are at the core of the business. First and foremost, we prioritized fixing our cost structure. Once that was tackled we could look at the other key priorities that would make us global champions (eg. international expansion, improving the customer experience, and improving our technology platforms)
Q: Air Canada has over 30,000 employees. How do you gain alignment in an organization of your size?
A: In 2009, gaining alignment around a new set of strategic priorities required a significant culture shift. A culture shift is not a sprint, it’s not even a marathon, it’s like a series of marathon relay races where someone runs 42 km, passes the baton to someone else, and they run 42 km and so on. I was profoundly impressed by the resiliency and flexibility of our people and the speed of change that we were able to achieve. Once it was clear what we had to do to move forward we moved incredibly quickly, especially for an organization of our size. When an organization starts thinking like winners, success happens, and that success breeds more success. That’s why it’s so important to celebrate every win.