How to lead through immense instability toward smoother skies
In 2003, Air Canada filed for CCAA protection. During that time there was uncertainty as to what the future held for the company. By 2009, the company was a “burning platform” according to CEO Calin Rovinescu, in large part due to the financial crisis of 2007 and 2008. Fuel prices had spiked, banks were not lending and the company was basically losing all its liquidity. But, he says, that was just what the company needed to turn itself around.
The first ingredient necessary to effect fundamental change, Rovinescu says, is to have the necessity to change.
“When your back is against the wall, that’s when we see the greatest creativity, the greatest strengths, and the greatest commitment from the people that need to participate in the transformation.”
The second driver, he says, is to have a clear vision.
“Have a clear vision for the future, and be capable of explaining it in bite-size pieces. When you have a big organization, everybody looks at it from their particular corner of the universe. And yet,” he says, “you have to be capable of explaining it to all 30,000 people in the company. We had a fairly concrete plan for what the future looked like, and then we had a very clear communication strategy to ensure that all stakeholders had the right information.”
There were a lot of changes that needed to be made in order to keep Air Canada competitive in the fragmented market. Rovinescu recalls that they first needed to reduce its cost structure, which proved challenging for the then-72-year-old legacy carrier. Rather than focusing on changing the organization, Rovinescu focused on changing the company culture to make it more flexible; he refers to Air Canada as an 80-year-old startup.
“Obviously, it’s a large company with a lot of legacy systems and a lot of things that can’t be changed overnight. But the mindset of employees can be changed if one is committed to it, and so we’ve been working hard on that. It’s a big driver of our success, the creation of a mindset, based on entrepreneurship.”
And while the culture has begun to change, Rovinescu says he’s still working on it.
“Culture change is a continuous process. So, it’s not as if we’re going to declare victory after one year, two years, five years, or 10 years, frankly. It’s a continuous process if you want a dynamic culture,” he says. “And whatever it is that we have achieved today, sitting here in 2018, may not be adequate if we were sitting here in 2020. And so, the culture needs to continue to evolve. It needs to be living, breathing and dynamic, and I don’t expect to spike the ball in victory anytime soon.”
The culture that Rovinescu has tried to instill is entrepreneurial, empowering employees throughout the organization to be leaders. The model is that anyone can be a leader, and that decision-making should not be centralized at the top.
“Leadership is about being able to get people to move in the same direction that the organization wants to move in, and avoid silos. I think that anyone can be a strong leader, whether it’s the top seat, or virtually anywhere else in the organization, in any department or group.”
So then, if anyone can do it, what qualities make a good leader?
“I’d say the first tenet of leadership is transparency. And the second is being able to communicate well. If you cannot be transparent or communicate well, chances are you will not be successful. Even if you have the most innovative ideas and plans in mind.”
As with other entrepreneurial ventures, Air Canada is now focused on the integration of big data and artificial intelligence. This has already been introduced into revenue management.
“Big data and AI are now a big part of our business,” Rovinescu says. “I’ll give you two or three key examples. First, in Revenue Management: If we have a flight from Boston or Pittsburgh to Toronto, we use artificial intelligence to be able to predict on a daily basis over the entire year how many seats we should leave behind to be able to sell at a higher price for connecting flights to places like Beijing, Tokyo or Seoul.
“Another example is predictive maintenance. We have numerous fleet types, and we have taken delivery of brand-new aircraft, the 787 Dreamliner and 737 Max. These aircraft have regularly scheduled maintenance checks, of course, but in addition to that, we can now predict maintenance of components not yet broken, to repair when the aircraft is less active. This way, we can do other work that we know we’re likely to have an issue with, that would not come into the regular cycle.”
Rovinescu also plans to use data and AI to build Air Canada’s new, digital-first loyalty program.
“We have the data that exists for all of our frequent flyers and we know what their flying preferences are. We’re able to market much more effectively to those people. We are combining the relationship-management technology with loyalty management.”
Air Canada’s leisure carrier, Rouge, was introduced in 2012 to target price-conscious consumers, and as competition for these customers has intensified, Rouge has proven to be a powerful tool in Air Canada’s arsenal.
“Over the last 15 to 20 years we’ve seen the explosion of a large number of low-cost carriers, and more recently the explosion of ultra-low-cost carriers, in many of the markets that we serve around the world. There continues to be a lot of demand for the higher end, premium product, but there’s an important segment of the market that only purchases travel on the basis of price. That’s a reality of the market, and so we have leaned into it with the creation of Air Canada Rouge. It is, in our parlance, a leisure carrier, that has a lower cost structure than Air Canada and is capable of being deployed both domestically and internationally, but it is not seeking to be, and does not pretend to be, an ultra-low-cost carrier.”
The face of Air Canada has profoundly changed since 2009, thanks to dedicated and empowered employees bringing about a cultural transformation that has led to some of the most successful changes in the company’s history.
What’s more, Rovinescu retains the same enthusiasm for the industry in which he has spent such a large portion of his career.
“Let’s face it. Flying is still a miracle as far as I’m concerned, much as we have come to take it for granted. The idea that we can go to sleep in Canada and wake up in Australia is still awe-inspiring.”
• This interview has been condensed and edited from The CEO Series on CJAD, hosted by McGill University Associate Professor Karl Moore. This article was written with Dominique Buchanan, BCom student at McGill. The full interview is available on the CEO Series iTunes podcast at https://itunes.apple.com/ca/podcast/the-ceo-series/id1356596659?mt=2