Tuesday, March 31, 2009

Bad Time to be a CEO - Air Canada Surprise Move

Another CEO bites the dust, as Air Canada appoints Calin Rovinescu to replace Montie Brewer as CEO. With times being as bad as they are, it interesting that people are quietly and slyly asking these new CEO's (like the announcement of Nadir Mohamad replacing the late Ted Rogers at Rogers Communications yesterday afternoon) the same question that they were (jokingly) asking Obama on inauguration day: "In times like these, do you really want the job?"

I think a more honest question is what do you expect these new CEO's to do? Particularly in Air Canada's case, how will having Calin replace Montie really benefit the company? What will Calin do that Montie can't? Is there a strategy behind their shake up?

In my blog post about "Why Can't Canadian's Compete", I was actually thinking about Air Canada (even though I didn't explicitly write about it), but you can tell from the broad assumptions I made that these are the same types of challenges that plague Air Canada.

Air Canada struggled in the best of times with smaller companies like West Jet offering cheap domestic alternatives and eating up their market share. It seems like in the worst of times, even with low fuel costs Air Canada can't seem to catch a break. Despite all the points made for the case of a national airline, they seem to be laid to rest by the realities that prevent a self-sustaining profitability in this industry for Canadians (remember Canadian Airlines a few years ago? RIP and acquired by AC in 2001).

This raises an interesting question for consumers: Should you cash out your Aeroplan miles (frequent flyer program for Air Canada) now? Or would it be considered risky in case they go out of business and you are stranded (What happened to Zoom customers in late August of last year - and what I narrowly happened to avoid myself on a trip to Europe by only a few weeks).

Or would you even consider paying for a ticket of a potentially distressed airline? In a similar vein to comments about GM and other distressed companies, would you buy a car if you knew the automaker might not be there to honour the warranty? Have these companies past the tipping point of no return regarding consumer confidence?

This type of behaviour and thinking certainly won't help Air Canada (nor GM), but it must be a question all their customers are asking themselves.

1 comment:

Joshua Wong said...

Clarification: Air Canada does not own Aeroplan (although Aeroplan manages their frequent flyer program).

Aeroplan is owned and operated by Groupe Areoplan.