Business

Will Milton be grounded?

Critics take aim at Air Canada’s tough-guy CEO

KATHERINE MACKLEM October 29 2001
Business

Will Milton be grounded?

Critics take aim at Air Canada’s tough-guy CEO

KATHERINE MACKLEM October 29 2001

Will Milton be grounded?

Business

Critics take aim at Air Canada’s tough-guy CEO

KATHERINE MACKLEM

When Robert Milton took over the reins at Air Canada in 1999, he was heralded as an efficiency whiz-kid. He was 39 and hed already reorganized the airlines entire schedule, creating significant savings. Almost from the time he started at Air Canada, he was being groomed to one day assume the top job. His first words, once he got there, were music to the ears of investors: “It’s time now,” he declared, “to look after the shareholder.”

It hasn’t happened. Within days of Milton’s crowning, Toronto mogul Gerry Schwartz of Onex Corp. launched a hostile takeover bid, setting off an intense battle for control of the Canadian airline industry. Milton won, of course, and Air Canada began folding Canadian Airlines International Ltd. under its wing. These days, Schwartz says he’s counting his lucky stars that his dual bid for Air Canada and Canadian was, as he calls it, a failure. Milton must be wondering what he really won— and how long he can last.

Air Canada’s takeover and integration of Canadian has been anything but efficient—and Milton’s abrasive style has done little to smooth the way. Massive schedule disruptions have only provoked the ire of the travelling public. Employees

are highly distrustful of a leader who, during his battle with Schwartz, promised they’d be the real winners if he succeeded. Today, thousands are facing layoffs. And the now-virulent friction between the formerly separate Air Canada and Canadian staffs has made it much more difficult to integrate the two operations.

Under Milton, the company has also been embroiled in countless competition skirmishes with its small-time counterparts, including Westjet Airlines Ltd. and Canada 3000 Inc., which accuse it of acting like a schoolyard bully. And it’s been embarrassed by a high-profile slap on the wrist from securities regulators over phone calls made by company officials to airline analysts that weren’t accompanied by a general news release.

Then there are the world’s travails. Economic decline and a jump in fuel prices have hurt the company financially, leaving it in a weak state—and ill-equipped to deal with the blow that hit on Sept. 11. When Milton became Air Canada’s chief executive in August, 1999 (he’d been named president in May), the company’s share price was about $7. It rose, on the promise of merger efficiencies, to an all-time, but short-lived, high of $20.90 in May, 2000, and slid this year to trade between $6 and $7 in late summer. After Sept. 11, the stock went into

free fall and closed last week at $ 1.80.

Ever since the terror attacks, Milton has been in crisis mode—and looking a bit raided. His call for $3 billion to $4 billion in government aid was met with widespread derision. He managed to convince Transport Minister David Collenette to compensate air carriers for the cost of shutting down following the attacks. But at $160 million ($100 million to Air Canada and $60 million for other airlines), the bailout is a drop in the fuel tank compared with the $ 15 billion (U.S.) the American Congress is giving the U.S. airline industry. An attempt to cut 1,280 staff—part of the 12,500 total layoffs announced since last December—was thwarted by the Canadian Industrial Relations Board. Then, much to the confusion of many observers, Milton forged ahead with the launch of Tango, a no-frills, purpletinted discount carrier set to fly next week.

All this turbulence comes amid talk that the company, even the whole industry, is in need of a major overhaul—one that could include Miltons departure. “The first thing I’d do is turf Robert Milton,” says Ray Canon, an economist specializing in aviation at the University of Western Ontario. “He’s part of the problem.” Canon says Air Canada has to get its costs in line, improve customer service, gain concessions from its unions on labour costs—and not put its energy into launching a discount air service. Regarding Milton, he says, “they need new blood in there.”

Not necessarily so, says Toronto investment banker Tom Caldwell. Air Canada’s problems run much deeper than its CEO, he argues. From the time it was privatized in 1988, the company has been a “political football,” Caldwell says, and Milton is hobbled by government interference.

Still, given his dreadful public image and toxic employee relations, Milton may find that Tango is his last waltz. 03