BUSINESS

A new empire in the East

Michael Clugston August 2 1982
BUSINESS

A new empire in the East

Michael Clugston August 2 1982

A new empire in the East

BUSINESS

Michael Clugston

"The only good thing about Friday is that it’s close to Monday,” Harry Steele told an aide recently. That sentiment would be an appropriate motto emblazoned on the gleaming, aluminum-sided Eastern Provincial Airways hangar at Gander International Airport. As a homily it captures nicely the drive and the tight, but informal, style that Steele has instilled in one of the least known but most dynamic transportation empires in Canada. Vast coniferous forests run right up to the airport and to the bleak, flat city of 12,000 in northeastern Newfoundland where Steele’s operations are based. It is an incongruous setting for those who associate large, profitable, interconnected enterprises with metropolitan canyons of steel and glass. Yet it is to this remote centre that the Newfoundland Capital Corp. (NCC) and its flagship, Eastern Provincial Airways (EPA), have managed to attract topflight executives with tastes for the arts and Savile Row suits acquired in more cosmopolitan postings. The main reason why they come, and then stay, is Harry Steele and his innovative and, above all, indefatigable entrepreneurship.

On the face of it, Steele’s empire seems like a big gamble. EPA operates in some of the worst weather and in the weakest regional economy in the country. Not only that, but NCC is in direct competition with the Crown corporations Air Canada and Canadian National, which have access to comparatively enormous sources of financing. Still, from his wing-shaped desk high in the hangar offices, this easygoing, slightly rumpled but powerful figure of a man runs one of the two major air-

lines in the country that is turning a profit (the other is Pacific Western Airlines of Calgary). And, through his October, 1981, takeover of the thriving, Montreal-based Clarke group of transport companies, Steele steers the operations of trucking fleets, steamships, a container port in Halifax and a pool-car operation. Also under the NCC banner (Steele, with 47 per cent of the voting stock, is majority shareholder in the holding company) is Atlantic Inns, with two hotels in Nova Scotia and Newfoundland and a pilot-training facility in Halifax.

Unlike the stereotypical eastern businessman, Steele has a certain flamboyance, an independent streak that he often animates from behind podiums on such pet subjects as the need to get government out of business. He must be the only man in the world with a strict Methodist upbringing who is conversant with the price of codfish on the Newfoundland coast and who drives an $86,000 Ferrari. Steele is an individualist with a sense of fun who says of the sleek, red bombshell in the president’s parking space, “It’s fun to do something different, you know,” grinning widely. But his sense of family and of moral principle is firm.

It is impossible to imagine Steele mouthing corporate buzz phrases such as “viable, feasible alternative.” His style is direct, personable and informal, running to such phrases as, “The trouble with that guy is he doesn’t know whether he’s pitching or catching.” The son of a woodsman and fisherman, Steele grew up, elbow-deep in household chores and fishing nets, in the tiny outport of Musgrave Harbour, then 100 km by boat from the nearest big centre, Lewisporte. He toughened up an al-

ready sturdy and big-boned frame by digging ditches with the highways department for four years before earning a B.Ed. at Memorial University in St. John’s, then joining the navy. It was the unification of the services in 1968—“the biggest load of bull manure to come down the pipe”—that led him toward retirement from that very satisfying life at age 45. By the time he retired, however, Steele had turned a flair for real estate and stock investments into a personal fortune of more than $1 million. He spent the next few years profitably employed with his investments and, for a short time, as a vice-president of EPA. But he quit that post in a dispute over how the company was being run. Eighteen months later the major stockholders approached him with a request to take over from the existing management. As a result, Steele bought out over 50 per cent of the 29-year-old airline. In 1977 EPA had lost more than $1 million and had an alarming 19.2:1 debt-to-equity ratio. But Steele quickly set about turning the company around, and within two years its stock had jumped from $4 to $13. Last year it recorded a profit of $4.4 million. The salvage job that Steele organized has been called near-miraculous and is given as evidence by those who expect EPA’S holding company, NCC—which was formed in 1980—to become a major force in the East Coast economy once the mega-projects start to roll.

“Good management, basically, is the biggest single factor in any company,” says Gander’s Citizen of the Year for 1981, in his office, where there are such book titles as You, Too, Can Become a Millionaire by 198k■ Adds Steele: “It’s hard to get the management team in place.” On that score Steele has performed admirably. He removed the for-

mer EPA vice-presidents, albeit on friendly terms, and handpicked a lean staff to whom he could delegate the authority in his characteristic style to cut costs and raise productivity and revenues. He convinced Bill Verrier, a dapper 50, to leave secure trappings in London as Air Canada’s director of operations in the U.K. and Ireland, and to take over as vice-president of marketing. (“Air Canada just about fell out of their chairs,” says Verrier.) Another catch was Ivan Kilpatrick, a specialist in reviving consumptive enterprises, who became vice-president of finance.

With the top levels pulled into shape, Steele went back to work on the nuts and bolts. Financial controls were introduced, productivity levels were increased with every contract negotiated, and debts to the provincial government were repaid. Pilots learned to fly more conservatively, and last year that saved the company about $1.5 million on fuel alone.

In the executive suite the style became direct and open, as Steele learned the names of virtually all of his 900 employees and insisted that his vicepresidents, like himself, answer their own phones. His staff learned to adapt to the shifts in Steele’s normally calm demeanor to “giving you absolute hell,” as one executive put it, when things went wrong. “You always know where you are with Harry, every minute of the day,” says Roy Rideout, vice-president of administration and planning. “That’s all you really need to know.” Steele places great importance on having almost all his managers live in Gander, although the first question his headhunters ask—“Would you move to Gander?”—eliminates many candidates. He also emphasizes the need for social contact among his executives. And while he insists that the working day must begin at 8:30 a.m. sharp, it can continue over coffee in employees’ homes, on weekends or in chance meetings in town.

“There aren’t too many nine-to-fivers left around here,” says Rideout, who was with EPA before Steele took over.

One of Steele’s major battles came in 1980 when EPA and CP Air were competing before the Air Traffic Committee of the Canadian Transport Commission (CTC) for the right to schedule a nonstop flight to Toronto from Halifax. In public hearings in the region, EPA’s big bid was supported by dozens of business and political leaders, but CP was given the route anyway. “A kick in the teeth for all Atlantic Canadians,” declared Steele, who quickly strung together a powerful lobby that included Newfoundland Premier Brian Peckford and federal Sports Minister Gerald Regan. Together with telegrams from all the other Atlantic premiers, and with Steele’s threat to liquidate the airline, the lobby persuaded the federal cabinet to overrule the CTC and give the route to EPA instead. Steele is still bitter over that incident, which to him exemplifies the power of government to control the airline business through the CTC—before which EPA is now fighting for a route to Boston.

Over scotch in the wood-panelled boardroom, EPA executives relax and discuss the other great irritant in the business. They point out that Air Canada, which managed to lose some $27 million in the first quarter of 1982, has access to government funding instead of having to fight for it along with the private carriers and is less cramped by the regulatory system.

A businessman’s businessman, in a speech to the Gander Chamber of Commerce Steele once stated what may be his credo: “While most people don’t agree, making business work is the most important thing in the country. The main ingredient in this process is profit, which is not a dirty word, because profits provide more jobs than subsidies.”

It seems clear that Steele’s empire is just getting moving and that, once it picks up speed in the offshore oil boom, it will be free enterprise all the way. “I think he’d probably rather close the business down altogether than have government assistance,” says Rideout. “He’d go out and collect nickels in a tin cup before he’d do that.”