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Air Canada shares down more than 10 per cent

Shares of Air Canada (TSX:AC.B) fell more than 10 per cent in early trading on the TSX on Tuesday as fears rose that Canada's biggest air carrier may be preparing to file for bankruptcy protection from creditors for the second time in six years.

Air Canada B stock dropped 12 cents to $1.03, a decline of 10.4 per cent, in early trading of more than 35,000 shares.

Late Monday, Montreal-based Air Canada announced the resignation of Montie Brewer as president and chief executive and named Calin Rovinescu, a former Air Canada executive who played a key role in the airline's court-supervised restructuring in 2003-2004, as his replacement.

The appointment of Rovinescu, who takes over effective Wednesday, may signal the airline is preparing to restructure again to deal with its debts, mounting pension liabilities and other cash problems.

The company faces $660 million in debt payments, a pension shortfall that has tripled to $3.2 billion in the last year and capital spending needs. These financial burdens come at a time when the recession has squeezed its business and led to mounting losses.

In the last restructuring, which came in the wake of the Sept. 11 terror attacks that battered the global airline industry, Rovinescu helped Air Canada cut jobs, reduce its capacity and streamline operations to save money.

"Calin's reputation as a proven leader and his wealth of experience in corporate strategy will serve Air Canada well during this particularly challenging period for the world's airline industry,'' Air Canada chairman David Richardson said in a statement
late Monday.

A lawyer by training, Rovinescu had been managing partner of the Stikeman, Elliot law firm in Montreal before joining the airline in April 2000 as executive vice-president of corporate development and strategy.

He later became chief restructuring officer before resigning in April 2004 in the middle of the airline's restructuring.

"While the challenges in front of us are large, we will continue to build upon the successes of the airline to date and deliver a quality product for our customers, employees and shareholders,'' Rovinescu said in a statement.

Rovinescu rejoins Air Canada from Genuity Capital Markets, an independent investment banking firm he helped found.

Air Canada also announced Monday the addition of Michael Green, lead director of ACE Aviation Holdings Inc. (TSX:ACE.B), to the airline's board of directors effective immediately.

Rovinescu takes over at a difficult time for the airline.

Canada's largest airline has said it expects to reduce capacity by another 2.5 to 3.5 per cent this year, on top of the nine to 10.5 per cent reduction during the winter season.

It is also aiming to cut another $100 million of costs on top of $20 million to $40 million in supplier concessions.

Last month, Air Canada reported a net loss of $1.03 billion or $10.25 per diluted share for 2008 compared with a profit of $429 million or $4.27 per diluted share in 2007. Operating revenue totalled $11.08 billion for 2008, up from $10.65 billion.