ONE ON ONE with Robert Milton
October 2, 2007 By Darren Locke
WE’VE DESCRIBED THE TRADITIONAL AIR CANADA BUSINESS MODEL AS BROKEN. HOW DO YOU FIX IT?
Canada has been consistently ahead of other network carriers in
repositioning the airline and innovating our product. Our progress was
reflected in results that surpassed all North America’s international
carriers by a considerable distance.We’ve worked hard at reducing costs
wherever we can, but it is not enough.We still posted a loss in the 4th
quarter and for the year.
Consumers, including business
travelers, are buying down and this trend is permanent. The days when
CFOs issued directives not to travel in Executive Class have been
replaced by new directives to only travel with lowcost carriers
whenever they are available.We have to confront this reality and
transform Air Canada into a low-cost carrier in its own right. We
cannot produce a product for $1.00 and sell it for 75¢ while our main
domestic competitor can produce the same product at 50¢. I’m confident
our employees understand that reality.
HOW DO AIR CANADA’S WAGES AND BENEFITS DIFFER FROM LOW-COST COMPETITORS?
we had our main low-cost competitor’s work rules, pay scales and so on,
we would drop $1.3 billion to our bottom line. If you stop and reflect
on this, if we had our competitor’s labour-cost structure we would have
made $900 million last year. We’ve cut that down the middle to arrive
at the $650 million number. And, just remember: other recent low-cost
carrier start-ups in Canada have even lower labour costs.
IS THE LABOUR CLIMATE RIGHT TO DO WHAT NEEDS TO BE DONE?
no more important aspect in terms of the relationship between our
customers, employees and our shareholders, than the relationship
between management and employees. Obviously unions play a critical role
in that relationship, and I think given the new realities around us
unions are going to need to be very responsive to those realities to
protect the interests of our employees. The situation is moving very
fast. It’s not a good environment, and it’s not an easy environment.
And I know in my heart of hearts I want what’s best for our employees.