The apparent collapse of Victor Li's plan to pump $650-million into Air Canada has claimed the job of chief executive officer Robert Milton's right-hand man, raising more questions about Mr. Milton's future and the ability of Canada's largest airline to emerge from bankruptcy protection.
Confirming widespread speculation in union ranks this week, the insolvent airline said yesterday that Calin Rovinescu, its chief restructuring officer and a key architect of the plan to bring Mr. Li, the eldest son of Hong Kong billionaire Li Ka-shing, on board as major shareholder, has resigned from his post.
Air Canada said Mr. Rovinescu's responsibilities will be shared out among senior executives, in particular Mr. Milton and Paul Brotto, an executive vice-president. As well, Ernst & Young Inc., the airline's court-appointed monitor, will assume an "expanded role" in the restructuring.
The announcement followed a lengthy meeting of Air Canada's board of directors and a lunch-time rally in support of the company by some of its employees in Montreal.
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Mr. Rovinescu and Mr. Milton have become lightning rods for anger among Air Canada's unions, particularly because under the deal with Mr. Li, each was in line to receive 1 per cent of the airline's shares, potentially worth an estimated $21-million.
Mr. Li's Trinity Time Investments Ltd. announced on Friday that it would not extend the April 30 deadline for its agreement to buy 31 per cent of Air Canada.
Trinity complained about the labour climate but left the door open a crack when it said it still might invest if the unions changed their minds on pension changes it wants and if cost-savings targets were met.
Mr. Rovinescu's departure appears to make it even less likely that the deal can be revived, though he insisted in an interview yesterday that it is salvageable and that other investors are in sight.
"I don't think the Trinity deal is dead, and my departure certainly is not and should not be construed as any type of indication that there is not an equity alternative on the horizon," he said in a telephone interview. "I've had several expressions of interest over the last several days since the Trinity announcement."
Mr. Rovinescu said it was his decision to resign, not a request from the Air Canada board, and he attributed it mostly to the impasse between Trinity and the unions.
"In my mind, I had managed to bring to the table one of the most sophisticated international investors, who has lots and lots of airlines and lots of other opportunities to invest in [but] has selected us," he said of Mr. Li. "And to the extent that as a result of the inability of the unions and Trinity to come to an agreement, the deal doesn't close, then I think it's time to hand this last 10 yards over to another running back."
A source close to Air Canada said it became clear to Mr. Rovinescu at a meeting in London on March 25 and 26 that the Li family was rapidly cooling to the deal, insulted by union attitudes and concerned about the airline's prospects.
Mr. Rovinescu has close connections with a key Li family adviser, Frank Sixt, based in Hong Kong. The two met and became friends at high school in Montreal and went through university and law school together before joining Stikeman Elliott LLP, a Montreal law firm that represents Air Canada.
Mr. Rovinescu, who joined the airline from the law firm in 2000 as executive vice-president of corporate development and strategy, said yesterday he is exhausted after what he called "the most complicated restructuring in the history of Canada, by a factor of 10."
In a statement, Mr. Milton heaped praise on Mr. Rovinescu. "His leadership, strategic skills and vision were invaluable during the most tumultuous period in the history of Air Canada and the airline industry."
Mr. Rovinescu said he does not think it was a mistake for him to have agreed to the stock bonus pledged by Mr. Li at a time when unions had agreed to make about $850-million a year in concessions to help keep the company flying.
As it is, his severance pay will be "strictly in accordance with the terms of my employment contract." He would not elaborate.
An annual information form that Air Canada filed last year says only that under his employment agreement, Mr. Rovinescu is to receive a lump sum equal to three years of his base salary in the event that he is "involuntarily terminated by the corporation for any reason other than just cause, death, disability or retirement." The form says he was paid a salary of $676,667 for 2002.
No tears were shed at Mr. Rovinescu's exit by several union officials. "I don't think his departure means a whole hell of a lot to us one way or the other, to be truthful with you," said Dave Ritchie, Canadian general vice-president of the International Association of Machinists and Aerospace Workers, which represents about 11,500 Air Canada workers. "We are committed to keeping this airline flying . . . he's gone and we're here."
Don Johnson, president of the 3,100-member Air Canada Pilots Association, also welcomed the departure. "We are disappointed with several aspects of the restructuring process to date, particularly that many decisions were made behind closed doors and without any input from the Air Canada pilots. . . . We hope that . . . process will [now] be more transparent and inclusive."
However, the Canadian Auto Workers union, which represents about 7,500 customer-service workers and crew schedulers, was conciliatory. "As far as the CAW was concerned, Mr. Rovinescu was always honest and up front in his dealings with [us]," said Gary Fane, national director for transportation. "We wish him well in his next endeavours."
Karl Moore, a business professor at McGill, said that Mr. Rovinescu's exit likely will "lower the temperature a bit and make for better labour-management relations."
Air Canada's main-line pilots and flight attendants have made no secret that they would like Mr. Milton replaced, and there are rumblings this may be in the cards. But a source close to Air Canada's board said this week that Mr. Milton is unlikely to step down of his own accord while the restructuring remains unfinished.
