Air Canada - John M. Baker

Building a Global Airline for Canada

The last 12 months at Air Canada have seen instability, media coverage, government involvement and high drama, the likes of which seldom occur in Canadian business. An earlier issue of Lexpert reported on Onex's unsuccessful hostile takeover bid for Air Canada, followed by Air Canada's successful acquisition of Canadian Airlines. During the hostile takeover period of August to November 1999, Air Canada's management team was divided into two: one group was assigned to deal with the Onex campaign, and the other dedicated itself to the ongoing management of the airline.

The Company: The new Air Canada, after merger integration with Canadian, will be the world's 11th largest airline, with 39,000 employees and grossing in excess of $10 billion. The restructuring of Canadian's debt of $3.5 billion and the integration of technology, of workforces and routes is a daunting challenge and still has a number of months to go. In addition, the summer period of 2000 is guaranteed to generate significant pressures as peak travel loads are handled.

Air Canada has four corporate goals: 1) to be a profit leader among major airlines; 2) to leverage the strength of the two great airlines; 3) to build a strong entrepreneurial culture; and 4) to be a proud standard bearer for Canada.

There is still a gamut of short-term objectives for the airline, and many will involve the legal services team. These include rationalizing the flight schedules, negotiating new collective agreements and commercial relationships, integrating support systems, and managing a global network. Air Canada will begin to apply the "wave" system to supplement the Toronto "hub" system of equipment and flight scheduling. Changes to the schedule will be introduced later this summer, permitting west-bound planes originating east of Toronto to continue westward after landing in Toronto, rather than turning around and returning east.

The internet is rapidly transforming how Air Canada's clients relate to the airline. February 2000 saw the introduction of personalized ticketing and CD's issued to frequent fliers to help in trip planning, reservations, and customization of travel-related (hotel) arrangements. Express check-in services and electronic ticketing are removing another layer of intermediaries.

Title: Vice President and General Counsel

Age: 51

Principal Outside Counsel: Stikeman Elliott's Montreal office receives most of the corporate/commercial work referred to outside counsel in Canada. Heenan Blaikie has acted for the airline for years on labour and employment matters.

The Law Department: Air Canada's law department currently numbers nine lawyers, and focuses on three broad areas: first, general commercial, including aircraft financing, procurement, airport issues and joint ventures; the second is litigation, including labour and employment; and the third is in the regulatory domain including code-sharing, and other international alliance arrangements, and international bilateral negotiations in collaboration with the Canadian government. If the financial restructuring of Canadian Airlines is successful, then an integrated law department will be created of approximately fifteen lawyers.

The role of the law department has changed substantially in the last five years, from gatekeeper and contract negotiation and review, to a partnership role with different segments of the company. Although the workload is greater (as is job satisfaction), growth in the size of the department has been restrained.

The Star Alliance: The airline business is a global business. As a founding member of Star Alliance three years ago, Air Canada has played a brokering and facilitation role particularly in regard to the relationship with larger carriers such as United Airlines and Lufthansa German Airlines. The integration with Canadian will add strength and reach in the Pacific and Australia as well as in South America. The international arena is one where governments play a significant role, since the designation of international routes are negotiated between governments on behalf of their locally-owned carriers. As such, at least 40 per cent of airlines are national flag carriers and, in most cases, icons of the countries they represent. The addition of four carriers later this year will bring the number of Star Alliance partners to 12.

Portfolio Diversity: The airline's legal portfolio does not contain a lot of "commodity" work. Instead, there is significant diversity. The more visible components are major procurement and joint venture transactions, and aircraft finance transactions. Less visible, but of equal importance, are marketing/sales and systems outsourcing transactions. As a case in point, Air Canada currently outsources its IT functions to IBM. The corporate real estate portfolio and relationships with airports around the world require agreements and the involvement of the legal team. The labour and employment portfolio comprises an increasingly important area and service is provided in conjunction with outside counsel. Both e-commerce and the growing importance of ancillary businesses, such as loyalty management (Aeroplan and CIBC Aerogold card) and third party airplane maintenance, repair and overhaul activity are creating new demand for legal services at Air Canada.

Regulatory issues abound with the integration of Canadian. And then there is the constant need to contribute to standards setting and harmonization as a member of IATA, ATAC, and ATA.

Management Challenge: Delivering the scope and breadth of legal services required in a complex business environment poses a genuine challenge. The integration of Canadian will have ramifications in every area of law and business endeavour. The legal implications of Air Canada's expansion into related business activities needs to be managed. John views creating growth opportunities for legal talent within the airline to be a priority.

Style: As a strong team builder and team player, John likes to quarterback transactions and has applied his negotiation and communication skills to a diversity of business objectives. Air Canada's relatively flat structure allows him to participate fully in offering strategic business advice as a member of the executive team.

Career: A graduate of Osgoode Hall Law School, John was called to the Bar in 1976. During the early years, he worked in Toronto both in-house and with Osler, Hoskin & Harcourt LLP in a corporate and commercial practice. He joined Northern Telecom Inc. in 1982, primarily in support of corporate staff and operational sectors. John moved to BCE Inc. as senior legal counsel in 1985. From 1986 to 1990, he worked in both Toronto and Montreal as Vice-President and General Counsel, first of BCE Publitech Inc. and then BCE Information Services Inc.

When BCE decided to sell off its printing and packaging businesses inter alia to Quebecor, John and his wife took the opportunity to travel extensively for ten months, including seven in Africa, during which time they were married in Zimbabwe. On his return, he assumed the position of VP, General Counsel and Commission Secretary with the National Capital Commission in Ottawa. John then joined Air Canada in 1995.

Family: John's wife, Robin Geller, is a lawyer and an engineer. She is the Registrar and Director of Admissions of McGill University. They have two sons, Dylan, 8, and Stephen, 6.

Reading: Currently midway through Louis de Bernière's novel and love story, Captain Corelli's Mandolin, set on a Greek island before and during World War II. As a counterweight, John is also reading Thomas Petzinger, Jr.'s Hard Landing-an account of the air wars in the United States post-deregulation.

Relaxing: In addition to actively participating all his life in sports such as hockey, soccer, golf, tennis and squash, he continues to passionately follow sports as an avid spectator around the world.

Richard G. Stock, M.A., FCIS, C.ADM., CMC, is a partner with Catalyst Consulting. Catalyst Consulting has been designated the Preferred Supplier for Legal Services Consulting by both the CBA and the Canadian Corporate Counsel Association.