The Plane Spotter

By Steven Frank/Montreal

Canadians are generally a tolerant bunch. But last summer the nation of 30 million nearly went berserk when record demand for air travel led to a spate of flight delays, cancellations and lost baggage. Unlike Americans, whose similar woes might come from a dozen airlines and agencies, Canadian flyers had a solo target for their rage: Boston-born Robert Milton, 40, the in-your-face president and CEO of Air Canada, the country's dominant carrier. Newspaper columnist Scott Feschuk, writing in the National Post, summed up the mood neatly: "Dear Bob, Your freaking airline totally sucks. Sincerely, Everyone." Even the Canadian government had cause to agree. The airline lost the luggage of federal Transport Minister David Collenette in May, and later delayed several flights he was taking.

Like everyone else, Collenette is faced with learning to love Air Canada or finding another way to travel long distances--for instance, walking. After a bruising battle with a Canadian financier in the fall of 1999, Milton took over his principal competitor, Canadian Airlines, which was 25% controlled by American Airlines. He has been merging it into the world's 11th largest airline: Air Canada has almost 80% of the air-travel market within Canada and controls about 43% of the traffic between Canada and the U.S. The airline has plans to start a low-cost carrier in 2001 that will compete directly with the five domestic firms still aloft. And because Air Canada is the only international carrier with regularly scheduled flights across Canada, it has played hardball with giants like British Airways, hiking the price BA paid Canadian Airlines to have its passengers flown to its destinations of Montreal, Toronto and Vancouver from smaller Canadian cities.

Milton is in the midst of what some experts call the most difficult airline integration in the history of North America. "Trying to improve service while merging the operations of Air Canada and Canadian Airlines is like attempting to douse a fire while an open pipeline of fuel is poured on it," says HSBC Securities analyst Ted Larkin. Air Canada, with a workforce of 23,000, and slightly smaller Canadian, which was bleeding $1.35 million a day, had "computer reservation systems that didn't talk to each other," says Milton, and workers accustomed to "beating each other to death." Milton made a very public commitment to improve service by the end of the year. Says Larkin: "This is an amazing test by fire for a guy who just turned 40."

Milton won his prominence in a bareknuckle corporate brawl. Only a few weeks after assuming the presidency in August 1999, he was hit with a hostile takeover bid backed by AMR, parent of American Airlines. Milton won a court verdict reaffirming a law that said no single shareholder could own more than 10% of Air Canada, effectively scuttling the bid. Then, with backing from United Airlines and Lufthansa, Air Canada swallowed its competitor for a fire-sale $61 million. Milton summed up his business philosophy: "I don't mess around with other people, and I don't like people messing around with me."

Some people think Milton's dislikes extend to any form of competition. When a small regional airline started up in eastern Canada, Air Canada responded last fall with sharply reduced fares on some routes. When the Competition Bureau, a federal consumer watchdog, ordered Milton to stop price cutting on five of those routes, Air Canada hit back with a legal challenge questioning the bureau's constitutional power to unilaterally restrict fare changes. The case is winding through a Quebec court. Air Canada dived into hot water again in October, when a corporate official sent voice-mail messages about the airline's profit forecasts to select stock analysts. The stock plunged the next day, outraging investors not privy to the information. Milton denied Air Canada had done anything wrong.

Milton, who as a teen used to hang out near airports watching planes take off and land, has been in love with the airline business his whole life. The son of an international-business executive, he grew up in Hong Kong, Belgium, Britain and Singapore. After graduating with a management degree from Georgia Tech in 1983, he used $15,000 from his dad to help start a company that chartered planes to larger airlines. He sold out five years later and became an industry consultant. Four years after that, his Atlanta-based boss, Hollis Harris, was named Air Canada president, a job he held until 1996. Harris brought Milton to Montreal to rationalize Air Canada's inefficient cargo division.

Milton is still a plane spotter at heart. His office, overlooking Montreal's Dorval Airport, is brimming with models and photos of planes. He has turned his desk to face Dorval's runways, and he has binoculars within reach to see if planes are docking on time--and at the right gate. Now he has only to get Canadians to love his hobby as much as he does.

--With reporting by Ian Jack

With reporting by Ian Jack