MONTREAL - Air Canada's chief executive received more than $7.8 million in compensation last year as he oversaw a dramatic turnaround in the airline's financial performance and share price.
According to regulatory documents filed ahead of airline's annual meeting in May, Calin Rovinescu's total compensation was down from $9.5 million in 2012, when he received a $5-million award on the third anniversary of this employment with the carrier. That one-time payment was part of a 2009 employment contract that lured him from Canaccord Genuity, the investment bank where he was a co-founder.
Excluding this retention payment, Rovinescu's compensation increased 72 per cent from the $4.5 million he received in 2012, which in turn was up from almost $4 million in 2011.
His salary was unchanged at $1.4 million in 2013, but share-based awards surged to $2.6 million, stock options to $1.24 million and his annual bonus to $2.26 million. He also had a $290,800 pension value.
Rovinescu oversaw dramatic financial improvements at the country's largest airline in last year.
Among other things, he was credited with achieving a record $384 million in adjusted profits, a 14.7 per cent improvement in on-time performance and the launch of the Air Canada Rouge low-cost subsidiary. He also oversaw new pension funding regulations with the federal government, the development of international routes and reached or surpassing cost-reduction targets.
Air Canada's (TSX:AC.B) shares had the best performance of any Canadian company last year, more than tripling in value. They fell in the months after hitting a 52-week high of $9.90 in January, but surged 25 per cent last Friday after the company upgraded its outlook for the first quarter and said it expected a strong summer season.
The stock closed down 12 cents, or 1.58 per cent, at $7.47 on Wednesday.
The guidance prompted several analysts to upgrade their forecasts and target price for the airline's shares.
The proxy circular said chief financial officer Michael Rousseau's total compensation increased nearly 58 per cent to $2.3 million last year, including $527,000 base salary.
Benjamin Smith, the chief commercial officer, received $2 million, up from $1.2 million in 2012.
Meanwhile, Air Canada announced Wednesday that it will begin offering passengers across North America in-flight air-to-ground Wi-Fi connectivity starting in May.
Air Canada has been testing the Gogo Wi-Fi system on two Airbus 319s operating in Canada and the United States under and agreement with Panasonic. The remaining narrowbody fleet of Airbus, Embraer 190s, CRJ-705s and Embraer 175s will be outfitted with the system with the goal of equipping 29 aircraft this year. The service is expected to be available on 130 aircraft by December 2015.
Air Canada says the system, which allows passengers to search the Internet and use e-mail, offers peak connection speeds comparable to mobile broadband services available on the ground and will be offered at "competitive" prices.
In the U.S., Gogo costs US$5 for one hour of use, $14 for 24 hours and $39.95 a month for a single airline, while for $49.95 a month a passenger can use it on all airlines.
Current regulations prohibit the use of cellular phones for voice communication.
"In today's connected world, our customers want to access e-mail, mobile device applications and the Internet wherever they are, both to increase their work productivity and expand their leisure options," Smith said in an news release sent from one of the aircraft.
WestJet Airlines (TSX:WJA) announced in February that it plans to replace seatback television monitors in its aircraft starting next year as it adds a new entertainment system that will allow passengers to access TV, movies and the Internet with their electronic devices while in the air.
The satellite system will be installed on one aircraft later this year for testing and be expanded over the next few years as it replaces seats with slimline alternatives and installs USB and power outlets.
It's part of the Calgary-based airline's ongoing efforts to increase revenue.
David Tyerman of Canaccord Genuity said he expects Air Canada's profits from its new service "may prove limited."
He said Gogo is gaining users and reported US$8,375 average monthly service revenue per aircraft in 2013. That could translate into about $5.2 million of revenue annually for the 130 Air Canada aircraft, assuming the airline receives 40 per cent of that rate.
But Tyerman cautions that pricing for the service may change. He points to the many hotels which once charged for Internet service but now provide it for free. And the airline JetBlue is offering free, lower-speed Wi-Fi through at least June.
"In the end, Wi-Fi may prove one of the costs of doing business in the airline world," he wrote in a report, pointing to other carriers that already offer the service.
"Accordingly, this announcement may have little long-run implication."
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