Taking off to the future
For Air Canada’s Vice President of International Sales, Virgílio Russi, the time has come to create new standards to shape aviation and business
by Andréa Ciaffone
As humankind we are taking off towards new times and we have to create new routes because maps have changed, the equipment is different and the speed at which we need to reach the destination is increasing. In this context, all the experience of the last decades must be aligned with the perceptions of what the near future will bring us. Based on this vision, Air Canada’s Vice President of International Sales, Virgílio Russi, has been piloting the company’s recovery in the global market.
Brazilian, while still a teenager, he identified with Canada during an exchange program in Winnipeg. He studied Business Administration at the University of São Paulo and, since the 1990s, has been working in sales in the travel and tourism sector. Today, as VP, he is responsible for Air Canada’s international sales on a worldwide scale and, with his team, he determines the future of the airline through his choices of routes and destinations. According to Giancarlo Takegawa, the company’s Country Manager in Brazil, Russi is an example of great management skills combined with an excellent perception of contexts and a lot of empathy. “He was my first boss at Air Canada and our partnership spans decades,” says Takegawa.
It is said that humankind has advanced more in the last 30 years than in the previous 3,000. How does this reflect on your journey working in aviation?
I experienced the transformation of the aviation world intensely. I started at Canadian Airlines, which was closely linked to American Airlines. With the creation of StarAlliance in 1997, the competitors, led by AA, began to move towards creating another alliance, OneWorld, which started its activities in 1998 and I experienced this process very closely. Shortly after, in the year 2000, Air Canada bought Canadian Airlines in a year-round merger process that was completed in early 2001 – it was a time of many consolidations in all markets. So, I went through two bankruptcies, a merger, the 9/11 crisis, and the SARS crisis, which had its epicenter in the West in Toronto. At that time, as the traffic ended, Air Canada filed for bankruptcy. So, as an executive, I experienced it all. In 2005, I moved to Canada to work at the Head Office and that also brought me new perspectives.
How do you see the relationship between global and local at Air Canada?
When I became sales manager for Canada, which includes all domestic routes, it was a totally different experience because it means being at the company’s head office taking care of its main market – the domestic one – which in terms of volume of routes represents 50%, while international routes account for 30% and the United States accounts for 20% of flights. Having a Brazilian, in a Canadian company, taking care of the domestic market makes Air Canada’s meritocracy philosophy clear. This comes as a surprise to people from other cultures, but it makes perfect sense in the Canadian social and corporate structure. Being a foreigner in Canada means nothing. We currently have around 400 people at our head office in Toronto and at least 20 languages are spoken there. Canada is multicultural. Proof of this is that, while the domestic market represents 50% of flights, the international market accounts for 50% of revenues – therefore, the focus has been on growing more in this segment to shield the company from any domestic instability and provide more flexibility and greater resilience to the company.
What was the pre-pandemic scenario like and what happened as of March 2020?
From 2016 to 2017, with the arrival of the new Boeing 777 and 787, we had a fantastic growth! We started operating in 34 new destinations and were among the companies that grew the most in this period. As a result, the company’s shares had their best performance at the Toronto Stock Exchange in the last 10 years – a rare accomplishment for a traditional and high-risk segment such as aviation. The feat is even more significant when you consider that there are large Canadian companies both in international sectors such as mining and energy and many high-value startups, linked to the forefront of technology. The driver of this was the international area.
We ended 2019 with a reserve of CAD 6 billion, we were very well structured financially. We even got criticized for sitting on so much money. The answer at the time was that if we found the right investment, the reserve would be used. Having this capital helped us a lot during the pandemic and was key to getting the loans we needed to keep the business running during lockdown periods. Initially, we lost a lot of money, about CAD 1 million per hour, but the loss has been steadily reduced. In the last quarter of 2021, it was less than CAD 6 million a day, or a quarter of what it was in 2020. We were also able to reduce the financial cost thanks to reserves. Today we have an even bigger reserve: CAD 8.5 billion.
“From 2016 to 2017 we had a fantastic growth!
We started operating in 34 new destinations
and were among the companies that grew
the most in this period”
Aviation is an expectation exercise conditioned by experience and predicting the future is part of the business. Suddenly, the pandemic arrives. How did it impact the company?
All of a sudden, we dropped to 10% of our schedule and 5% of our demand. We even considered stopping operations completely, but we came to the conclusion that it would be more difficult to start over from scratch. We kept very few domestic flights and some essential connections – London, Paris, Hong Kong – and, at the request of the government, we carried out dozens of repatriation flights because we had to bring Canadians home from all over the world. We spent months making these flights that were not commercial but humanitarian and that came crowded from all over the world: Morocco, France, Italy, Chile, Peru, Brazil. In parallel, several passenger aircraft were converted into freighters to transport protective equipment such as masks and aprons, and then we transported the vaccines. We made about 11,000 cargo flights during the pandemic to keep the supply chain active. In regular times, the company makes 10,000 passenger flights per month. So, we can say that we were doing less than 10% of our regular operations and carrying cargo instead of passengers. It was a total inversion of our routine, but it was the best way to meet the existing demand during the isolation period. The effect of this change was that Air Canada, which did not operate in cargo, is now in this market. In fact, at least eight Boeing 767 aircraft in our fleet, which are older models, will no longer transport passengers and will be converted to cargo. The pandemic crisis really opened this opportunity for a new business.
After this shock, what were the lessons learned?
In aviation, we always worked on revenue management by making comparisons to past performance data and, suddenly, there was nothing to compare to. All experience and references dissolved in the face of the pandemic. The question was “what’s next week going to be like?” and there was no way to compare it with the same week in previous years to match the demand. So, we created a new area at Air Canada to make forecasts based on other elements. They look at absolutely everything! For example, they created a mathematical index to define how much demand changes according to the level of restrictions at each location; calculate the demand according to the vaccination level of each country – in detail, such as age group, number of doses, the various contagion and hospitalization curves, etc – all to make a demand projection more based on the future than on references we have from the past. In the beginning it was difficult, but now the forecasts have been quite correct.
“Our future is 100% customer centric, which is
a big change in the context of airlines,
more focused on operations than service.
Everything we do needs to be aligned with
the client’s desires and values”
How did you set Air Canada’s new priorities?
We did everything based on this study group, called Demand Recovery Group, this area has greatly helped the commercial and operations department to follow the same path. To arrive at trends, we conduct interviews, analyze the activity of the sectors, in short, we use a series of indicators to understand where the demand will come from and how big it will be. For example, we believe that around 20% of the corporate market will replace travel with video conferencing for weekly and monthly internal meetings. But we believe that visits to customers and partners will continue to be made in person because people need this rapport to generate new business. This was the case in Brazil. When we reopened flights on September 7, 2021, demand immediately rose. We jumped from 15% occupancy to fully booked flights – immediate reaction. In other markets, people were much more cautious.
What values will shape the future of Air Canada?
The customer. All we’ve been talking about these days is building customer-centric strategies and services. Our future is 100% customer centric. And that’s a big change because airlines have always seen themselves more as operating companies than service companies. Today, it has become clear that everything we do has to be aligned with the customer’s desires and values.