NATURAL RESOURCES MAGAZINE
           
 

CEO of the Year

CEO of the Year

When Brian Chafe helped sell PAL Group to a Winnipeg firm, it was so he could create a stronger local company. He includes employees and clients in his definition of family— and invests in them and their communities accordingly. And, he’s determined to take PAL Group into the stratosphere of aviation and aerospace defence by staying firmly grounded in Newfoundland and Labrador. Yes, Chafe’s career has been one of consistent growth for PAL, but also of doing the right thing, for the right reasons— proving once and for all that big business can have a big heart.

If you had asked Brian Chafe at 10 a.m. on November 12, 2014, where he’d rather be, he might have answered anywhere but where he was— which was standing on a stage inside Hangar 1 at the St. John’s International Airport in Newfoundland, preparing to explain to 200 uncertain-faced employees that the PAL Group of Companies (the venerable, hugely successful 40-year-old aviation company they all worked for) had just been sold.

Exchange Income Corporation (EIC), a publicly-traded, Winnipegbased firm that already owned six other Canadian aviation companies and boasted revenues north of one billion dollars annually, had officially agreed to fork over $246 million in cash and stock to acquire the PAL Group.

PAL, the brand umbrella for the legal entity known as Provincial Aerospace Ltd., was definitely a worthy prize. Though Newfoundland-birthed-andheadquartered, it was also a globally evolving $185-milliona- year company whose various moving pieces now numbered not only a successful scheduled regional airline and an aviation services division, but also an innovative aerospace unit with worldwide sky’s-the-limit potential. To make the company an even more attractive prize, PAL had announced only the month before that it had teamed up with Airbus Defence and Space to bid on a lucrative, longterm Canadian government contract to replace this country’s aging fleet of fixed-wing search and rescue aircraft.

Brian Chafe’s reticence had nothing to do with the terms of the sale. As PAL’s CEO for the past year, Chafe was without-doubt convinced the sale represented an excellent deal not only for Gus Ollerhead (PAL’s long-time owner, key shareholder and driving force) and for EIC, but also for the PAL Group and its employees too.

He wasn’t the only one. Wings, Canada’s aviation magazine, praised PAL’s founders for having “built a wonderful company [that has] gone global.” Thanks to the new deal, it added, PAL “has more financial resources to really dominate its market segment… Under its current CEO, Mr. Brian Chafe, there is nothing the company cannot achieve in its markets with the financial support of EIC.”

Chafe was also certain of the deal’s win-win-win-win, in part, because he himself had worked “hand-in-glove” with Ollerhead to put the details of the sale together.

But could he now convince his own employees it was good for them?

Chafe understood many of those employees, especially the lifers who had worked for PAL their entire professional careers, would be skeptical. Perhaps most concerning to the still largely Newfoundlandbased work force was the reality the new owners were from “away.” Would they decide to shift the company’s corporate headquarters westward? Did they intend to centralize, to consolidate, to cut and chop, to seek the sort of bigpicture corporate “synergies” that would ultimately disappear PAL’s successful collection of semiautonomous, inter-connected parts into a mash-up company in which they would no longer feel welcome? And if that did happen, what would then happen to them?

Chafe had answers—reassuring answers—for all of their questions.

The reality, he could tell them, for instance, was that PAL was already poised for a new and exciting next stage in its existence, including having built its own first-class management team that could lead the way into that future. But reaching that next stage, he would need to explain, would require significant investment and even more corporate patience. While Gus Ollerhead’s smarts and passion for the business had brought the company to the enviable place it was today, Ollerhead had other business and personal interests. He wasn’t prepared to sit back for 10-15 years until those next-stage PAL investments could bear fruit.

In 2013, Ollerhead had decided it was time for him to sell.

Which had been when he and Chafe quietly began to look for a buyer. Not just any buyer, to be sure, but one who understood and appreciated the company’s history and strengths, and also “supported the owner’s vision moving forward.” And, of course, not to forget finding a buyer who could (and, more importantly, would) willingly reach into its own deep pockets to make vision reality.

Ollerhead and Chafe invited several potential suitors to kick PAL’s tires, considered competing bids and eventually “downselected” until they’d found what they considered “the best fit for the people who remain, and for the company.”

The company they’d found, of course, was Exchange Income Corporation, “a diversified, acquisition- oriented corporation focused on opportunities in… aviation services and equipment, and manufacturing.” EIC had become the pointy end of a broader movement to consolidate Canada’s aviation industry as it transitioned from the pilot-driven, mom-and-pop ventures of the last half of the twentieth century to a new generation of well-funded, professionally managed 21st century corporate entities.

What made EIC’s bid especially interesting to Chafe and Ollerhead, however, was that EIC’s “acquisitions strategy,” publicly laid out on its corporate home page, was not only to “target strong niche businesses with strong cash flows” (check!) but also, and perhaps more important, “to retain the key management personnel following acquisitions.” Double check!

“We don’t buy damaged companies,” Mike Pyle, the CEO of EIC, explained to the CBC after the sale. “We buy strong performing companies and then hopefully give a little extra access to capital and those kinds of things to enable them to grow perhaps a little faster than they could under private ownership… [EIC’s motto is] don’t change the culture of the company you buy.”

In other words, EIC was willing to let PAL be PAL.

While Brian Chafe harboured no doubt he had an exciting, upbeat story to share with his employees that day, he also admits, “I was very nervous.”

That was, in part, because of the corporate culture that had developed within their privatelyowned company during the decades since its founding. “Gus is a very private person. I’m very much that way too.”

Although speculation about a possible sale had been rife within the gossipy aviation community for months, a PAL spokesman had insisted to a CBC reporter as recently as a month before the announcement that he was “not aware” of any plans to sell the company. “We kept it all pretty close,” Chafe acknowledges today with a mix of pride and embarrassment. In fact, he adds with a laugh, PAL—not counting its airline division’s public charitable giving and community ventures—is Newfoundland and Labrador’s “best kept secret.”

No more. “Now suddenly, we were going to be a public company that reported and was reported on,” Chafe says. “We had to embrace that, including me personally.” And he had to start embracing it today, beginning with reporting to the company’s own employees, to explain to them who their new owners were, that their jobs were safe, that EIC had bought them because they were successful and only wanted to give them the necessary tools to become even more successful. Convincing them of that was critical, Chafe knew, because “we would need buy-in from our employees” if the sale’s promise was to be realized.

So Brian Chafe stepped up to the microphone.

The company that would eventually become the PAL Group was born in 1974 when St. John’s entrepreneur Tom Collingwood helped launch a modest St. John’s-based flight training school and charter service known as Aztec Aviation.

By 1983, it had changed its name to Atlantic Airways and begun operating scheduled services to a dozen destinations in Atlantic Canada, as well as to the French islands of St. Pierre and Miquelon. In 1988 as part of its corporate growth strategy, Atlantic scooped up Eastern Flying Services Ltd.— another flight training and air courier operation, this one based in Nova Scotia and helmed by Gus Ollerhead—and changed its name again, this time to Provincial Airlines. During the following decade, Ollerhead would become the company’s chief decision maker and Collingwood would fade into a key shareholder role.

Although it was best known for its network of scheduled regional air services, Provincial had also, by the mid-1980s, slipped beneath the radar, so to speak, and almost accidentally found itself in the aerospace business.

The back story: every year, thousands of icebergs, some weighing more than one million tons, sheer off from glaciers on Greenland’s west coast and begin their random, dangerous, often untracked trek south down through what’s known as Iceberg Alley. The Alley is a huge swath of key North Atlantic ocean that includes the fish-rich Grand Banks, the vital Great Circle shipping lanes and the then-increasingly important oil and gas fields off Newfoundland and Labrador.

What if the company could come up with a way to spot and track icebergs from the air?

Provincial already had begun to work with the federal department of fisheries on an ad hoc basis to troll the coastal skies off Canada’s east coast, monitoring foreign vessels illegally fishing in Canadian territorial waters as well as spotting Canadian vessels catching out of season.

In 1985, Ollerhead devised a scheme to install militarygrade radar (the kind used to track submarines) on the belly of Provincial’s King Air 200 patrol aircraft so they could more easily identify and track icebergs and other objects in the water while they were conducting their fisheries patrols. But when he approached the manufacturer to inquire about buying the defence-related radar technology, the manufacturer initially refused to sell. Provincial persisted and eventually the company agreed to sell it.

Though it might not have seemed like it at the time, that became one of the key turning points in Provincial’s evolution. Its new spotting capability allowed it to not only solidify its relationship with fisheries (it’s landed the fisheries patrol contract five different times since 1990) but also to win surveillance and reconnaissance contracts with other federal departments, including environment and the military, and, of course, with oil and gas companies exploring off Newfoundland and Labrador. The company was on its way.

Brian Chafe, it is fair to acknowledge, was not a CEO to the airline born.

The son of a longtime Pepsi-Cola distributor and his work-at-home wife, Brian was born in St. John’s in 1969, five years before Aztec Aviation launched. After graduating from Brother Rice High School, he attended Memorial University where he earned a commerce degree with a specialty in accounting.

Like many Newfoundlanders of his age and the island’s economic stage, his early 1990s career path soon led him away from home. “No one wanted to leave Newfoundland,” Chafe recalls, “but we had to.” He joined Loomis Courier in St. John’s, and was soon promoted to increasingly important jobs in Halifax, Hamilton and eventually Mississauga.

Which was where Provincial Airlines finally tracked him down in 1998. The airline had had business dealings with Chafe through Loomis and were clearly impressed. So was Chafe. “What I remember is that [Provincial was] very customer focused. If there was a problem, they would bend over backwards to solve it.”

So, when the airline “gave me a call and asked me to come home,” Chafe didn’t hesitate. “To be able to come back was a big deal.”

At the time, Provincial was looking for a chief financial officer who could not only sort out the books but who was also operationally focused. “By then, I’d had experience running branches, so I also understood business, not just how to produce books.”

That said, Chafe’s initial job as CFO was to get the systems in place that would allow the company—it had just 170–180 employees at the time—to better understand the state of its own business and where to go next. “We were coming out of a bad time and had to set the standard for the future.”

cover-charityWhile many, including some in the organization, considered accounting “as an after-thought,” Gus Ollerhead “included me, supported me.”

At the time Chafe joined the company, he confesses now, “I didn’t realize the challenge it would be to build a successful company in Newfoundland in those tough economic times. It was the toughest environment for an aviation company.” What got the company through those times, according to Chafe, was Ollerhead himself. “The ownership was unwavering. We were never going to fail. The owners instilled that in me, in a lot of us, and built a foundation. Gus would set the goalposts, and as soon as I got close, he would move them.” Chafe laughs. He means that, he says today, in the best possible way. “He became my mentor.”

Ollerhead, in fact, encouraged Chafe to return to school to earn an MBA at Western University’s Ivey School of Business so he’d be better equipped to lead the company when the time came. When he returned to the fold with his freshly minted degree in 2004, Chafe was rewarded with a new title: vice president of finance and administration.

Why was he so keen to push his career beyond his accounting expertise? “The excitement,” he says today. “There’s something new every day. You’re building, you’re looking toward the future. I always wanted to be involved in developing strategy, dreaming of what we could be.”

One of his first jobs with the company, in fact, was negotiating an innovative partnership between Provincial and the Innu Economic Development Corporation to create Innu Mikun Airlines to provide passenger and cargo services to remote and far flung communities in Labrador.

What the company could become in the larger world of global aviation became clearer in the early 2000s when Provincial decided to market itself internationally, piggybacking on the experience and expertise it had gained during 20 years of providing maritime patrol services in Canada. “We took [potential international clients] on special mission flights, displayed our proven product and it was quite a success,” Chafe told the Globe and Mail at the time.

That paid dividends in 2006 when Provincial Aerospace bested other, larger competitors to win a $150-million, 10-year contract to provide surveillance services for the Netherlands Antilles and Aruba out of Curacao. “That gained a lot of attention for us worldwide.”

Three years later, Chafe headed up the company’s 15-member negotiating team that struck an even bigger deal against “heavy competition”—a $370-million contract with the United Arab Emirates to modify and operate two DASH 8 Q300 aircraft to patrol that country’s offshore with “the most technically advanced maritime patrol program in the world.”

“It needed a lot of patience,” Chafe says of the deal, “but it was worth it. There was a lot of money at stake and you had to prove you can deliver. You had to earn the customer’s trust.”

The result was that Provincial “established itself as a serious player in this defence business segment,” creating a new source of revenue for the company moving forward.

By then, Provincial Aerospace Ltd. was effectively operating three different companies (PAL Airlines, PAL Aviation Services and PAL Aerospace), each with its own distinct revenue stream, but all connected under one branded corporate umbrella.

PAL Airlines, which had been the foundation upon which the whole enterprise was built, had quietly become eastern Canada’s second largest regional airline after Air Canada Express. Every week, it provides more than 200 scheduled and charter flights throughout Atlantic Canada and into Quebec. In addition, the company operates air ambulance/medevac services for governments and health providers in Newfoundland and Labrador, New Brunswick, Nova Scotia and Quebec. And its important partnership with Innu Mikun Airlines continues.

PAL Aviation Services provides everything from catering, to ground services, to de-icing, to maintenance, to even hotel room bookings for commercial, corporate and military clients from fixed base operations stations in St. John’s, Goose Bay, Halifax and Montreal.

PAL Aerospace very quickly became a “global leader” in the maritime surveillance market niche, developing a “vertically integrated aerospace and defence business,” that provided clients with “intelligence, surveillance, reconnaissance and maritime patrol aircraft operations and systems,” including modifying, maintaining and operating those aircraft and systems.

In the end, the aerospace division and its exponential growth potential is what convinced EIC’s Mike Pyle to buy PAL. “With many parts of the world facing increased threats of economic instability, conflict, terrorism and pandemic disease management, security is of a paramount concern for many countries,” he explained in a statement. “Outsourced maritime surveillance, which is in its infancy in world security, will play a growing part in fulfilling these needs.” PAL, he said, is “well positioned to take advantage of these growth opportunities… [but] it is the strength of the management team led by Brian Chafe that is truly exceptional. They have built a labour force that is as good as any we have ever seen and we believe will be the engine to grow PAL in the future.”

Brian Chafe’s meeting with employees on the day of the sale to EIC went far better than he’d anticipated. “I tried to address the concerns I thought they would have.” While the company’s employees appeared to feed off his enthusiasm for their new future, Chafe and his management team also understood they had now committed themselves to creating a new and very different corporate culture of communication moving forward.

“Communication breakdowns can be devastating,” Chafe says, but “when we are communicating well, everything just clicks.”

With 800 employees now spread around the world, the company reinstituted an internal newsletter, The PAL Flyer, “so all employees felt more informed, engaged and connected.” It created an employee engagement committee to ask staff members for their “ideas and inspiration to help us make PAL the best place to work.” And it brought in 50 key leaders from various company offices around the world for a three-day retreat to collectively “review the strategic direction of our company for the next five years.”

These days, the head office leadership group meets weekly “to discuss company direction and current issues. Our senior management group meets twice annually, in a retreat-style environment, to discuss goals, share experiences and challenge each other to drive collective success.”

More tangibly, Chafe announced last year that PAL was introducing a maternity leave top-up program and improved retirement benefits for staff, as well as a scholarship program for employees’ children and—now that it is a publicly traded company—“a competitive stock option plan so that all employees have an opportunity to become an owner and directly benefit from the growth of the company.”

Explains Chafe: “We want to be able to say to people, ‘Come, work for us and be here for your whole career.’”

It does seem to be working. The PAL Group, which now boasts close to 850 employees, is continuing to grow.

Last year, it acquired Halifaxbased CarteNav Solutions, an aerospace software development company that has created “cutting edge software used for intelligence.”

It also established a dedicated research and development division to push innovation, including the use of unmanned systems for airborne special missions. Although the company already had a history of innovation, the new R&D group has taken an additional step of inviting employees to submit their own ideas and “get access to the required support and resources” to bring them to fruition.

PAL also opened a business development office in Ottawa to both be closer to potential partners in the aerospace and defence industries and also to be “more centrally located to chase national and international business opportunities.”

In December 2016, one of those opportunities became reality when Ottawa awarded its fixed wing search and rescue aircraft replacement program contract to the consortium of which PAL Aerospace was part. PAL will be responsible for the in-service support and maintenance for the new aircraft for up to 20 years.

Says Chafe: “We want to double our size in the next five years to be one of the largest airlines in Canada and to be the premier aerospace and defence company in intelligence surveillance and reconnaissance in the world.”

No surprise then that Brian Chafe, the CEO of the PAL Group of Companies, is Atlantic Business Magazine’s CEO of the Year for 2017

When he walked up on stage at the St. John’s Convention Centre on the night of May 17, 2017 to accept his award, Brian Chafe began by conceding, “I’m not great at this stuff.”

As had been the case back in Hangar 1 on November 12, 2014, however, Chafe need not have worried.

Graciously deflecting attention to PAL’s leadership team “at tables 30 and 58—the true leaders that drive our business,” he spoke about his own personal mantra, learned at the feet of Gus Ollerhead. “I know I’m not just responsible for over 800 employees. I am really responsible for them and their families, which makes somewhere between 2,400 and 3,000 people I feel accountability to. In tough times, that has kept me up at night.”

Following his short speech, Chafe sat down for a brief on-stage interview with the evening’s emcee, comedian Mark Critch. It was intended to be a light, friendly interview with softball, occasionally humorous questions. Chafe handled himself well enough, but it was clear there were moments—Critch’s interview itself, for example—when Chafe wished he could simply return to being that private person he had once been.

Coming to the end, Critch asked him what had been his biggest challenge as a CEO.

Brian Chafe didn’t hesitate. “This could be it,” he answered with a smile.

Not even close.

Q&A
Celebrity emcee Mark Critch giving Atlantic Business Magazine’s 2017 CEO of the Year Brian Chafe (CEO, PAL Group) the 22 Minutes treatment, with a fun and informative impromptu interview at the awards gala

On joining PAL… “I didn’t realize the challenge it would be to build a successful company in Newfoundland in those tough economic times. It was the toughest environment for an aviation company.”

Culture shock… “Gus (Ollerhead, former owner, PAL Group) is a very private person. I’m very much that way too. Now suddenly, we were going to be a public company that reported and was reported on. We had to embrace that, including me personally.”

Moving target… “The ownership was unwavering. We were never going to fail. The owners instilled that in me, in a lot of us, and built a foundation. Gus (Ollerhead, former owner, PAL Group) would set the goalposts, and as soon as I got close, he would move them. He became my mentor.”

The most important quality for a leader to have… “The ability to listen and connect with others: leaders have to do less talking and more listening to understand where others are coming from. You don’t have to always agree but you do have to understand and empathize. You hire smart people for their talents and abilities so you need to harness that and listen carefully. To plan and execute successfully, you have to get alignment—you have to ensure everyone is in the same boat and rowing in the same direction!”

Serious business… “I know I’m not just responsible for over 800 employees. I am really responsible for them and their families, which makes somewhere between 2,400 and 3,000 people I feel accountability to. In tough times, that has kept me up at night.”

What he loves about his job… “There’s something new every day. You’re building, you’re looking for the future. I always wanted to be involved in developing strategy, dreaming of what we could be.”

cover-QA

Leave a comment

Your email address will not be published.

*



ADVERTISEMENT