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Steering Air Canada Through Troubled Times Case Solution

Solution Id Length Case Author Case Publisher
1401 1178 Words (7 Pages) Gerard H Seijts, Ann C Frost, Ken Mark Ivey Publishing : 9B06C005
This solution includes: A Word File A Word File

Robert Milton, the Chief Executive Officer of Air Canada, has been facing numerous issues during his tenure at the company. He had overseen the airline’s operations during difficult times such as the September 2001 attacks, the Sever Acute Respiratory Syndrome (SARS) threat, the war on Iraq and negotiations with the labor unions. Observers are now concerned about the future sustainability of the airline and whether or not Milton’s decisions have led towards the lack of employee commitment and motivation towards the company.

Following questions are answered in this case study solution

  1. Introduction

  2. SWOT Analysis

  3. PEST Analysis

  4. STEEPLE Analysis

  5. Porters 5 Forces

  6. ​Conclusion

Case Analysis for Steering Air Canada Through Troubled Times

The following report conducts an in-depth analysis of the organization based on the information available in the case. The external analysis is presented by a SWOT analysis whereas the internal analysis is supported through PEST, STEEPLE, and Porters 5 Forces.

2. SWOT Analysis

• Strengths
  • Air Canada is the only major full-service airlines in Canada

  • The carrier has been in business since 1937 and is renowned worldwide

  • Wide network of around 150 destinations of cargo and passenger

  • Partnered with Star Alliance – 700 global destinations

  • Many other subsidiaries including online travel sites and airline subsidiaries e.g. Tango, Zip Air, and Air Canada Jazz

  • Low-cost carriers such as Zip and Tango compete more effectively

  • Ranked amongst the world’s safest airlines

  • Voted best airline in North America in 2002, for the second time in three years

  • Aeroplan, the frequent flyer plan voted best in the world in 2003

  • Milton’s success is evading the hostile takeover and successfully merging with Canadian Airlines

• Weaknesses
  • Milton has not been able to tackle labor unions appropriately

  • Job cuts are seen as a solution to price tickets lower to compete effectively

  • Constant changes in structure and governance for the airline

  • Culture and employee attitude and sense of entitlement to lifetime employment, ever-increasing wages and government bailouts

  • Stormy labor relations and work stoppages throughout history

  • Losses for the airline post 9/11

  • Failure to develop good relations with labor unions

  • Four separate labor unions to deal with

  • According to Milton, the airline has a weak business model

  • The airline has run into a pension deficit

• Opportunities
  • Tango, and its low-cost structure enables Air Canada to compete more effectively in the market

  • Zip was the best weapon to compete against WestJet, a major competitor

  • Growing consumer demand

  • Contracts between Zip, Tango and Air Canada on services such as pilots, maintenance, information technology, etc

  • Milton has the right attitude; he is not a schmoozer and a straightforward leadership style

• Threats
  • Milton’s treatment of union leaders as adversaries and publicly mocking them

  • Poor public image of Milton

  • WestJet is the major competitive threat for the airline

  • Milton’s statements in public e.g. “I feel like I’m Dr. Evil in an Austin Powers movie”

  • The pseudo-government organizational culture

  • Constant media scrutiny, have to be wary at all times

  • Canadian Airlines’ past performance was not very good, and the merger would have certain repercussions for Air Canada

  • Post merger stress between management and labor unions was difficult to manage

  • September 11 attacks left consumer demand plummeting

  • New discount airlines were a major threat as Air Canada was not able to cut costs

  • The SARS outbreak affected the industry heavily, added to the issues

  • Rising fuel costs meant ticket prices had to be increased

  • Unions did not agree to concessions 

3. PEST Analysis

• Political Factors
  • The Canadian government had been bailing out Air Canada in the past e.g. post 9/11

  • The company was started initially by the Parliament of Canada

  • Slots at major airports were owned by the government

  • The federal government has a role to play in operations e.g. merger agreed based on the condition that the airline maintained routes to smaller communities whether or not they were profitable.

  • Lay-off requests were overruled by the Canada Industrial Relations Board

• Economic Factors
  • The costs for Air Canada were rising continuously resulting in the losses. These were fuel costs and the passenger security tax at airports.

  • The growth rates in the aviation industry had plummeted due to 9/11 and SARS outbreak leaving passenger demand taking a downward trend

  • Other economic forces and competition from new carriers added to the economic issues the airline faced

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