Steering Air Canada Through Troubled Times Case Solution

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