Air Canada Case Study

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Service[r]

“Air Canada has fleets of Airbus A330, Boeing 767, Boeing 777, and Boeing 787 wide-body jetliners on long-haul routes and uses the Airbus A320 family aircraft, including the A319, A320, and A321 variations, and Embraer E190 family aircraft on short-haul routes” (Air Canada annual report 2015, P9). The company operating these divisions include Air Canada Cargo, Air Canada Express, and Air Canada rouge. Their extra-subsidiary department is Air Canada Vacations which provides vacation packages to over 90 countries. Air Canada now days operates more than 1530 flights daily. Furthermore, according to JACDEC, the firm has the 4th best safety record, just behind Cathay Pacific, Emirates, & EVA Air. [s]

Further more, the company has carried more customers than ever, their annual report of 2015 says that the aircraft is flying more than 41 million people during the year, and the load factor is 83.5 per cent. “The Ipsos Reid Canadian Business Traveller Survey determined 86 per cent of Canadian frequent business travelers prefer Air Canada; an improvement of 17 percentage points in the airline’s ratings in the national survey over the past seven years” (Air Canada annual report 2015, P9). Driving this priority has been Air Canada’s ongoing fleet renewal program. During the year of 2015, Air Canada has come down [t]to six more Boeing 787 Dreamliners. 787 [u]aircraft performed significant efficiency, and customer satisfaction goes over [v]the older aircraft which they replace. There is the competitive opportunity between complementing the 787 program and their Boeing 777 and Airbus A330 fleet as well. That is the reason why they move to outfit and provides consistency with the 787 next generation cabin design. “Lastly, Air Canada rouge is maturing, reaching at year-end 39 of a planned total of 50 aircraft in its fleet ”(Air Canada annual report 2015, P9). The report says their leisure carrier has an overwhelming expectation. They plan to grow the profit of international leisure markets at a cost of 25% lower than they have reached with the same type of aircraft in main line fleet.

Current Strategies[w]

Air Canada’s prime goal is to become the best global airlines. To achieve this goal, the company continues growing profit for their shareholders and suppliers, enhancing customers service level to improve customer experience and fostering the best employees group for the society. They are focusing four core strategies which are identified and implement cost reduction, business expansion, enhance customer service and foster positive culture change.

There are some key achievements in 2015. “Increased EBITDAR margin by 5.7 percentage points when compared to 2014. Reduced CASM by 9.3% from 2014, Adjusted CASM decreased 0.2% from 2014. Had the Canadian-U.S. dollar exchange rate remained at 2014 levels, adjusted CASM would have decreased 3.6% when compared to 2014, implemented a new passenger revenue management system to optimize the airline’s revenue performance by selling on the basis of a passenger’s full trip itinerary rather than on individual flight legs ”[x](Air Canada annual report 2015, P10). Air Canada eager to focused on seeking new international growth opportunities to increased profit and diversify its work which also lowers its risk profile. In 2016, nearly 90% of the airline’s planned to be growth is occurring in international markets, which approximately one third is facing to serving new international routes. Air Canada’s growth strategy pay attention to the selective expansion of the airline’s network and development of experience from international customers.

From providing a consistent customer service and growing the company, the premium customer base has become a very important aspect of Air Canada’s business strategy. “Air Canada continually strives to improve customer loyalty and generate positive referrals for new customers, and the airline recognizes that its continued success is dependent on consistently delivering superior value and innovative products, providing the high level of customer service and anticipating the changing needs of customers” [y](Air Canada annual report 2015, P10).

In 2016, the company will keep promoting employee awareness which is the importance of Air Canada for achieving its financial goals and keep messaging the healthy financial statement and profile to confirm their stability of low risk, further opportunity, and profitability.

Individual assessment 2

According to this report, we can figure it out what should an airplane company do, when it face to its audiences. The most important thing is to enhance its service level to meet customers’ demand. Through our analysis, we know that Air Canada tried to make a balance between customers’ complain and competition in this industry. But we still believe that it could solve problems better when we have problems during our flights. From setting up a system to reflect complaining of customers, Air Canada can make progress in the future.

Financial capacity analysis

(Canadian dollars in millions and the initial statistics are based on 2015 annual report of Air Canada)[z]

- Solvency analysis

Solvency is refers to the enterprise to repay all the debts that are due. Solvency analysis is an important aspect of enterprise financial analysis, through this analysis can reveal the financial risk of the enterprise. Enterprise managers, creditors and equity investors think highly of the enterprise's debt paying ability analysis. Solvency analysis [aa]is mainly divided into short-term solvency analysis and long-term solvency analysis.

Long term creditors and owners of enterprises are not only concerned about the short-term solvency of enterprises, but also more concerned about the long-term solvency of enterprises. Therefore, we would like to talk about the long-term solvency now.

Asset-liability ratio shows how much of the total assets of the enterprise is obtained by borrowing.

asset-liability ratio = [pic 1]*100%

= [pic 2]* 100%

= 9.97%

As for asset-liability ratio, the higher the ratio, the worse the ability to repay the debt, the greater the financial risk, on the contrary, the stronger the ability to repay the debt. As we can see[ab], the asset-liability ratio in 2015 was 9.97%, it showed that in 2015 the company's assets from 9.97%