Introduction
History of Air Canada
Air Canada was first founded in 1937. On April 10, 1937, the
Canadian government passed an act establishing Trans-Canada Air
Lines. From that time, Canadian had their own air lines. In 1965,
they changed the name to Air Canada, which employed more than 22,000
people and had sales and assets totaling close to $6 billion. The
eighties were a difficult time for airlines. Air Canada had
increased its debt in order to upgrade its fleet, and to buy
regional airlines that could feed into its national network. At that
time, Air Canada and Canadian Airlines (the two major carriers in
Canada) were battling very badly for market share in a fight that
left the two airlines losing more than a million dollars a day
during the depths of a recession that severely affected the travel
industry. By the end of 1999, Canadian Airlines lost in the
competition and Air Canada became the only dominant carrier. Air
Canada impressed not only the Canadians but also the world by its
wonderful service, and great compete ability for few years. However,
when come to the 21 century, Air Canada has to face some new
problems -- competition from new discount airlines, such as WestJet,
and the fallout to air travel from Sept. 11. [1] Now the company is
still struggling to find a way to solve all the troubles. Whether
they will pass the hard time or break down, anything is possible.
Air Canada Family[2]
Air Canada Cargo is a member of Cargo 2000. It is a worldwide air
cargo industry. It creates a specific route map for every booking.
Its objective is to implement processes, backed by quality standards
that are measurable and supported by data to improve the efficiency
of air cargo, thereby enhancing customer service levels while
reducing operational costs. It brings major airlines and forwarders
with the unique goal of implementing a quality management system
together.[3]
ZIP
Zip, created as a response to Calgary-based WestJets success in the
domestic market, flies to eight Western Canadian cities, as well as
to Ottawa and London in Ontario.[4]
Air Canada Jazz
Jazz has been designed for North America. It helps people to travel
between Canada and the United States. It is one of the largest
regional airlines in the world.
Air Canada Jetz
Air Canada Jetz is a jet charter service by Air Canada offering
premium business service to satisfy the travel needs of corporate
clients and professional sports teams.[5]
Star Alliance
Star Alliance is an airline network to provide all the flexibility
to customers. It is made up of Air Canada, Air New Zealand, ANA,
Asiana Airlines, Austrian, bmi, LOT Polish Airlines, Lufthansa, SAS,
Singapore Airlines, Spanair, Thai Airways International, United, US
Airways and VARIG.[6] With it, it is easy to arrange your timetable
and you need not worry about your trip any more.
Aeroplan
Aeroplan is a program for helping Air Canada to promote its
business. Customers earn Aeroplan Miles when they travele by Air
Canada. When the Aeroplan miles reaches to certain amount, customers
will get a free ticket. This kind of Aeroplan Miles can transfer
among the Star Alliance members. It can help to increase the
customer loyalty.
Big Challenge Today
After being the leading position of Canadian airline service for
years, Air Canada was exposing more and more problems. They lost the
altitude they should have to the customers. The arrival and
departure time was not as accurate as before, losing a luggage
becomes normal, the service was worse, and the food was colder.
People started to hate everything that Air Canada used to be proud
of. They didn’t like to stick with Air Canada any more. When WestJet
came out, they soon turned to that one. Air Canada lost a huge
number of customers. Now it is facing a very embarrassed bankrupt
dilemma. Although Air Canada has been seeking help from the
government for a while, no real actions were taken yet. A way must
be found out to save the business becauseCanadian need their own
airline. Air Canada is for sure the best option, if not the only
option.
Corporate Marketing Review
Company Market Mission
Canada’s flag carrier is recognized as a leader in the global air
transportation market by pursuing a strategy based on value-added
customer service, technical excellence and passenger safety.[7]
Market Environment
Current situation
Air Canada is Canada’s largest domestic and international
full-service airline, providing scheduled and charter air
transportation for passengers and cargo. For all of 2001, Air Canada
reported a record loss of $1.25 billion. Air Canada lost another
$428 million in 2002 and warned it would need to make more deep cuts
to keep flying. The terror attacks made a bad situation much worse.
Air Canada’s revenues plunged as passengers stayed away.[8]
Massive losses in the past two years have North American carriers
facing bankruptcy. The following figures are examples of the
contrast of the profit and loss among some major airlines in the
world. As we can see from the figures, most of the airlines are
losing money, except WestJet, the major competitor of Air Canada.
Airline Employees Fleet size 2001/2002 combined profit/loss[9]:
American 99,200 793 -US$5.3 billion
United 72,500 550 -US$5.4 billion
Delta 60,000 831 -US$2.5 billion
Air Canada 40,000 335 -C$1.7 billion
WestJet 3,200 38 +C$89.0 million
Competition
For Air Canada, The domestic picture is bleak: Air Canadas share of
the market has fallen to 59 percent from 70 percent - with the
difference gobbled up by much smaller carriers: the cheery, cheap
WestJet and Jetsgo, one of the newest airlines in Canadas skies. On
the other hand, the international travel had been a bright spot.
International routes tend to be more profitable because passengers
are willing to pay more and pay for more amenities. Aircanada will
pay more attention to international market, which will be discussed
in the recommendation section .
Marketing Mix
Price
Companies usually adjust their basic prices to satify different
needs from various customers and according to different situations..
The following example will show the great price difference among
different air companies. The seat sale from Air Canada and Air
Canada Jazz is offering a $49 one-way fare between Vancouver and
Calgary, based on a round trip purchase. The regular return flight
for an advanced booking ticket with restrictions is $178. These
tickets must be bought by January 24 and are good for travel from
January 25 to March 15.
The sale from Air Canadas Zip offers discounts on its western
flights until February 28. A one-way ticket between Winnipeg and
Calgary begins at $39.99 – a 68 per cent reduction from the regular
$124 fare. Travel must be booked by January 28.
On Wednesday, CanJet announced a 50 per cent-off sale on all its
regular fares and for every seat. Tickets must be purchased by
January 31 for travel up to April 30. Sample one-way fares include
Toronto to Halifax for $62 and Moncton to St. Johns for $52.
WestJets seat sale offers special fares on most routes for travel up
to February 19. Its Vancouver-Edmonton one-way fare is $69, while a
Calgary-to-Victoria ticket is as low as $40. Tickets must be booked
by January 28.
Customer connection
· Membership[10]
Air Canada’s frequent flyer program, Aeroplan, is Canada’s most
popular program among airplane’s passengers. Over 6 million members
earn miles toward reward travel to destinations served by Air
Canada, which includes both regional airlines and worldwide partner
airlines. Aeroplan miles earned on Star Alliance flights count
toward achieving top-tier membership status. In addition, members
earn miles through an extensive network of car rental companies,
hotels, telephone companies and affinity credit card companies.
· Customer Relationship Management
Customer Relationship Management enables Air Canada to quickly and
easily identify its most profitable clients so that the company can
meet their travel needs more effectively.
Air Canada has selected MicroStrategy’s enterprise-wide decision
support technology for its Customer Relationship Management Project.
The new system will advance Air Canada’s goal of leading the
industry in developing better relationships with its clients by
allowing the airline to analyze frequent flyer program data and
better identify customers’ travel behavior.
Market Analysis
Immigrant Population
Immigrant population in 2001 Census.
Date source from www.statcan.ca
Canada is an immigrant country. The immigrant policy is an important
long-term policy in Canada. From this chart, we can know Europe and
Asia are the largest source of immigrant population of Canada.
People must take planes to Canada from their countries. That is our
target market for Air Canada.
As we know China and India are biggest country in population. So
Chinese and Indian are the largest source of immigrant population of
Canada in Asia. Chinese is also the third language in Canada.
Immigrant population in 2001 Census.
Date source from: www.statcan.ca
Revenue Analysis
Date source from: www.sedar.com
Date source from: www.sedar.com
This is the revenues of Air Canada in first quarter in 2004. It
shows that the passenger revenue is the main and important revenue
of Air Canada. So we focus on the passenger market.
The chart shows the percents change from the prior year in passenger
revenues by major market for the most recent five quarters. The
first quarter of 2003 was negatively impacted by the war in Iraq and
first stage of SARS crisis. We can know that from the second quarter
of 2003 to the first quarter of 2004, the changes of revenue of
Pacific are the biggest one. So how to catch the Asia market will
directly affect the system revenue.
Competition Analysis
Growing competition[11]
Air Canada (AC) and Canadian Airlines (CAI) flew a combined total
of 77% of all seats in Canada in August 1999 (AC flew approx 43%
and CAI, approx. 34%). In July 2001, the merged carrier flew about
65% of all seats in Canada.
During the same period, WestJet’s share of capacity grew to 14%
from 7% and Canada 3000 grew to almost 9% of total capacity from
4%.
The numbers of seats available in total are 143,125 in 2001 and
141,890 in 1999. They are almost the same. It appears that other
carriers have replaced any reductions in capacity made by Air
Canada.
source from: www.tc.gc.ca
Not Growing Competition[12]
At the same time, these numbers also tend to indicate that there
has been no real growth in the market (in other words the pie is
being redistributed, but it hasn’t gotten any bigger).
· Air Canada’s recently announced reductions in flights and
capacity could lead to new opportunities for other carriers to
expand their services.
Air Canada, Air Transat, WestJet and Canada 3000 each follow
different business models and offer four very different packages
of services and prices.
The economic downturn could have a permanent impact on business
travel patterns, reducing the high-yield market segment and
increasing demand for low-fare travel.
Strength[13]
CANADIAN CITIES SERVED: Air Canada serves 143 Canadian direct
city-pairs (almost twice the number of all other carriers (78)
combined).
RURAL CANADA: Air Canada has reduced capacity in regional markets
by about 7% in 2000 and 13% in 2001. Other carriers have replaced
some of this capacity, but not completely.
Competition has grown rapidly, particularly in the low-fare
market, and has replaced capacity removed by Air Canada overall.
On the other hand, Air Canada still has the lion’s share of
domestic seats (65%).
Air Canada is the only domestic carrier which is linked to a
global alliance and can offer 894 destinations in 129 countries.
The absence of a standard definition of competition makes analysis
difficult and fairly subjective.
Service language
CATHAY PACIFICAIR CANADA
Reception Asian desk clerkWestern desk clerk
Front desk informationChinese and EnglishEnglish service
Internet check in LineYesNo
Air stuffAsian and WesternWestern
Service languageChinese and English and some Asian
languagesEnglish
Medias
Newspaper & MagazineChinese & EnglishEnglish
TVIndependence TV
48 Channels and Games; self services; offer many movies in
different languagesShare a big screen
No choice.
Offer English movies
FoodChinese food and western foodWest food only
This is a comparison between Air Canada and Cathay Pacific on the
flight between Canada and HongKong. It is a sample of competition.
Language service is one of the power tools in competition. Many
travelers are not good at English, and they don’t have to learn
English just for their travel. They need helps in their languages
specially when they feel uncomfortable. Most passengers enjoy and
prefer the friendly service in their first languages, although they
can speak English.
Complaint Analysis
· From those data, it is not difficult to understand that why
Air Canada is the company that the passenger complaint a lot. That
is the main reason that Air Canada lost its 9 percent market share
in the competition.
· Service is the main problem. Service improvement is very
compelling. It is difficult to promote unless the services satisfy
the passengers.
Complaints Received - All Carriers Incsues -
Air Canada
Air Canada*310
Air Transat64
Skyservice58
Jetsgo19
WestJet6
HMY Airways5
Zoom Airlines5
Other68
Air France15
United Air Lines6
British Airways5
Kuwait Airways4
Lufthansa4
Air Comet4
Delta Air Lines4
Total577
Quality of Service205
Ticketing100
Flight Disruptions86
Baggage69
Frequent Flyer Program35
Reservations34
Denied Boarding19
Fares19
Other31
Total598
Air Canada includes its affiliate
Recommendations
After analyzing the company’s marketing situation and their
marketing strategies, we would like to give Air Canada some
suggestions on the basis of our knowledge. There are three key steps
that Air Canada can take to save the company from the dilemma
situation. That is to gain back the Canadian’s trust, to target more
customers, to know very well the advantages/disadvantages that their
competitors have. The detailed explanation of each step follows.
To gain the Canadian’s trust
Air Canada used to be a proud brand for the Canadians, but not any
more. Air Canada is on the edge of bankrupt and it is losing the
Canadian’s trust. Customers complain the delayed flight, rude
service, and lost luggage about Air Canada. Air Canada was deemed
the worst managed brand in the country in a survey conducted by
Spencer Francey Peters and the Strategic Counsel. Instead of loving
Air Canada, Canadians love to hate Air Canada. This is the biggest
challenge that Air Canada is facing. How to regain Canadian’s trust
and loyalty is the first problem need to be solved.
· To change the leadership style
Air Canada’s CEO Robert Milton seems to become the main target of
complains. He has difficulties in raising enough cash to cover the
regular working cost. Both the CEO of WestJet and Southwest (Clive
Beddoe for WestJet, Herbert Kelleher for Southwest) set out to be a
model for their employees by being common working staffs if they’re
on-board. They build their company culture by setting examples for
their employees because they do not treat themselves different from
other employees. Milton is different from these two CEOs. He seems
usually put himself in a higher level than common employees. This
leadership style cannot help him and the company to gain
well-regarded brand for customer service as the other two. This
leadership has to be changed, especially when the company is
suffering bankrupt protection. It is time for everyone in the
company, including the high level management, to work together. In
fact, high-level management should be the starting point for this.
· To improve the service
The service is the key element to attract customers. Today’s Air
Canada is known by its rude service. I had a personal unpleasant
experience with Air Canada. I asked for a blanket on the Air
Canada’s flight from Vancouver to Toronto just after I got on the
plane, and I was told to wait until they’re not busy. The awful
thing is I asked three times, and always got the same answer “would
you please wait”? This answer seems to infer me that as a passenger,
I am not patient. I have to wait without bothering those busy staffs
again. The worst thing is that I did not get one until I got off the
plane. How could you expect this kind of rude service to gain
customers’ trust? To improve the service is really essential for Air
Canada.
· To gain the trust from employees
No matter how well the CEO designs the plans to save the company, it
is the employees who set out to put the paper or oral plans into
actions. It is the responsibility of high-level managers to build a
trust relationship between employees and the management. Milton
complains a lot about his employees, which definitely won’t do any
good to build a trust bonds between himself and his employees.
People are tired of all the whining that Milton does.
To gain the trust from employees, the high-level management has to
make sure they can provide an environment that employees can feel
they are part of the company and be proud of being part of the
company. A friendly working atmosphere comes from top to down. The
high level management has to start it. Having shares of the company
is only the finical strategy to feel part of the company. The
company needs to do more than this. Especially for Air Canada now,
having shares does not mean a lot. Having a positive company
culture, enhancing the coherent of the company are all strategies to
gain employees’ trust.
To target basic customers
Target the right group
Air Canada has spent lots of time focusing on the frequent fliers.
It is not wrong, but it is wise to realize that people who only fly
once or twice a year are counted as the great portion of the
customers. Air Canada is the most frequent choice that most
Canadians would take when they are on international travel. This is
a very bright side especially when we consider the great number of
the immigrants come in and out Canada every day. Air Canada should
be very pleased with this segment of business and should really
think of how to keep this potion of space. Realizing this point, Air
Canada then should develop marketing strategies to keep and enlarge
this portion of the market. Canada is an immigrant country. There
are around 25,000,000 new immigrants come to Canada, plus those old
immigrants fly back and forth between their home countries and
Canada. It is a really considerable huge number. Air Canada needs to
domain the share of market that they are having and they are sure to
have in the future.
Use proper strategies to target proper market
Although Air Canada has been suffering from losing money in recent
years, their Asia routes has been earning money. On the basis of
this reason, it is advisable to divide Air Canada into four
independent sub-companies: Asia market, North America market, Europe
market, and Africa market. Three basic strategies can be used.
To provide new aircrafts such as Boeing747, Airbus 300. Install
micro-TV on the back of each seat, this will attract lots of young
customers. Because of the open international education changes
programs between Canada and other Asian countries, young students
have become the main stream of the customers. Most of these young
students travel at least once a year between China and Canada.
To arrange a staff who can speak Chinese on each plane fly to
China. Among the airlines to Asia, around 80% customers come from
China. It is important to provide Chinese food, Chinese magazines,
newspaper, and even movies.
It is also advisable to arrange staffs who can speak Chinese on
some check in area in each international airport. Broadcast in
Chinese is also advisable at the airport. Customers will
definitely appreciate this consideration and would like to take
Air Canada as their choice.
Same strategies can be executed in India and South Asia market.
The other three sub-companies which in charge of different region
market also need to adjust their rules according to their own
specific situation. Since the variety of all these markets, it is
much easier for each sub-company to develop its goals and strategies
in order to walk out of the current dilemma.
Use the advertisement wisely
Air Canada is now spending great amount of money on advertisement.
In fact, Air Canada is already widely known because of the continue
broadcast of its bankrupt protection. No matter how many good words
they can put on the ads, they cannot really change the company’s bad
names easily. Since there are so many other developmental issues in
Air Canada need money, the high level management department and the
financial department should carefully plan how to use the limited
money wisely. In addition, beautiful words only cannot attract more
customers. It needs to be combined with real actions.
To know the competitor well
Know what the competitors are doing well
WestJet, the major competitor of Air Canada in the national and
North America market, is a small airline that rapidly developed in
the passing seven years. WestJet has a very high reputation in the
travel and transportation sector with the 31% support in the survey
as the best-managed name in this area, while Air Canada only has
10%, as the second-best-managed name. Having a good reputation,
WestJet is ahead of Air Canada in customers’ trust. In order to beat
the competitors, Air Canada has to do more. It is necessary to
improve the service to gain back customers’ trust. It is also
necessary and wise to develop some new service to attract customers’
attention first, and later their trust.
It is also noticeable that another important reasons that people
choose WestJet is because of the low price. It is really hard for
Air Canada to compete WestJet on price. Customers are looking for a
combination of a good price and a good experience. Price is not the
point. A company cannot simply relay on cutting the fares to keep
its competitive ability in the market. Air Canada needs to think out
new strategies that can draw customers’ attention away from price to
other aspects such as the quality of the service, the variety of the
service etc.
Know the problems that the competitors have
WestJet is currently replacing its older aircraft with much newer
planes. WestJet’s income is positively high in these years. However,
because the costs such as maintenance and depreciation will increase
with the aircraft ages, WestJet would not expect today’s high income
in later years. Realizing this point, Air Canada should not be panic
when they look at the WestJet’s balance sheet. This does not mean
that Air Canada is not taking WestJet as serious competitor. Knowing
the difficulties that the competitor will have in the future will
give Air Canada confidence to make long-term business plans. It will
also help Air Canada make short-term business strategies as well.
Conclusion
For these days, the stock value of Air Canada has been dropping. It
is really the time for people in Air Canada to face their fates.
Whether the company will pass the hard time or get bankrupt in the
future? A way must be find to solve the problems. From our point of
view, we suggest to divide the whole company into several small
sub-companies by different serving regions.. Make these companies to
be more customer-oriented. At the same time, improve the service
quality and reduce the cost. Each employee of Air Canada should work
hard to help the company and to survive in the difficulties, and
this company culture comes from top to down. It is a long way for
Air Canada to go. We are hoping the return of the legend.
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