Air Canada Vs Westjet: A Strategic Analysis

Part 1.

Synopsis, Symptoms, Problem, Causes. Value 10% of the course grade. Read the case carefully. See “Guidelines” regarding how to format the assignment.

From the case study provide a brief synopsis of the highlights and facts of the case. This should be limited to ½ to ¾ of a page.

From the perspective of Air Canada and its situation described in the story:

Identify and explain the symptoms.
Identify and explain the major problem or problems.

Identify and explain the cause or causes related to what are defined as problems.

Part 2.

Alternatives, Decisions and Plan of Action. Value 10% of the course grade

Based on your analysis from Part 1 develop and describe in detail three alternative solutions and the advantages and disadvantages of each. Remember an alternative may be a combination of different actions.
Identify which of the three alternatives you believe would be the best solution;

explain why it is the best solution, and how you would implement the strategy. Please note: The alternatives must be separate and distinct from one another. The three  options cannot be rolled together to form the final decision. Also note that firing or sending an employee out for re-training is not an acceptable  solution.

Competitive Strategies in the Travel Industry

Westjet decided that the sale of tickets were to be done in an innovative manner. An innovative guarantee of price was provided in the mode used for booking tickets. The main rivalry of Westjet comes from Air Canada, which strategically fired its CEO on the possibility of a bankruptcy. Some of the strategies of Westjet include promises made of never overbooking flights. The strategic implementation brought about by the company can mean the end of Air Canada. They have implemented the idea of providing customers with the flexibility to cancel flight bookings after 24 hours. This is a huge step taken by the managers of the company. The biggest problem, however, is the application of the price guarantee scheme. It is not quite clear as to the number of customers that the company have received from Air Canada and whether the price guarantee will be a permanent process. At one point Westjet even considered cutting down the snacks provided to the customers and start charging people who make calls online. It has been seen that the recession period has played a huge role in crippling the travel sectors. Companies like Conquest Vacations were forced to shut down due to the price cut off strategies implemented by Westjet. The progress so far indicates similar fortunes for Air Canada.

Air Canada showed symptoms of being in problem form the time of firing their CEO. The fact that the company was going to be bankrupt again within 5 years is an alarming point for the company. Air Canada faced a series of flight cancellations due to a snowstorm that prevented the customers from boarding the planes. With the growth of Westjet and its strategies, Air Canada has faced a crisis in terms of maintaining the satisfaction of the customers. The fact that the prices of the flights and the services provided by Westjet are superior to Air Canada is another alarming symptom provided in this case. The excessive competitive strategy of Westjet provides Air Canada with the disadvantages that have been looming in the travel industry. The recession is one of the periods in which most of the airline companies in Canada have suffered. The cost of the seats provided by Air Canada is about 36% higher than the costs of Westjet. It can be said that a high cost may attract customers but the quality of service has to be 100% accurate for customers to book seats at an expensive rate (Blut et al., 2015). With the decrease in revenue and the rising cost of maintenance increasing, the company is believed to be on the verge of being shutting down just like Conquest Vacations.

Factors Affecting Air Canada's Financial Situation

The biggest problem that Air Canada faced is the brand new rules that Westjet implemented on the cancellation of flights. The latest rules that were implemented by Westjet are that cancellation can be made after 24 hours of booking the flight. Not only this, full refunds were to be provided along with no extra charge for booking the next flight. This made it possible for Westjet to draw in more customers. The price guarantee provided by Westjet posed a big problem for Air Canada, as most of the customers of the company were loyal to Air Canada at one time. With the problems caused by the recession, Air Canada needs to fix the prices that it has implemented on the seats of the flights. This is mainly because the analysis shows that the seats of Air Canada cost about 36% more than that of Westjet. The fact that the company lost $1 billion on revenue of the $11 billion is alarming for the company. Another problem is the fact that the employee pension of the company suffers from $3.2 billion deficit. It is required that the company comes up with an additional $800 million to close the gap within the year. The full-time employees of the company cost about $214,000 as compared to $75,700 employee cost of Westjet.

The analysis of the case study shows that the root cause of the problem for the degradation of the condition of Air Canada is the excessive strategic planning of Westjet. The fact that Westjet had implemented strategic use in terms of pricing and quality of service, set up the cause for the problem of Air Canada. The fact that Air Canada aimed at gaining more money by increasing the amount of money for the seats is another cause for the rise of such problems. It can be said that the strategic applications of Westjet probed to be a high factor for the failure of Air Canada. Westjet managed to understand the situation properly and thereby make effective decisions on prices and quality of service. Apart from this, the high pay of the employees is also another factor that led to the cause of the problems. The case study provides evidence that the full-time employees of Air Canada make about $214,000. Thus, such mismanagement of funds caused the company to become bankrupt five years earlier. Thus, it can be said that the threat from a competitor like Westjet is a strong reason for the company to face bankruptcy and a possibility of non-existent in the industry. The recession period added more to the loss of business to Westjet.

Possible Solutions for Air Canada's Challenges

In the light of the scenario, it can be said that Air Canada can undergo certain changes that can help the company to rectify itself from the current situation. This also includes being competitive in the market and gaining back the loyalty of the staffs. One of the ways to cut the costs is by going through a major transition stage. The case study provides evidence that such transition can be done by downsizing the company. This means that the company need to reduce the number of workers, aircrafts and routes. The CEO is of the view that about 333 fleets of aircraft and about 6000 employees need to be discarded from their jobs. It has been seen that the bankruptcy as well as the restricting of the company, the existing employees have to work hard. However, with little motivation in terms of monetary as well as non-monetary benefits, it has become difficult for the employees to continue to work. Hence, it is necessary that the company indulge in motivational techniques that can help to keep the employees occupied. The CEO stated that if 10% of the 23,000 employees worked hard, then Air Canada could become competitive in the air industry again.

However, an alternate decision can be made that may refrain from imposing the huge cutbacks that are proposed by the CEO. For example, it can be said that instead of getting rid of the employees, Air Canada can encourage the employees to be more creative. The creativity of the employees can help in finding and solving the problems of the company. Such an alternative solution can help employees explore new areas and ensure that the employees find ways to solve the problems such as providing proper service to the customers. Another alternative source is to be bold while conducting a business. This can be related to the bold decision taken by Westjet to open up cancellation process within 24 hours of booking a flight. The risk of such a decision is excess, however, it is required that Air Canada, find ways to mitigate the risks. On the other hand, the advantage of this alternate solution is that Air Canada does not have the treat to lose customers. As seen from the case study, due to the non-cancellation procedure, people who could not board the plane during a snowstorm were not refunded the money. However, with the adoption of such a practise, this threat can be mitigated. Apart from the two mentioned solutions, a third solution that can be implemented is the nurturing of talent. It has been seen that Westjet has a separate head office that nurtures talented employees. Air Canada can adopt a similar approach that can help the company to deal with the issues. The advantages of such a strategy are that Air Canada will not have to short on employees at any time.

Having analysed the possible solutions along with the alternate solutions it can be said that in order to succeed in the competitive market, it is needed that Air Canada adopt the solution to take up bold decisions. This need to be in accordance with the culture of the company and need to be based on the skills that the employees possess. The resources of the company also need to come under scrutiny before the implementation of such a strategy. The advantage of implementing this strategy is that it can help the managers to analyse the situation at hand in a more detailed manner. Based on the analysis, the decisions to cut off ticket prices or make innovative moves to satisfy customers can be adopted. Thus, the creativity of the managers as well as the employees can be developed which may help in saving Air Canada from bankruptcy.

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