CAPSTONE CASE 1 CASE ANALYSIS AIR CANADA VS THE OTHER AIRLINES The chosen airline is Air Canada....

Question

CAPSTONE CASE 1
CASE ANALYSIS
AIR CANADA VS THE OTHER AIRLINES

The chosen airline is Air Canada. Use other airlines for comparison: Air France/KLM,
American Airlines Group, Aeroflot, China Southern Airlines, Delta Airlines, Lufthansa, Singapore
Airlines, Southwest Airlines, Spirit Airlines, United Airlines Holdings.

Your main goal in this analysis is to figure out those factors and suggest ways to improve
Air Canada’s performance by making changes to the company’s strategy. Please plan to devote at
least 50% of your submission to discussing your proposed plan of action and explaining its
projected effects on various performance metrics. You should use financials to determine where
your chosen company stands relative to the other companies in the industry. Here are some
financial indicators that you might find useful: market share, ROA, total asset turnover, fixed asset
turnover, gross margin, operating margin, revenue growth rate. Since firm performance fluctuates
over time, it’s a good idea to use the average over the last few (3-5) years not including TTM. The
financials provide raw evidence of financial strengths and weaknesses but don’t say anything
about the underlying factors that affect performance. You must use theory, logic, and evidence to
uild and explain your action plan for your chosen company. If the company is in the middle of
the pack in terms of performance, it may have some competitive advantages coupled with some
problems, or neither. In any case, you must offer an action plan to improve the firm’s
performance. You may want to discuss ways to boost its competitive advantages while also
dealing with its disadvantages, weaknesses, and problems. If the company has neither, please
suggest ways of building competitive advantages without creating disadvantages (or at least
creating more competitive advantages than disadvantages). In all cases, your action plan should
address both the short term (1-3 years) and the long term (5-10 years). You should discuss the
pros and cons of your plan (including any performance tradeoffs that the firm is likely to incur)
and explain why the pros outweigh the cons.

TOPICS TO ADDRESS IN PAPER
● Analysis of external environment
● VRIN analysis of resources of capabilities
● Industry analysis
● Air Canada appears to be in the middle; not an industry leader or poor performer
○ Discuss competitive advantage and explain why
○ Discuss disadvantages with an action plan to improve performance
○ Discuss new ways to build competitive advantage
● Develop an action plan for Air Canada
○ Develop short term plan (1-3 years)
○ Develop a long term plan (5-10 years)
○ Discuss the pros and cons of your plan
○ Discuss why the pros outweigh the cons

● Air Canada vs Air France/KLM, American Airlines Group, Aeroflot, China Southern Airlines, Delta
Airlines, Lufthansa, Singapore Airlines, Southwest Airlines, Spirit Airlines, United Airlines
Holdings.

AC AF-KL
M
AA Aeroflot CSA Delta LufthansaSingaporeSW Spirit UA
Market share
ROA XXXXXXXXXX XXXXXXXXXX XXXXXXXXXX 5.93
TAT XXXXXXXXXX XXXXXXXXXX XXXXXXXXXX86
FAT XXXXXXXXXX XXXXXXXXXX XXXXXXXXXX 1.46
GM XXXXXXXXXX XXXXXXXXXX XXXXXXXXXX XXXXXXXXXX
OM XXXXXXXXXX XXXXXXXXXX XXXXXXXXXX XXXXXXXXXX
RGR XXXXXXXXXX XXXXXXXXXX XXXXXXXXXX XXXXXXXXXX
Net Income XXXXXXXXXX14345

XXXXXXXXXX

1843
(5-yr
avg.)
621.2
(5-yr avg.)
2535.6

298.8
(5-yr
avg)
3374.4
(5-yr
avg.)
Market
Capitalizatio
n
6.9821
Bil
1.9435
Bil
9.4120
Bil
75.544
Bil
8.345Bil 24.808
Bil
6.7397
Bil
9.340 Bil XXXXXXXXXX
Bil
2.665
Bil
12.61
Bil

air-canada-case-analysis-qig1u1hd.pdf

Azra S · Accepted Answer

Air Canada- Financial Analysis and Solutions
Abstract
Air Canada is the flagship airlines of Canada and is the leader in the aviation industry in Canada. This report has been prepared as an analysis of Air Canada’s performance in relation to the performance of a competitor American Airlines Group. The report discusses the implications of the financial reports of both the companies, analyses Air Canada’s weaknesses, its causes and proposes remedies to the problems it faces while analysing the trade-off between short term and long-term gains. 
Objectives
This report aims at-
· Displaying the airlines’ current financial position in relation to a competitor
· Proposing a solution to the financial problems faced by the Air Canada
Analysis of external environment
The external environment of Air Canada can be analysed in the form of Political, Economic, Social, Technological and Ecological environments. The political environment of Air Canada is unfavourable in that the aviation industry is a heavily taxed industry giving airlines situated outside Canada an advantageous position. The economic environment is favourable with lots of opportunities for growth. The social environment is also favourable with Air Canada providing the best in safety and quality standards to its clients.  The Technological environment is a highly opportune one, with growth in technology at an unprecedented pace. The Ecological environment is unfavourable that give advantage to competitors while restricting the growth opportunities of the current players (Kyoung Bae, & Shin Young, 2015).
VRIN analysis
The VRIN analysis allows a company to assess its competitive advantage. The VRIN Analysis of Air Canada shows-
Valuable- Air Canada has the sufficient finance, an excellent personnel and good management of operations. It needs to focus on developing its marketing in order to improve.
Rare- Air Canada’s rare resources include its high safety standards, comfort standards and sustainability.
Inimitable- Most of Air Canada’s resources can be imitated and it needs to develop a differentiation strategy	
Non-substitutable- Most of Air Canada’s resources are non-substitutable.
While most of Air Canada’s current resources do not offer it competitive advantage, the following are some of Air Canada’s resources that are VRIN compatible
· Financial strength
· Eco-friendliness
· Safety and comfort standards (Hennessey, 2005)
Analysis of Financial figures
Upon analysis of the financial statements of Air Canada and American Airlines Group we find that both the companies exhibit a rate of return of 4.12 and 4.12 respectively. This shows both the companies are doing comparably well. Compared to other airlines though, the two companies are gaining only average returns based on the general trend. The Gross Margin is estimated at 22.00 for Air Canada and 23.02 for American Airlines Group in which AAL seems to be doing comparatively well. 
Two main financial figures that are showing significant difference leaning towards AAL is the Net income and Market Cap. The Net income is 972 for AC and 3061 for AAL while Market Capitalization is 6.9821 BIL and 9.4120 for AAL. These figures show that AAL is doing much better than Air Canada, with Net income more than thrice that of AC. AAL also seems to enjoy a significantly better public opinion than Air Canada.

CAPSTONE CASE 1 CASE ANALYSIS AIR CANADA VS THE OTHER AIRLINES The chosen airline is Air Canada. Use other airlines for comparison: Air France/KLM, American Airlines Group, Aeroflot, China Southern...

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