Air Canada Issues

Air Canada Issues

Over the past few decades, airline industry has been introduced to many challenges that shaped the way it operated and moved forward. It all started with the collapse of dot-com industries in 2000, when most of the business travel was cut back. On September 11, 2001, a series of terrorist attacks on World Trade Centre and the Pentagon successfully decreased the confidence of people. Furthermore, the terrorist attacks decreased the number of airline passengers, and raised expenditures for security of airports and air crafts. While the passenger traffic increased in 2003, the costs involved in operating an airline increased as well. When both air traffic and the number of new airport terminals increased, so did the landing fees and the price of fuel. The price of crude oil used to produce jet fuel rose from $27 a barrel up to $133 a barrel in 2008. The sudden increase in fuel prices left the industry in a fix and increased the cost of the industry, since fuel accounted for around 30 to 40per cent of the total operating expenses. Other issues that decreased substantially the number of international airline passengers at that time, were health related concerns such as the outbreak of SARS in 2003, and the outbreak of H1N1 Influenza in 2009. Lastly, the financial crisis and the bad state of global economy, has reduced the price of fuel. Financial crisis also reduced the air travel by 5.4% in Canada.
At that time, financing became very difficult for airlines, and the use of consolidation such as mergers and acquisitions became a primary strategy of dealing with the problem. Another way of addressing the problems faced by airlines at that time was global expansion which accounted for 45 per cent of air passenger revenue, and the code sharing alliances under which two or more airlines share the same flight. This strategy reduced the leasing cost of equipment, labor cots, landing fees and fuel cots.
In addition to the challenges that airlines such as Air Canada had...

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