Analysis of alternatives
Partnership with WestJet
Air Canada faces serious competition both locally and internationally, and therefore the company has to adopt strategies which will enable it maintain its market leadership in Canada and market share internationally. Its major rival in the domestic market, Canada, is WestJet although there are other small players in the market. Air Canada would better achieve its local growth ambitions by partnering with WestJet.
Evaluation
Partnership between Air Canada and WestJet would create several benefits for both companies:
- It would help eliminate unhealthy competition which could further hurt the industry as a whole and Air Canada in particular. Air Canada survives in the market by offering lower priced Tonga fares; however, this pricing strategy could also be exploited by WestJet to offer relatively lower prices, making the industry less profitable as other airline companies also adopt the strategy as they try to remain competitive. Thus, by partnering with WestJet, the two companies will be able to use their different preferential rates to attract more customers; and given Air Canada’s market leadership, it will make significant gains from this partnership.
- Strong partnership between these two companies which are the major players in the Canadian airline market would help prevent new entrants.
- Air Canada will lower its marketing and advertising costs as it will be able to use WestJet’s marketing and advertisement channels, thereby reducing its cost of operations.
Differentiated pricing/fares
The new agreement between the Canadian government and the European Union offers an excellent opportunity for Air Canada to establish more direct routes to European countries within the EU. This would certainly help the company lower the cost of its operations. Thus, it can use this opportunity to extend its differentiated pricing strategy to international flights.
Evaluation
- Extending the differentiated pricing strategy to its international flights by making some of its products (fares) to be relatively cheaper will enable it attract more customers.
- This strategy will be viable since the lower cost operations in direct flights will compensate for the lower priced tickets.
- Differentiated pricing will help it build its reputation and enable it to compete favourably in the low-frill as well as budget travel segment in the international market.
Partnership with the Canadian government
Government regulations especially on taxes and charges imposed on airliners in Canada remain a major threat to Air Canada’s profitability. Therefore, partnering with the government by allowing it to own shares in the company’s stake should be explored.
Evaluation
- Bringing the government on board as shareholders though not necessarily major shareholders would help the government better understand the impacts of the charges and taxes it imposes on the industry.
- It would now be easier to lobby the government to review these charges and taxes so as to lower them or provide subsidies which will enable the company reduce the costs of its operations within the country and improve its profitability.
Partner with major security agencies
New security challenges especially the terrorism threats remain major challenge facing the airline industry and calls for advanced and more efficient strategies for dealing with the threat. Therefore partnering with major security agencies both locally and internationally with other security agencies like the FBI, CIA, and other major security agencies would help deal with security threats.
Evaluation
- Partnering with security agencies will help Air Canada implement and improve its capacity to use advanced explosive detection equipment like backscatter X-ray machines as well as explosive trace-detection portal equipment to screen its passengers and their luggage.
- Advanced security equipment will enable Air Canada’s security personnel detect any weapon hidden anywhere on the passenger whether underneath the clothes or even in shoes and luggage.
- Partnering with major security agencies experienced in terrorist attacks prevention would enable the company improve detection of weapons and explosives before there are used on its assets, planes included.
- Air Canada will be able to better to ensure the safety of its passengers and assets, and as a result, build its reputation in the industry.
Recommendations
The best and less costly strategy that Air Canada should implement is differentiated pricing strategy in international travels.
Why
- This strategy will enable the company provide lower priced tickets in some international routes thereby building its reputation as it attracts more customers.
- It will be cheap to implement given the opportunities for expanding its direct routes which have been made possible by the Canadian government and the European Union agreement. Direct routes are generally less costly as compared to connecting flights or routes.
- Air Canada’s partnership with Lufthansa, Continental and United airlines allows it use its partners established routes, which makes the costs of its operations even cheaper, and therefore making it possible to provide lower priced fares in particular routes.
Where
Air Canada will adopt this strategy in its international flights to Europe.
When
Air Canada will implement this strategy after introducing more direct roots to European Union cities/countries.
How
- Implementing this strategy will require that the company studies the costs of its operations in the newly created direct flights against those of its major competitors in the international market so as to find routes which lower priced fares can be best implemented to achieve competitive advantage.
- Finally, Air Canada will adopt the best marketing strategies and advertisement channels to advertise its lower priced fares to reach the target demographics.