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Impact of the COVID-19 Pandemic on Air Canada

Introduction

Air Canada is the biggest air carrier in Canada, ensuring safe transportation of passengers since the second half of the 20th century. The organization has extensive power in the region while also providing training services to other airlines and maintaining its international operations (Tang et al., 2020). Value-based approaches employed by Air Canada help the organization attract more customers and pursue technical excellence while ensuring passenger safety. The company successfully targets an audience of all ages and occupations due to its unified marketing strategies that appeal to most consumers. The current project is going to discuss the impact of the COVID19 pandemic on Air Canada and provide a PESTEL analysis of the organization.

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Mission, Vision, and Core Values of Air Canada

  • The mission statement of Air Canada is “Connecting Canada and the world.”
  • The vision statement of Air Canada is “Building allegiance via passion and modernization.”

The values of Air Canada suggest that the company is always trying to celebrate inclusivity and kindness. As an ambassador to the world, Air Canada supports the ideas of compassion and equality as well. The company manages to generate positive sentiment through awareness and patriotic beginnings. It may be safe to say that Air Canada’s values are socially-driven and respond to the needs and aspirations of customers in the most appropriate ways. The increasing level of engagement is the key finding that has to be considered when dwelling on the taglines and core values that are characteristic of Air Canada. The company’s mantra is to remain loyal to its vision and mission while helping consumers get the most from flying with Canada’s biggest air carrier.

Impact of COVID19 on Air Canada

One more important subject that has to be discussed within the framework of the current paper is the influence of the COVID19 pandemic on Air Canada’s operations. It was hypothesized that serious job cuts and reduced incomes might be expected to hit the air carrier industry within the next three years, and Canada’s biggest airline is not an exception (Mogaji, 2020). The smaller number of flights and the turn to survival suggest that the whole air carrier industry is having trouble responding to the challenges adequately linked to the pandemic. The income levels and corporate capacity are quickly moving downhill, causing Air Canada to expect a 75% decrease in returns on investment (Garrow & Lurkin, 2021). This reverse acceleration is also supported by the lack of potential passengers who would benefit from airline services. According to Mogaji (2020), most of the current initiatives instigated by Air Canada are aimed at bringing the past level of liquidity and reducing production and maintenance costs.

The company’s expectations revolve around the idea that Air Canada could reduce its size to respond to the transformation of industry and save time and monetary resources. Such reductions, nevertheless, would inimitably cause employee and fleet shortages due to the absence of a financial cushion that would protect the company from the economic drawbacks of the pandemic (Garrow & Lurkin, 2021). Most of the recent Air Canada statements capitalize on the idea that commercial aviation is currently going through one of the most complex periods in air carrier history. As stated by Mogaji (2020), a decrease in share cost was a logical continuation of the COVID19 pandemic, whereas the company would have to restore its value with the help of a set of different instruments and strategies. The pandemic overturned the industry and has made it much harder to put trust in airline stocks, even though Air Canada is one of the most successful and loved franchises across the globe.

Air Canada Strategies

Corporate Level

Air Canada’s corporate strategy is a profitability-driven approach that is stemming from stratagems aimed at stability. The rationale behind this strategy is the company looking for the best pricing policies that would attract as many customers from different target audiences as possible. Air Canada achieves profitability with the help of slightly higher prices that cannot be overcome by competitors due to the COVID19 pandemic and a relatively low level of rivalry across the Canadian air carrier market.

Business Level

Air Canada’s business strategy is cost leadership, which is most evident because of the company’s willingness to cut costs throughout any other aspects of business except for ticket prices. The rationale behind using this strategy is Air Canada’s high level of income that allows for experiments and cost-cutting initiatives. None of the company’s competitors were able to replicate Air Canada’s approach so far, mostly due to the lack of resources and strong management.

Air Canada PESTEL Analysis

Political Factors

Speaking of political variables affecting Air Canada, it may be first mentioned that the company is operating within a rather complicated domestic market. The favorable environment for local investors is not as positive for others due to limitations associated with foreign ownership and an incredible amount of fees and taxes that have to be covered (Tang et al., 2020). Air Canada significantly benefits from political factors because the air carrier industry is way less competition for local organizations. Accordingly, the presence of high taxes is mediated with the help of weaker competition that averts Air Canada from being exposed to the need to invest additional resources into fighting the competition. Political instability, nonetheless, maybe a crucial factor affecting the organizational success because Air Canada frequently has to reroute flights due to international sanctions that can be imposed to limit the organization’s income or regional impact.

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Economic Factors

One of the main reasons why economic factors affect Air Canada is the strong popularization of the staycation. The promotion of domestic tourism became a crucial contributor to Air Canada’s income during the COVID19 pandemic, allowing for millions of dollars to be invested in the internal market, respectively (Campan, 2020). Logistical and financial challenges are currently addressed by Air Canada with the help of ever-changing prices. Yet, there is a problem with these economic factors that are related to Canadians having to pay exceptionally large sums of money for their flights, even if they are domestic. Air travel became extremely costly, with similar American flights of the same distance being at least two times less expensive (Killins, 2020). Knowing that there is only limited competition in the region, Air Canada is winning because there are no reasonable alternatives available to Canadians. These painful passenger experiences somehow move the company forward and help it generate larger profits. The latest updates from the segment suggest that the Canadian government is willing to interfere with the aid of financial assistance to avert Air Canada from setting the most extreme flight prices.

Social Factors

As of now, the process of social transformation instigated by the pandemic is making it harder for Air Canada to implement its vision and achieve corporate objectives. Consumers are growing their awareness and get the possibility to assess the value they receive before purchasing a certain product. This is why Air Canada depends on its customer base and has to remove cheaper alternatives from the radar so that end-users would always return to the largest Canadian air carrier (Sivaramakrishnan & Carvalho, 2019). Currently, Air Canada can be deemed as rather expensive, which causes it to become a non-low-cost organization where the number of destinations is still limited due to the pandemic. Even though the management has made numerous changes to appeal to a larger crowd, Air Canada’s premium offerings remain active during the pandemic as well (Zaki Ahmed & Rodríguez-Díaz, 2020). The challenges that all industries had to go through because of COVID19 are making it safe to say that the year 2021 is going to be quite different in terms of how consumers, employees, and executives linked to the air carrier business will perceive it.

This growing anticipation ultimately affects the community and forces the middle class to change their attitudes toward air carriers. Air Canada has no problem with establishing pricing plans that would appeal to all classes of consumers (Tang et al., 2020). A well-thought-out combination of premium and economy offerings is going to blur the line between customers and assist them in supporting the value of diversity promoted by Air Canada. The variation achieved by the carrier is its biggest strength that unites the community instead of dividing it, even if the price is slightly too high for the middle class (Killins, 2020). Air Canada’s focus on societal interests has always been the company’s biggest strength that the organization knowingly turned into profit.

Technological Factors

The biggest advantage related to technological factors at Air Canada is the company’s strong inclination toward innovation and flexibility. To affect customer experience and facilitate some of the organizational operations, Air Canada started implementing Artificial Intelligence (Campan, 2020). For example, one of the vital tasks performed by machines is the predictive maintenance of the fleet. There is a rather high chance that Air Canada is going to invest even more resources into technology in the future because Big Data and Artificial Intelligence are taking over (Sivaramakrishnan & Carvalho, 2019). The prevalence of human errors is reduced, and the company gets an opportunity to safeguard its resources as well.

Environmental Factors

With the growing number of premature deaths per annum, Air Canada remains one of the strongest advocates for reducing air pollution. To become a frontrunner in the area, the company started releasing additional policies and tools intended to slow down the influence of air carriers on the environment (Tang et al., 2020). The help of local communities and industry partners has made it possible for Air Canada to reduce energy and fuel consumption.

Legal Factors

One of the recent challenges in the area was Air Canada being fined by the Transportation Agency for not adhering to passenger regulations in 2019. The company’s inability to commit to the linguistic rights of two French-speaking passengers has also resulted in a large fine that same year (Campan, 2020). Air Canada has to be much more vigilant in terms of how it addresses bilingualism because of the specifics of the country where it operates and the need to protect customers’ rights to diversity.

References

Campan, G. (2020). A sound competition approach supports Air Canada’s acquisition of Air Transat. Montreal Economic Institute.

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Garrow, L., & Lurkin, V. (2021). How COVID-19 is impacting and reshaping the airline industry. Journal of Revenue and Pricing Management, 3(9), 1-7.

Killins, R. N. (2020). The impact of oil on equity returns of Canadian and US Railways and airlines. The North American Journal of Economics and Finance, 52, 1-13.

Mogaji, E. (2020). Financial vulnerability during a pandemic: Insights for coronavirus disease (COVID-19). Mogaji, 2020(5), 57-63.

Sivaramakrishnan, S., & Carvalho, S. W. (2019). The implication of country disposition in consumer response to ingredient branding strategies. Journal of Business Research, 103, 286-292.

Tang, N. Y. A., Wu, C. L., & Tan, D. (2020). Evaluating the implementation of performance-based fuel uplift regulation for airline operation. Transportation Research Part A: Policy and Practice, 133, 47-61.

Zaki Ahmed, A., & Rodríguez-Díaz, M. (2020). Analyzing the online reputation and positioning of airlines. Sustainability, 12(3), 1-27.

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