Reservations About Its Future

1

• Reservations About Its Future
• by
• Group 1
• Wei-Ru Chen
• Josh Earle
• Hong Xu

2
Overview

• Background
• Porters Competitive Forces
• How Porters Forces Relate to Canadian Airlines
• Internal Strengths and Weaknesses
• Recommendations

3
Background

• Airline Industry and the Technology Age
• American Airlines
• United Airlines
• Air Canada
• Canadian Airlines

4
Porters Impact of Competitive Forces
5
Porters Five Competitive Forces Model

• Helpful to assess the Economic and Competitive
  forces in a companys industry.

6
Bargaining Power of suppliers

• Suppliers
• --American Airlines (AA)
• --United Airlines (UA)

7
Bargaining Power of suppliers

• Competitive Advantages
• --Profitable flight routes
• --Computerized Reservation Systems (CRS)
• ?controlled 80 of U.S. travel agents
• ?unfair information monopoly
• ?closely monitor and control travel agents
• ?display biased data

8
Bargaining Power of Buyers

• Buyers
• --Travel agent
• --Travel agencys customer

9
Bargaining Power of Buyers

• Competitive status
• --Travel agent
• ?limited power to choose CRS
• ?switching cost is too high
• --Travel agents customer
• ?profitable VS rural routes

10
Threat of New Entrants into the Industry Segment

• Threat of New Entrants
• --new airline company
• ?capital requirements
• --existing airline company
• ?economies of scale
• ?information technology
• ?government regulations

11
Threat of New Entrants into the Industry Segment

• Barriers
• --Information Technology
• ?huge start-up costs in developing the
• system
• ?high maintenance costs
• --Government Regulation
• ?Canada
• ?U.S.

12
Threat of Substitute Products or Services

• Substitute Products or Services
• --ground transportation
• --water transportation
• --differentiate product
• ?service
• ?price

13
Positioning of Traditional Intra-Industry Rivals

• Air Canada VS Canadian Airlines
• ?routes
• ?capital

14
Question ???

• What are the internal strengths of Canadian
  Airlines?
• What are the weaknesses of Canadian Airlines?

15
Internal strengths

• Fixing market.
• ? Fixing national routes.
• ? Fixing international routes

16
Internal strengths

• Government subsidies
• ? The government provides subsidies for the
  less profitable routes
• Employees support
• ? Make an equity investment for keeping the
  company profitable

17
Internal weaknesses

• Not enough room to grow
• ? Limited routes and market
• Lack of capital for paying projects (CRS).
• ? Have to pay for the use of CRS

18
Internal weaknesses

• Financial crisis during the Persian Gulf War.
• ? The Financial decline during the Persian
  Gulf
• War
• Lack of important controls.
• ? Has no internal control over the IT
  system
• ? No position to make its own decisions.

19
Recommendations

• Build its own IT system.
• Globalize its business
• Collaboration with various web browser companies
  (yahoo.com, excite.com, etc.)

20
Goals

• ? Reduce the airline transaction cost
• ? Increase end customers and market shares.
• ? Build its electronic communities

21
Where is Canadian Airlines Today?
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The End
23

• Questions?