CANADIAN AIRLINES CASE

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CANADIAN AIRLINES CASE

• Presented By
• Bin Chen
• Tyler Ferguson
• Mike Gravino
• Yuka Wakayama

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Canadian Passenger Aviation Industry Conditions

• Small Market Share
• Worldwide Recession
• Over Capacity
• High Government Regulation
• Geographic Limitations
• US Cabotage Rights
• 2 Major Carriers in the Market

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Canadian Airlines International LTD

• History
• Calgary Headquarters
• Result of Industry Consolidations
• Costly Acquisition
• Bad Terminal
• Routes- South America, Pacific, Western Canada

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• Case Situation
• High Debt C3.2B
• Low Current Ratio of .65
• ROA -.029
• NPM -.098
• Negative Cash Flow Last 5 Years
• Litigious Market
• CRS is Gemini

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Competition Air Canada

• Debt Ratio of .88
• Current Ratio of 1.36
• Negative Cash Flows Last 2 Years
• Routes Caribbean, US, Eastern Canada

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Impact of IT In the Present

• CRS Computerized Reservation Systems
• SABRE American Airlines
• APOLLO / COVIA United Airlines
• Gemini-Canadian CRS -3.7 share
• CRS Monopoly Between SABRE/COVIA

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Alternative Solutions

• Develop Proprietary CRS
• Accept American Airlines Proposal
• Reduce Operating Expenses
• Pay Down Debt
• Increase Operating Revenue / Per Employee
• Merger
• Cease Operation

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Potential Use Of IT With The Alternative Options

• Preventive Maintence Software Programs
• CRS Based Routing
• CRS Based Assets Schedule
• Route Evaluation

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• Web Site Reservation System
• E-Tickets/Reservations/Seating
• Internet Advertising
• Human Resources Employee Management
• 401k
• Employee Training
• Time Card
• Career Management
• Insurance/Health Care

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Quiz Time

• What alternative solutions do you have?

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Our Recommendation

• Merger

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Pros / Cons of a Merger

• Pros
• Financial Stability / Access to Capital
• Continue to Operate
• Complete and Effective Use of CRS
• Economies of Scale
• Operational Synergies
• Higher RPM (Revenue Passenger Miles)
• Greater Capacity, Utilization and Leverage

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• Cons
• Loss of Control
• Potential of Non-Canadian Ownership
• Regulatory Approval
• Loss of Jobs

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Current situation of Canadian Airlines

• Government Rejection of AMR Hostile Offer
• Air Canada Wholly Owned Subsidiary
• 10 Month IS Integration
• Consolidated Gemini with New Star Alliance
• 2001 Bankruptcy
• Used IT to Develop Award Winning Systems
• First Interairline E-Tickets
• Joint Venture with IBM

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• Any Questions
• or
• Comments?

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THE END