The Air Canada Case Analysis

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Executive Summary

The aim of this paper is to conduct an analysis for the Air Canada Company that was established in 1937. It has been undergoing a rebranding process to improve its competitiveness amid the various evident operational challenges. The corporate governance arm of the company ensures that the interests of the shareholders are observed.

On the other hand, the codes of ethics ensure that the companys workforce executes its tasks in a manner that is consistent with the Air Canadas stipulated vision and mission. In the attempts to make sure that the company serves the interests of the communities in which it was established, the company subscribes to the environmental laws besides providing mechanisms of tracking derailment from the stipulation of the environmental laws.

As part of CSR, the company funds a hospital transportation program. The organization of the Air Canada Company is essentially hierarchical. The hierarchy provides the positions for CEO, CFO, and other managers who must work to realize functions such as leading, planning, and controlling, as discussed later in the paper.

Introduction

In November 2010, the CEO of the Air Canada Company made a public announcement that the company had managed to deal with various challenges that had afflicted it since 1990s. Specifically, the CEO told the business crowd the company that had more passengers, more revenue, and rapidly escalating stock prices (Cowan, 2012, p.23).

Interpreted in the manner the CEO puts it, these were good signs that the company had made pragmatic strides towards overcoming the crisis it had been experiencing financially in 2009.

Such a success, as claimed by the CEO, is essentially impossible without proactive participation by the companys management towards enhancing the measures of ensuring that the publicly traded company adhered to its mission and vision statement.

In particular, corporate governance must have played critical roles in ensuring that accountability by the management was enhanced. In this paper, corporate governance is considered as having the need to mitigate or foster the enactment of conflicts of interest, control, and prevention among stakeholders.

Generally, the mitigation of these conflicts of interest is more often accomplished through the enactment of various customs, laws, processes, policies, and institutions, which have enormous repercussions of afflicting the manner in which organizations are controlled.

From a different perspective, the paper also considers and discusses ethics within the Air Canada Company as one of the mechanisms of strategically focusing all the employees towards the realization of the goals of the company.

Ethics is used in the context of the paper to refer to the rules and regulations that are set by the Air Canada Company to ensure all employees of the organization operate in a manner that would not tarnish the name of the company.

In the realm of fostering the demand for a company to not only operate to create wealth for the shareholders, the paper argues that the Air Canada Company has managed to put a strong CSR program in place to help in conferring benefits to the communities within which the company is established.

Additionally, while attempting to conduct a thorough analysis of the Air Canada Company, the paper also pays an enormous attention to scrutinize how the company realizes its managerial functions of leading, controlling, and planning. However, a discussion of an overview of the company is done first to show how the company is organized.

Overview of Air Canada Company

The Air Canada Company was established in 1937 under the brand name Trans-Canada Airline (TCA). The corporate headquarters of the company are located in Montreal, Quebec. According to the Air Canada Review (2012), Air Canada is the worlds 13th largest airlines by fleet size that has its largest hub in Toronto along Montreal and a small mini-hub in Vancouver (Para.1).

The company is the largest full-service Canadas airline. Additionally, according to the Air Canada Review (2012), it is the largest provider of scheduled passenger services in the Canadian market, the Canada-U.S. trans-border market, and the international market to and from Canada (Para.2).

Coupled with the Canada Express, which is the regional partner of the company, the Air Canada Company extends its services to about 33 million passengers on a yearly basis. These passengers are destined to about 170 destinations across five continents. The company is also the founder of the Star Alliance. With regard to Air Canada (2011), Star Alliance is the worlds most comprehensive air transportation network (Para. 2).

The company managed to acquire a full privatization status in the year 1969. The trading of the company shares is done in the Toronto stock exchange, and is symbolized as AC-B.TO. Following the rapid expansion of the company since its establishment, it has been able to stand as one of the dominant airline companies preferred by many passengers with an employment capacity of 26000 people.

The major hub of the Air Canada Company is based in three key cities: Vancouver, Toronto, and Montreal. The extensive worldwide network of the company provides air travel services to 59 cities within Canada, 56 within the United States, and 63 cities in the Middle East, South America, Europe, Caribbean, Australia, Mexico, and Asia.

Coupled with the companys regional partners, the Air Canada Company controls an average of about 1530 flights every day besides giving services to about 1290 airports. One of the key recent endeavors of the company has been to initiate nonstop flights across its destinations.

For example, according to Air Canada (2012 (a)), in 2010, the Air Canada Company inaugurated a non-stop service between Calgary-Tokyo- Copenhagen, and Montreal- Brussels besides expanding several more non-stop services to several more U.S. destinations (Para. 3).

Furthermore, the company has also been embarking on strategic plans for expanding its service delivery to include more destinations within the areas where the company has been conducting flights across the globe.

For instance, according to Air Canada (2012 (a)), in 2011, the company added flights from Toronto to three Caribbean destinations (St.Kitts, Curacao, and St. Thomas) besides increasing services to Bogota, Santiago, Zurich, and Munich (Para. 8). The company also increased its services in Geneva and Brussels.

Governance

The theory of finance proclaims that companies that are traded publicly should put measures in place to ensure that the action of the shareholders and the market are aligned if such companies are to realize a superior performance. This stands out as the central goal of any firms corporate governance strategies.

Corporate governance is the set of actions and procedures used to ensure a company is managed so that shareholders receive a return on their investments in the company that is reasonable given the risks involved (Hennessey, 2004, p.4).

With this definition in mind, the central question is whether the Air Canada Company has managed to achieve the concerns of corporate governance as prescribed by the finance theory. The Air Canada Companys structures for corporate governance widely provide mechanisms for ensuring that the decisions taken by the management of the company are open to scrutiny.

This argument may be evidenced by several documents of the company claiming, the board represents shareholders interest by providing strategic directions to management besides reviewing the business of the Air Canada Company like its strategic business plans and major capital acquisitions (Hennessey, 2004, p.28).

In 1990s, many of the board members of the company were largely not related to the Canadian airline because they were members of a permanent committees board comprising five members. This meant that an opportunity existed to ensure that the management of the airline was held accountable for decisions leading to the underperformance of the company hence exposing the shareholder to risks.

Unfortunately, this never happened (Hennessey, 2004, p.29). Similar to the 1990 fiscal year, the 1998 fiscal year was equally a disappointing one.

According to Hennessey, (2004), these disappointments prompted the board of directors chairperson to write to the shareholders stating, Your board of directors is strongly supportive of the program formulated to bring about a balanced change to the airline to ensure a higher level of profitability (Hennessey, 2004, p.29).

Nevertheless, in this period, the company was characterized by market performance, operational, and financial performance challenges. Arguably, therefore, the governance arm of the company failed to ensure that the company remained under control through the inculcation of accountability and supervisory measures.

It is important to note that, during the late 1990s and early 2000, the company endeavored to become global as evidenced by its attempts of seeking an alliance with other key players of the airline industry such as the CDN.

This implies that the management would do anything within its capacity to ensure that the interests of the shareholders were reserved even if it meant seeking an amalgamation to eliminate competition. In particular, the company also sought to acquire cheap takeovers.

This was perhaps a crucial governance decision that has truncated to the incredible performance of the Air Canada Company in the recent days since, according to Spencer et al. (1998), partial takeovers are a cheap way for acquiring companies to gain either partial managerial control (p.429).

Even though it may be argued that the company has encountered a number of challenges including a failure to secure the market in the past, through corporate governance decisions, it is evident that the success of the company today would not have been possible. Additionally, the decisions have enabled the company to ensure that it has aligned both the market and the concerns of the shareholders so that they are harmonious.

This way, the company has become profitable hence increasing returns to the shareholders even if they may be optimal. Therefore, the goals of corporate governance have been realized by the Air Canada Company though having taken a long time to do so.

Ethics and Social Responsibility

Organizations set specific codes of ethics, which all employees deserve to abide by in the attempt to realize the organizational goals. Organizational goals are the road maps that lead the contributions of the employees of an organization to the desired objectives, values, and missions.

For the Air Canada Company, the mission is to connect the rest of the world with Canada while its vision is to create loyalty by deploying innovation and passion.

To realize the mission and vision, the company requires all its employees, through the code of ethics, to enhance teamwork by always ensuring that safety remains the first and the very last thing in all their tasks. Integrity is yet another requirement for all the workers of the Air Canada Company workforce.

This requirement is found ample in ensuring that accountability is fostered so that an operation environment characterized by trust is established and maintained in the attempt to make the company remain always profitable and valuable to the employees, shareholders, and other stakeholders.

The argument here is that, by prescribing integrity as one of the ample codes of ethics of the Air Canada Companys workers, the company attempts to reduce the risks of dishonesty and engagement in fraudulent activities, which in turn expose the interests of the shareholders to a threat.

Additionally, with reference to Air Canada (2012, (b)), the codes of conduct also stipulate that the companys employees are free to participate in the political process as individuals subject to applicable laws on their own (p.6).

This means that the code of ethics of the company hinders the employees, irrespective of their hierarchical position in the company, to deploy the assets of the company to fund any political party or candidate. In the context of the companys assets, all employees are required to ensure that all tangible and intangible assets of the company remain protected from willful damage, unauthorized access, loss, and even abuse.

Enshrined in the codes of ethics is also a requirement for holding the information of the company confidentially such as protecting intellectual property of the company, funding, and contracting matters of the company. Apart from ensuring that public firms create wealth for its owners (shareholders), the company is also indebted to dedicate a part of its gains to community-focused activities.

This implies that it is required to be socially corporate responsible. Corporate social responsibility (CSR) involves economic, legal, ethical, and discretionary expectations that the society has for the organizations at a given point in time (Carroll & Buchholtz, 2003, p. 36).

In the attempt to execute the obligation set out by the concerns of CSR, the Air Canada Company is dedicated to ensure that the environment is protected from emissions, pollution arising from improper wastes disposal, and or excessive energy.

Consequently, according to Air Canada (2012, b), the company has established the department for corporate safety to provide avenues through which employees can report instances of suspected violations of environmental laws or any events that may result to a discharge or emission of hazardous materials (p.18).

Another aspect of CSR requires organizations to focus on addressing the needs of the employees and other stakeholders such that no conflict takes place between them and the company. For the Air Canada Company, this includes prevention of acerbating violence against the employees, harassment, and discrimination coupled with protection of the employees personal information.

Additionally, as part of the CSR program, the Air Canada Company ensures that the employees are permitted to retain their personal information private. Apart from focusing on the interest of the employees, the company also channels a part of its efforts to serve the communitys interest.

In this perspective, Air Canada (2012, (b)) informs, The company is committed to providing a safe and healthy working environment for its employees to avoid adverse impacts and injury on the environment and the communities in which it does its businesses (p.24).

The concerns of the Air Canada Company in ensuring that the interests of the community within the area in which the company does businesses are taken care of are evidenced by the functions served by the Air Canada foundation. According to Air Canada (2012, (a)), Air Canada foundation supports charitable organizations with primary focus on children and youth in need (Para.6).

Essentially, the foundation is funded from the companys earnings and the Aeroplan miles that are contributed by customers to meet the expenses of a program meant to offer hospital transportation services to young people who are not able to provide themselves with a medical aid required within the communities where they dwell.

During instances of crisis, the foundation also seeks help from humanitarian organizations to expand its service capacity.

Organization

The Air Canada Company is organized in a hierarchical structure headed by a CEO. The CEO is the vision carrier of the company. This means that, in the Air Canada Company, the CEO is chiefly given the noble responsibility of designing goals coupled with making directions necessary for attainment of such goals.

These goals include making decisions on how the company will remain competitive by out-powering competitors operating within the line of business of the company.

However, in the execution of this noble role, the CEO is tied by the provisions of the corporate policy of the Air Canada Company, which, according to Air Canada (2012, (b)) make the company encourage competition and commitment while dealing with competitors in a respectful manner (p.20).

Consequently, the CEO must ensure that competitors are treated without bias since this would result to an anti-competitive behavior. The CEO also sits with other managerial staff to develop the corporate culture and values of the Air Canada Company.

The organizations structure for the Air Canada also provides and establishes the board of directors whose roles include overseeing the performance of the managerial staff including the CEO. Indeed, the CEO is accountable. He/she reports to the board of directors who represent the interest of the shareholders.

This means that they ensure that the management considers the interests of the shareholders besides giving them an incredible attention. This measure mitigates the management from serving its own interests as opposed to the interests of the owners of the Air Canada Company.

The board of directors is composed of seven directors and the chair of the board of directors. These directors are Roy Romanow, Michael Green, Joseph Leonard, Pierre Johnson, Bernard Attali, Vaq Sorensen, and Jean Marc Huot. The chair of the board of directors is Calin Rovinessu.

The company has also the position of CFO (Michael Rousseau) who reports to the CEO. Persons in charge of control, financial planning and analysis, and revenue management report to the CFO. The department of sales is organized into three sub-departments namely sales, customer service, and marketing.

The overall head of the department reports directly to the CEO. On the other hand, the departments of legal and human resources have only one sub-department each: international and regulatory affairs and employee relations respectively.

Other departments include COO, maintenance and engineering, network planning, cargo, ecommerce, industry and government affairs, and vacations department. The head of all these departments also reports directly to the CEO.

Planning

A growing organization such as the Air Canada Company requires a cute planning of the future expansion endeavors. The mandates of the planning department of the Air Canada Company include analysis of the future action plans so that they do not lead to exposing the organization to unnecessary risks.

In the planning process, a decision is made on the persons who are supposed to execute specific tasks by defining the resources that are required to execute these tasks. Therefore, the Air Canada planning department plans and analyzes the future necessary courses of action based on the available monetary and human resources.

The revelation forms the reason why the department of planning is also charged with the tasks of financial analysis since it is necessary for the planning process to balance the demand and supply constraints for the available resources at the disposal of the Air Canada Company.

At the Air Canada Company, planning is done in a number of steps. These include establishing objectives, planning premises, choosing between alternative actions to realize the objectives, formulating the various derivative plans, seeking corporation, and lastly conducting a plan appraisal.

The planning process is under the watch of the vice president in charge of financial planning and analysis with the inspiration of the visions derived by the CEO. However, this implies that other departments do not neither plan for their future courses of action nor dedicate this function to the department of financial planning and analysis.

The financial planning and analysis department is only charged with the major task of harmonizing the plans of other departments in making decisions on how resources are going to be allocated to the proposed plans by each department so that the resources are allocated optimally.

Leading

In the process of organizing resources coupled with people to ensure that goals of the Air Canada Company are realized, the management of the company is required to design measures for motivating, directing, and enhancing vertical and horizontal communication. These tasks are largely compliant with leading as a role of the management arm in any organization.

More interactively, leading refers to the management function that involves the managers efforts to simulate a high performance by employees including directing, motivating, and communicating with employees, individually and in groups (Anthonissen, 2008, p.67).

At the Air Canada Company, the main objective of leading the employees is enshrined in the need to make the employees look at issues and plans of the company from the context in which the managers look at them. For this purpose, hierarchical structures of management are established to enhance the supervision of employees so that they do not derail from the goals and visions of the company.

Unfortunately, there are challenges associated with leading at the Air Canada Company. For example, the CEO of the company announced that the employees of the airline needed to be motivated and empowered (Cowan, 2012, p.23).

Amid the financial challenges, the company had been experiencing prompting dwindling of the stock prices with workers of the company appearing as if they are only largely motivated to engage in strikes. This argument is evidenced by the last Junes strike of services and sales agents. The strike lasted for three days. It was brought to a standstill by the enactment of legislation for back to work.

Controlling

Among the functions of management is the organizational control. Controlling embraces monitoring employees activities, determining whether the organization is on target towards its goals, and making corrections as necessary (Anthonissen, 2008, p.81).

Consistent with this definition, at the Air Canada Company, controlling is done to ensure that all the plans developed and the leading effort put in place by the managers truncate into the actual realization of the plans as anticipated.

Important elements of control at the Air Canada Company include control of physical resources, financial and informational resources, and the evaluation of the program for rewarding the efforts of the employees. Ideally, at the Air Canada Company, controlling is considered an ongoing and a continuous process as opposed to being an intermittent process because all aspects of management at the company require some sort of controlling.

For instance, in the making of strategic plans to acquire new destinations, plans are developed based on the anticipated levels of resource commitment to hire new staff, buying of couriers, and marketing among other issues. Since these plans must be implemented in accordance with the available resources, controlling each phase of the plans is critical in ensuring that everything is done within the budgetary constraints.

On the other hand, while the managers of the company attempt to lead the employees towards the achievement of the organizational goals, they may choose to put incentive schemes in place to enhance the motivation of the employees. However, such schemes are only practical if they are within the constraints of financial resources available to the company.

This means that, whenever fluctuations in the market take place, revisions of the schemes are vital. In particular, at the Air Canada Company, the controlling function is not a task of one department. All departments must control the processes of execution of the tasks they are mandated to do in a manner that is directly congruent with the mission and vision of the Air Canada.

Conclusion

Established in 1937, the Air Canada has undergone an immense growth in terms of the employment capacity and the number of routes of operation. This growth has been realized amid hefty financial challenges.

Many criticisms have been raised by the shareholders on the capacity of the companys corporate governance to shield them from losses especially bearing in mind that, during the period of crisis, the company had been experiencing a decrement in stock prices. The company has also faced instances of employees work boycotts.

Due to reasons related to the companys financial position, the needs of these employees have always been addressed through the enactment of legislations for return to work without meeting their demands.

Amid these challenges, this case analysis has held that the company is indebted to ensure that the arm of corporate governance tracks undue circumstances that may lead to exposing the interests of the shareholders at risk. Leading, planning, and controlling functions of the Air Canada Company management have also been found as working consistently with the vision and mission of the company.

This inference is made amid the consideration of the fact that the leading function of the company encounters challenges especially in ensuring empowerment and motivation of the employees. Finally, the case analysis argues that the Air Canadas organization is essentially hierarchical with the CEO acting as the vision carrier.

However, the CEO is accountable to the board of directors headed by a chairperson. This board of directors represents the interests of the shareholders. It is mandated to ensure that the management does not serve to advantage itself while making organizational decisions.

Reference List

Air Canada (2012, (a)). Corporate Profile. Web.

Air Canada (2012, (b)). Corporate Policy and Guidelines on Business Conduct. Web.

Air Canada Review. (2012). Air Canada overview. Web.

Air Canada. (2011). About Air Canada. Web.

Anthonissen, P. (2008). Crisis Communication: Practical PR Strategies for Reputation Management and Company Survival. London, UK: Kogan Page Limited.

Carroll, A., & Buchholtz, K. (2003).Business and Society: Ethics and Stakeholder Management. Australia: Thomson South-Western.

Cowan, J. (2012). Can Air Canada be saved? Canadian Business, 2(1), 23-34.

Hennessey, S. (2004). Corporate Governance Mechanisms in Action: The Case of Air Canada. Charlottetown, Canada: University Of Prince Edward Island.

Spencer, C., Akhigbe, A., & Madura, J. (1998). Impact of Partial Control on Policies Enacted by Partial Targets. Journal of Banking and Finance, 22(3), 425-445.

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