Air canada organizational structure

© HEC Montréal 2014 All rights reserved for all countries. Any translation or alteration in any form whatsoever is prohibited. The International Journal of Case Studies in Management is published on-line (http://www.hec.ca/en/case_centre/ijcsm/), ISSN 1911-2599. This case is intended to be used as the framework for an educational discussion and does not imply any judgement on the administrative situation presented. Deposited under number 9 65 2014 001 with the HEC Montréal Case Centre, 3000, chemin de la Côte-Sainte-Catherine, Montréal (Québec) Canada H3T 2A7.

Volume 12

Issue 2 June 2014

Air Canada: Flying High with Information Technology Case prepared by Forough KARIMI-ALAGHEHBAND1 and Professor Suzanne RIVARD2

We are in a customer service industry. In this line of business, the differentiators are service level, identification and innovation, but innovation is key. And innovating means staying on top of things, knowing your business in order to understand what could make a difference. We are constantly searching for new ways to use information technology. I have one person whose sole job is to look at what’s out there from an innovation standpoint, what would be good for Air Canada. He’s looking at what’s coming, and he shares. Also, in our outsourcing contract with IBM, there is a clause by which they have to organize innovation sessions for us. And although our contract with Operation SYS does not have a specific clause on innovation, they know that we like to innovate, and they’re coming to show us a new system that they have developed that could help us cut costs. (Senior Vice-President, E-Commerce and Chief Information Officer, Air Canada)

Managing the information resource of a firm that is focused both on “engaging with customers”3 and competing “more effectively on multiple levels against the low-pricing structures offered by low-cost carriers”4 entailed many challenges, which the Air Canada CIO and her team had been addressing in multiple ways.

Air Canada – The Company

Founded in 1937, Air Canada was Canada’s largest airline in 2011, serving over 32 million customers annually. In 1989, Air Canada was privatized. The first years after privatization were challenging. After four years of net losses (from 1990 to 1993), 1994 marked the return to profitability.5 Air Canada acquired its main rival, Canadian Airlines, in 2001. As of 2011, it had more than 170 destinations and was the world’s 15th largest commercial airline. In 1997, Air Canada was a founding member of Star Alliance. Fourteen years later, the strategic partnership had 27 partners, making it the world’s most inclusive air transportation network. Headquartered in Montreal, Air Canada had hubs in Toronto, Montreal, Vancouver and Calgary

1 Forough Karimi-Alaghehband is an Assistant Professor (Lecturer) in the Department of Management Science at Lancaster

University. 2 Suzanne Rivard is a Professor in the Department of Information Technologies at HEC Montréal. She also holds the Chair in

Strategic Management of Information Technology. 3 Air Canada, Annual Report 2010, p. 8. 4 Air Canada, Annual Information Form 2009, p. 18. 5 Air Canada, Rapport annuel 1994, p. 42.

HEC045

For the exclusive use of R. Davis, 2019.

This document is authorized for use only by Reggie Davis in Info Analysis and Mgmt 2019 taught by ELIZABETH BAKER, University of North Carolina - Wilmington from May 2019 to Sep 2019.

Air Canada: Flying High with Information Technology

© HEC Montréal 2

Its shares were listed on the Toronto Stock Exchange (TSX) under the symbol AC-B.TO. In the 2010s, Air Canada’s mission was “connecting Canada and the world.”1 To accomplish this mission, and because of the ethnic diversity of Canada, which contributed to the high and growing demand for international travel, Air Canada pursued an international growth strategy. In 2010, the company entered major partnerships with Lufthansa and United/Continental, which significantly helped its growth strategy and connection mission. However, Air Canada had to compete with strong and growing airlines in the domestic market (e.g., WestJet), the U.S. market (e.g., Delta) and the international market (e.g., Air France-KLM and British Airways). Air Canada’s vision was to build loyalty through passion and innovation.2 Hence, the company followed a differentiation strategy that involved “engaging with customers, with a focus on premium passengers and premium products.”3 However, cost reduction was still a very important issue for the firm. Indeed, because the number one cost at Air Canada was fuel, and because the company had no control over fuel costs, cost reduction in other parts of the business was crucial. To this end, Air Canada initiated a Cost Transformation Program (CTP) in 2010 to modify its cost structure and reduce costs across the company. The CTP allowed Air Canada “to compete more effectively on multiple levels against the low-pricing structures offered by low-cost carriers.”4 It focused on three main areas: operational process improvements, supplier contract renegotiations and revenue productivity gains.5

Information Technology Use at Air Canada

Major airlines in general, and Air Canada in particular, depend heavily on information technology (IT) for almost all their activities, ranging from booking passengers to balancing the weight of an aircraft before flying. Air Canada also used IT to optimize its processes, such as the bidding processes through which pilots and attendants choose their flights. This significantly reduced operating costs. The IT applications portfolio at Air Canada comprised both recent applications (front-end) and legacy systems (back-end). For example, the passenger processing system was part of Air Canada’s legacy systems and was maintained as a very solid platform. The new technologies and interfaces (e.g., web check-in, iPhone and Blackberry applications) were built around the legacy systems. The IT department was responsible for making sure that the modern interfaces and the legacy back-end systems could co-exist and work together. Three of Air Canada’s business branches were the main consumers of IT services: Customer Service, Commercials, and Operations. Each branch had several departments. For instance, Customer Service included airports, call-centres, in-flight services and customer relations. The Commercials branch included, among other departments, marketing and product distribution. And Operations comprised flight planning and aircraft maintenance. 1 From Air Canada’s website: