Global Environment Of Business - Titled: Air Canada- Risk Management Case.... (outline For The – Case Study Example
Introduction of company In the current environment of highly competitive aviation industry, airlines are adopting innovative measures to meet new challenges. The effective risk management has emerged as one of the most important issues that influence airlines across the world. The 9/11 event and the financial crisis of 2008-09 have been major events that have witnessed serious ramifications on the airlines industry. Air Canada is important airline that needs to address various pertinent issues, especially the risk management within its strategy not only as turnaround strategy but also to ensure its sustainability in future.
History of the company
Air Canada had adopted consolidation as its strategy to meet the challenges of economic downturn and acquired Canadian Airlines to become the eighth largest global airline. It served 178 destinations worldwide but faced difficulties in integrating the operational challenges vis-à-vis differing approaches to labor relations, IT systems, different fleets etc. It had filed for creditor protection in 2003 and in 2004, received conditional $850 million financial package from Deutsche Bank that required $200 million reduction in annual cost over and above $1.1 billion in cuts as agreed with unions. Through stringent measures, 2010 had seen increased revenues and previous year’s loss had turned into profits. International routes had been more profitable as against domestic flights.
Brief overview of the case
Risk management is key strategic issues within airline industry mainly due to flexible fuel prices, operational risks and catastrophic risks. Air Canada had adopted best practices for its contingency plans for smooth running of its IT system and HR. Within the four quadrant severity analysis matrix for risk management, aviation risk was most unpredictable factor that needed to be critically reviewed for its sustainable performance. It involved aviation insurance under catastrophic risk and risks transferred due to change in interest rates, currency fluctuations, pension reserves, weather conditions etc. which could seriously impact its revenue and its operational performance.
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