Air Canada

In: Business and Management

Submitted By azizksa
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Air Canada Evaluation

Executive Summary
Air Canada is a full service airline company with the largest market share in the Canadian market making it the largest airline in Canada and 15th in the world.
I don’t recommend lending Air Canada due to: * Weak industry conditions * Poor historical performance/financial health * Risk factors assessment * Poor credit ratings
Summary of Main Points
The airline industry is a very volatile industry with a lot of uncertainties. Based on Porter’s five forces, companies in the airline business are faced with challenges such as threat of new entrants, high buyers power, high suppliers power, availability of substitutes, and intense competition.

Historical operating results are poor. The company has been having continuing losses since 2008. Also, financially it is not healthy. Air Canada leverage ratio is very high, and obligated to significant debt due to pension fund, employees’ benefit, and orders of new crafts. Labor strike is a major risk factor. Recently, the company was faced with several strikes that caused many flights delays or cancelations. Negotiation is taking place between the company and labor unions. Outcome this negotiation might result in higher labor cost preventing the company from enhancing its cost structure.

According to S&P, Air Canada credit rating is B-, which is a non-investment grade. Also, Moody’s downgraded the company from B3 to Caa1 due to its debt obligation and high leverage.

Company Overview
Air Canada is the largest full-service airline in Canada and the 15th in the world. With fleet consisting of 350 aircrafts, it serves more than 180 domestic and international destinations with 1,470 scheduled fights daily carrying over 32 million passengers yearly. Air Canada provides scheduled passenger services in the Canadian market, the Canada-U.S.…...

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