PESTEL analysis of Air Canada
This detailed ‘PESTEL analysis of Air Canada’ examines some of the macro-environmental factors that impacted on the operations of Air Canada in the past and continue to do so today. Air Canada, founded in 1937, is Canada’s largest airline. It is a founding member of the largest airline alliance in the world, the Star Alliance.
Political factors affecting Air Canada
Air Canada’s operations in the domestic market have benefitted from a favourable political climate in Canada. Canada is considered a very difficult country to start an airline for a variety of reasons e.g. high taxes and fees, and substantial restrictions on foreign ownership of Canadian airlines. This has made the Canadian airline industry less competitive which indeed goes in favour of Air Canada. The airline may pay high taxes but largely immune from fierce competition.
As Air Canada flies to over 98 countries and regions, it is affected by many political ups and downs. For instance, in early 2020, it had to reroute its five-times weekly flight to Dubai due to volatile situation in the Middle East (BellMedia, 2020). Likewise, it must sometimes avoid certain airspaces because of international sanctions.
Economic factors affecting Air Canada
Staycation has been on the rise in Canada for a long time. In May 2020, Ottawa pledged millions of dollars to promote it further in the country (Berthiaume, 2020). Surely, it is a good news for Air Canada’s domestic market at a time that is fraught with many financial and logistical miseries.
Lindeman (2019) reports that Canadians pay sky-high prices for flights. It can be extremely costly to travel from one corner of the country to the other. It has also been reported that Canadians pay more than twice the price Americans do for similar-distance domestic flights. This shows that Air Canada can generate a lot of profits in the domestic market, though it is painful for many passengers!
It is worth mentioning that Air Canada’s revenue in 2019 was C$19.1 billion and C$18 billion in 2018 (Wolfsteller, 2020). However, 2020 has been a year of grave financial challenges with so many local and international flights being grounded. Therefore, the airline has asked the Canadian government to come forward with some financial assistance.
Social factors affecting Air Canada
There are number of social changes taking place globally. Many people now-a-days are very aware of marketing gimmicks and therefore question the value they receive from their purchased products and services. Many people look for cheaper alternatives that have huge implications for the airlines that are deemed expensive. Air Canada understands this very well and therefore, introduced Air Canada Rouge (a low-cost subsidiary) in December 2012 to fly to a good number of destinations. However, it does not mean that the airline is moving away from its premium offerings.
Though the year 2020 was very challenging for most airlines around the world, it is anticipated that the year 2021 will be different. Apart from that, there is a growing middle class in developing economies who love to travel which is very good for an airline like Air Canada that has both affordable and premium offerings.
The workforce in Canada is very diverse and represents different walks of life. Air Canada takes it as a strength. It should be mentioned that the airline was named one of Canada’s Best Diversity Employers in 2018 (Air Canada, 2020).
Technological factors affecting Air Canada
Aviation industry is all about technology. Unsurprisingly, Air Canada has started using Artificial Intelligence (AI) to improve its operations and customer experience. For instance, it uses AI for predictive maintenance for aircrafts. However, it is worth noting that adoption of certain technologies by consumers may impact negatively on the airline. For instance, the use of video calls via WhatsApp and other devices may reduce the demand for travelling to some extent!
Environmental factors affecting Air Canada
Concern for the environment is not new and it is serious. In Canada alone, air pollution causes thousands of premature deaths every year. To address the issue and reduce the impact of its operations on the environment, Air Canada is working with industry partners, local communities and its employees. It has implemented a number of measures to reduce the fuel and energy consumption of its aircrafts, ground support vehicles, and facilities. For instance, its Dreamliner provides an approximately 20% improvement in fuel efficiency compared to the replaced aircrafts (Air Canada, 2020).
Legal factors affecting Air Canada
Air Canada was fined by the Canadian Transportation Agency in 2019 for violating passenger regulations. Likewise, it was also ordered to pay a French-speaking couple 21,000 Canadian dollars for violating their linguistic rights (BBC, 2019). It was found to have breached the country’s bilingualism laws. These instances show that the airline needs to be a bit more cautious about rules and regulations.
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Last update: 03 December 2020
Air Canada (2020) Diversity at work is a strength for Air Canada, available at: https://www.aircanada.com/ca/en/aco/home/about/media/media-features/diversity.html (accessed 02 December 2020)
BellMedia (2020) Air Canada adjusts route to Dubai following restrictions in Persian Gulf, available at: https://www.bnnbloomberg.ca/air-canada-adjusts-route-to-dubai-following-restrictions-in-persian-gulf-1.1370922 (accessed 01 December 2020)
Berthiaume, L. (2020) Ottawa hopes to ‘save the summer’ with big cash injection to boost domestic travel, available at: https://www.theglobeandmail.com/politics/article-ottawa-pledges-millions-to-promote-holiday-travel-in-canada-during/ (accessed 02 December 2020)
Lindeman, T. (2019) Canadians are paying sky-high prices for flights – and merger could make it worse, available at: https://www.theguardian.com/world/2019/jun/29/air-canada-transat-merger-high-fares (accessed 02 December 2020)
Wolfsteller, P. (2020) Air Canada posts higher 2019 results, despite 737 Max grounding, available at: https://www.flightglobal.com/strategy/air-canada-posts-higher-2019-results-despite-737-max-grounding/136810.article (accessed 01 December 2020)
Author: Joe David
Joe David has years of experience both in the UK and abroad. He writes regularly online on a variety of topics. He has a keen interest in business, hospitality and tourism management.