Air Canada Case Study: IT Strategy Plan within 1994 to 2011

The outsourcing approach and the IT department structure at Air Canada changed often between 1994 and 2011, when Air Canada signed its first contract with IBM.

Since 1994 through 2011, Air Canada underwent several changes in order to better serve customers and achieve a competitive edge by focusing on operational process improvements, cutting costs, and allowing the airline to concentrate on its core activities.

Its outsourcing strategy, which underwent a substantial transformation throughout the cited time, made this clear. The company involved in supplier contract renegotiations. 

According to Karimi-Alaghehb & Rivard (2014), Air Canada initially sought a single-vendor strategy because it was more in line with its main goals of lowering operational expenses.

The corporation was able to keep the pricing low because to this tactic. In order to set its goods and services apart from those of its rivals, it also began to employ a differentiation strategy.

In order to obtain a competitive edge and satisfy customer demand around the world, Air Canada is said to have switched from a single vendor method to a multiple vendor approach in 2003.

Additionally, according to Morabito (2013), this move was made so that it could take advantage of the suppliers’ specialization and improve the effectiveness and efficiency of its engagements and performance. Its multi-vendor strategy underwent a modest adjustment in 2011 with IBM acting as the integrator.

Air Canada was making sure that the vendors were in line with its strategic goals during this time. This made it possible for the business to gain significant outsourcing benefits.

Air Canada’s IT department structures also saw a considerable transformation throughout the time frame mentioned.

For instance, prior to 2003, the business had a centralized IT department, which implied that issues occurring inside the various departments would be handled by a single department that served as a standalone entity within the business.

This led to a plethora of problems and made it more time-consuming to address numerous problems inside of this centralized IT department.

To improve productivity and effectiveness throughout the organization, the corporation opted to switch from a centralized to a decentralized IT department structure starting in 2003.

According to Liu, Sung, & Yao (2014), IT experts were available in each area to aid with a variety of issues. 

The difficulty with these decentralized IT departments was that there were numerous organizations that were not properly collaborating with one another.

In 2010, the IT departments were split into three main groups as a result of this. This includes business operations, client relations, and advertising.

Air Canada is able to boost its productivity and performance thanks to the three IT divisions, giving it a competitive edge while still satisfying customer demand.

It also aided the business in developing a cost-reduction program for transportation in 2010, which was one of its main goals. IT was employed by Air Canada to streamline its operations and lower operational expenses.

How Air Canada was addressing challenges in 2011

Managing the information resources of a company that wanted to “engage with customers” and compete “more effectively on multiple levels against the low-pricing structures offered by low-cost carriers” was difficult.

Air Canada’s Chief Information Officer (CIO) and her team were tackling these problems in different ways.

It’s true that controlling information resources is essential for any business that wants to be successful. Despite advances in consumer engagement and the low-cost structures offered by competitors’ low-cost carriers, Air Canada had to exert greater effort in 2011 to manage its information resources.

According to Pham, Pham, & Pham (2016), in order to improve performance, Air Canada, for instance, ensures that the goods delivered by its departments are compatible.

Instead of working as a collection of independent units, which might produce incompatible products, it really made sure that the departments operated as a single organism to produce highly compatible products as reported by Karimi-Alaghehb and Rivard in article published in 2014.

This resulted in a considerable boost in performance and a reduction in operating costs because all departments collaborated at different points in the client interaction process.

As the business dealt with numerous issues that a single department could not handle, it also cut operating expenses to combat the problem of the low pricing structure supplied by its rivals.

In order to prevent dealing with the same issue twice, Air Canada made sure that no department’s aims overlapped with one another.

The company made sure that its IT departments monitored each department’s performance and directed them toward problems they could most effectively resolve.

This made it possible for Air Canada to deal with a variety of problems.  According to Proctor (2011), the business also successfully synchronized its business and IT sides to improve efficiency and performance.

For instance, to improve customer satisfaction, its IT department improved its customer-based service. As they converted the technical difficulty into a business issue and vice versa, the IT department established a suitable interface for clients. Due to this, performance, customer loyalty, and retention dramatically increased.

Air Canada’s IT and business alignment with Luftman and Kempaiah’s five-level maturity model

Typically, a five-level maturity model provided by Luftman and Kempaiah (2007) is helpful for classifying businesses and organizations.

According to the model, Air Canada may be classified as having improved, managed processes, which is the fourth level of alignment. This is because the company’s internal communications are cohesive and united.

The company’s stakeholders value and appreciate IT, and the IT architecture is properly integrated with them, which greatly aids in the company’s improved performance.

The stakeholders manage IT well and use it to implement the business strategies as per Pablos (2014). It is evident that Air Canada is at maturity level 4 as a result.

To get to this point, Air Canada had to overcome numerous obstacles. For instance, the business struggled to improve its IT departments so that it could leverage IT to improve performance.

Actually, Air Canada has trouble seeing the potential of IT and redesigning it to cut costs and boost performance and efficiency as cited by Jordan in a journal published in 2012.

Additionally, when switching from a single vendor to a hybrid-multiple vendor model with an integrator, Air Canada found it difficult to provide a customer-based service. To improve customer satisfaction, its professionals worked hard to make sure that all stakeholders were appropriately incorporated into the IT system.

The company is experiencing some other challenges at the moment. For instance, it is still having trouble adjusting its IT structure to this dynamic, cutthroat digital market are recorded by Lehaney, Lovett, & Shah (2011).

In reality, Air Canada still finds it difficult to offer original ideas that will give them a competitive advantage.

Due to the rapid advancement of technology, Air Canada also strives to increase the effectiveness of its current IT infrastructure.

The business thrives on contract negotiations with its labor unions to reach new agreements. For the majority of businesses, the cost of fuel continues to be a serious issue.

Related: Primark Market Segmentation Case Study

With Rouge, Air Canada has successfully competed in the leisure market to and from Canada. The company has also concentrated on capturing sixth freedom travel through its foreign gateways, namely Toronto and Vancouver but also Montreal and Calgary.

What was the biggest challenge for Air Canada?

The three main hurdles that Air Canada has to overcome to return to profitability are COVID, fuel prices, and debt.