• McMaster University

• COMMERCE 4PA3

Canadian Airlines Case – 4PA3
1) What is the difference between a regulated and deregulated
industry?
 In a regulated industry, Canada Transport Commission has the
authority to license new routes, exit from current, establish fares,
routes, schedules and M&A. In a regulated market, companies do
not have a free will to compete and must instead get routes and
prices approved by regulators. For example, policy “division of the
skies”.
 Many independent carriers existed in areas that were not in
interest for the national carrier. There was also limited
competition. Only if the CA carrier was not sufficient, the
competitor would have his license approved for the route. Airliner
is dominated by pride and ignores things like cost, service and
profits.
 Regulation also limit services, increased prices and stifled
innovation.
 Saturated market caused by deregulation that then lead to only
few surviving companies
 Deregulation leads to privatization. Ie., Crown corporations
 Deregulation can possibly lead to a monopoly.
2) What are the implications of deregulation for companies, the
government and customers?
 Companies are now required to find new strategic ways to provide
a better service through competitive advantage, in order to
guarantee security of the business.
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 Customers were able to obtain better services, possibly
promotions or points, cheaper flights
 Governments had to help out with bailouts and more lawsuits
being taken throughout the week
3) What is your assessment of CA’s strategic initiatives during the
various phases of its history?
 I like how CA established a strong alliance with American Airlines
opening more opportunities for the company to grow outside of
Canada.

4) In retrospect, should CA have done something different?
5) How does this industry make money? (explain using Appendix B)
 Profitability is affected by utilization (load factor); per mile
revenue, cost per seat mile, other costs
o Increase utilization
o Increase ticket price to increase unit revenue
o Lower costs
 90% from people and 10% from cargo
 Two classes: economy and business (15-30% premium)
 High level of fixed costs
 Fuel price depended where the airline flew as western Canada had
cheaper fuel
 CRS system determined the future demand and attempted to
optimize the load factor and yield (discounts for more people vs
ticket price)