Air Canadian Airline Industry Essay

The airlines industry we studied includes passenger air transportation but excludes air freight transport. According to a recent economic impact study, in 2015, Canada’s airports served 133 million passengers and the air transport industry accounted for $34.9 billion dollar of Canada’s GDP. It created 405,000 jobs, 141,000 were direct jobs as well as paid a federal taxation of over $7 billion. [1]

The airline industry in Canada can be characterized as a duopoly dominated by the major carrier families - Air Canada and WestJet since Air Canada and CAIL (Canada Airlines International Ltd) are merged; fringe competitors like Porter Airlines, serve some small segments of the market. Air Canada is the national flag carrier serving the busiest Canadian

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The airline industry activity is very sensitive to macroeconomic environment, the demand is highly seasonal and it responds to the general economy in an exaggerated way. For example, the air traffic in peak month can be roughly twice of the all-time low month. Also, this industry is controlled by overhead and capital costs, which diverse factors are contributed to. Such as the size of aircraft, flight distances, the seat occupancy rate and so on.

In a word, the performance of the industry is promising, Canada’s airline industry showed a strong growth during 2010-2014 period due to the rising air fares [5] more passengers and lower fuel price. [6] Take Air Canada for example, In Air Canada’s 2015 annual report, we can find that its net income in 2015 is nearly three times compare with 2014, up to 308 million dollars. Its total revenues increased mainly due to the decrease of aircraft fuel prices while other expenses continued to grow. In the picture below, the price of crude oil dropped from more than 120 dollars/barrel in 2012 to 55.05 dollars/barrel at present, and there was a slump in2014. However, this decrease was partly offset by an unfavorable currency impact. [2] Also, as Air Canada added 10 international routes this year so it witnessed a 27.9% growth in its number of international passengers.