Research Proposal Assignment: Impact of COVID-19 on Air Canada
Task: Prepare a research proposal assignment critically illustrating the adverse effects of COVID-19 on Air Canada.
1.1 Background of the study prepared in the research proposal assignment
With the rapid spread of the infectious virus disease that is COVID 19 since its first report from China has taken the form of the global pandemic all over the world. As stated in the reports ofnews.un.org, (2020), it has created an unparalleled shock to the economy of the whole world and has specifically impacted the global airline industry. Thus, the largest passenger carrier international airline of Canada that is Air Canada is also facing unprecedented turmoil due to the spread of COVID 19, which has hugely impacted the tourism and business sectors of the world. The airline company is lying off nearly 5000 employees and flight attendants as it is cutting the routes amidst the plunging demands and it's also suspending most of the international flights due to the declaration of the nations for closing the international borders (Cheer, 2020). Thus, this is highly affecting the economic standards of the companies which is incurring huge losses due to no business and can face the danger of bankruptcy in the near future.
1.2 Problem statement
The present study discusses the acute problem of COVID 19, which has taken the form of global pandemic all around the world. According to the views of Chung (2015), the airline industry is often one of the worst-hit during and after pandemic and epidemic situations, owing to the mandate of changing the operations vigorously, which gets uncomfortable for the staff onboard as well as owing to the minimization in the disposable income of the population. The lockdown and suspension of travelling from one place to another, as a way to prevent the spread of the pandemic has exerted a severe blow to the sales and profitability of the company. The present situation of COVID 19, has affected the business operation of the company worldwide due to lockdown. The global pandemic has already affected the economy of almost every country. This has restricted domestic and international flight of the aviation companies, which in turn has restricted the profitability count and bumped the GDP. Under this circumstance, the countries and the business analysts are trying to figure out a way to revamp the economy and re-open business operations as the aviation industry cannot survive entirely on its own. Therefore, it is quite challenging for the industries to survive under this circumstance.
1.3 Research aim and objectives
The aim of the research is to investigate the impact of pandemic COVID 19 on the sales and operations of Air Canada as well as to analyze strategies for counteracting the adverse impacts.
The primary research question to be addressed in this study is "How is the global pandemic, COVID 19, impacting the sales and operations of Air Canada, in comparison to the past"?
The objectives of the research can be enlisted as follows:
- To explore the past records of performance of Air Canada
- To investigate the impact of COVID 19 on the sales and operations of Air Canada
- To evaluate the performance of the organization in present times, in comparison to the past
- To analyze strategies for mitigating the adverse impact of COVID 19 on Air Canada
1.4 Secondary Research questions and hypothesis
The secondary questions of the research are enlisted below:
- What are the past records of the performance of Air Canada?
- What is the impact of COVID 19 on the operations of Air Canada?
- What is the impact of COVID 19 on the sales of Air Canada?
- How is the performance of the company as compared to its past records?
- What are the strategies adhered to by the company to mitigate the adverse effects of COVID 19 on its business?
There can be two hypotheses for this research study:
H0: COVID 19 has not impacted the sales and operations of Air Canada
H1: COVID 19 has adversely impacted the sales and operations of Air Canada
Of these, H1 that is the alternate hypothesis will be tested in this research study
The present study discusses the impacts of COVID 19 upon the airline industry and specifically focusing upon the sales and operations of Air Canada and the ways its business is affected by laying off the employees as well as suspending the international flights due to the travel ban imposed by the governments of other countries and hence, it may face bankruptcy. The issues have been rising in the company due to the emergence of the Coronavirus disease since its first reports from China. The company is facing a consistent loss in its business due to this global pandemic that results in drastic reduction of fleets, accelerated closure of the unprofitable subsidiaries, staff cuts, sluggish demands, and adjustments to the security measures. Hence, it is estimated by Chinazziet al., (2020), that the crisis of COVID 19 will have its impact for years, and the markets will take many years or perhaps a decade for returning to its pre-crisis levels. Thus, the issue is rising now as regards to determine the ways in which the company can mitigate the issues caused by the COVID 19 crisis and the loss in its business so that it can gain its normalcy in sales and operations as soon as possible.
1.6 Significance of the study
The study mainly focuses on the crisis caused by the COVID 19 consequences on the sales and operations of the airline organizations like Air Canada, which are facing this severe turmoil of rejected flights, staff cuts, plunging demands, and more that are adversely affecting their business with incurring loss and bankruptcy. Thus, the study will provide the audience with an in-depth understanding of the COVID 19 effects on the business of Air Canada and the ways in which the company gains back their normalcy within less time.
2.0 Literature review
2.1 The past performance records of air Canada
As evidenced by Cicala, Holland, Mansur, Muller & Yates (2020), in June, 2019 Air Canada was given the title of best airline service in North America for the third time for three consecutive years. The company was recognized to be the best in the world for its business class lounge and dining, having some of the best airline staff in Canada, the best business class within North America along with the best cleanliness in the Airline cabin within North America. The awards were presented to the company in 2019 before the COVID crisis by the Skytrax World Airline Award Ceremony which was held at the International Paris Air Show (www.worldairlineawards.com, 2020).
The company was successful in transforming its brand into the leading global carrier that is focused on the offering of superior products along with the excellence in customer service. The company used to commend its 33,000 employees who are the award winners and whose hard work in transporting the customers comfortably and safely has made them earn the respective titles. Thus, as stated by Didier, Huneeus, Larrain, &Schmukler (2020), the hardworking employees, the effective operational strategies, the products and services presented for the customer satisfaction along with such popularity among the global travelers was helping the company in effectively competing with certain larger airline companies of the world and also made it possible for them to gain the best position in the aviation business market.
Figure 1: Air Canada company
Source: (Zhou, Dai & Tong, 2020)
The company was founded in 1937 and is Canada's largest international and domestic airline service covering 220 airports within 6 continents. The company serves 51 million customers and incurs the revenue of CAN$ 19,131 billion along with the operating income of CAN$ 1,650 billion as measured in 2019. The Company holds the four-star ranking and is the founding member of the Star Alliance. As explained by Canadian Aviation News. (2019), the company commits to a continuous enhancement in all the aspect of traveling experience and it includes certain innovations like Upgraded in-flight entertainment systems, Introduction to the onboard Wi-fi systems, Refurbished and new lounges and similar others. The company has been well established within the industry and has been aiming at improving the indulgenceexperience of the passengers through Streamlined processes at the airport, narrow-body fleet renewal program, Modern reservation systems to improve the booking management and Contemporary loyalty programs, until the recent past, before the pandemic occurred (Fernandes, 2020).
Thus, all of the above-mentioned criteria made the company to be the best in the industry by attracting more and more customers and satisfying them with their service excellency and effective operations.
2.2 Investigating the impact of COVID 19 on the sales and operations of Air Canada
As observed by Fouad(2020), with the emergence of the global pandemic, the aviation company Air Canada is facing major loss in its sales and operation due to the ban initiated by the government of the countries within the tourism sectors and the strict regular imposed within the business operations. In the beginning of the crisis, to which the government of Canada has imposed nationwide lockdown, the Air Canada was constrained to announce that it might temporarily lay off more than half of its employees and may reduce its activities up to 90% within the second quarter because of the consequences caused by the COVID 19. As opined by Goodell(2020), this measure would impact 15,200 employees along with 1,300 managers from the month of April, 2020. Thus, according to the reports of Reynolds, (2020), Air Canada was the first Canadian Airline, which was hit hard by the pandemic situation and even announced the temporary suspension of more than 5000 flight attendants that also included the members of the low-cost subsidiary of Air Canada Rouge.
The Montreal-based organization is going to reduce its operation for the second quarter of 2020 to an extent of 85% -90% as compared to the similar period of the year. The cost reduction programs are going to be implemented for generating nearly $500 million and moreover, the senior executive who will give up part of their salaries along with the chief financial officers and the president of the organization will give up their entire salary. As stated in the reports bywww.businessinsider.in, (2020), the company also suspended most of the international flights that also include the United States after the temporary closure of the US- Canada Border as an attempt for stopping the virus to spread. The count of the company's operational airports were reduced to 40 and will also lay off the employees who work with the company according to their websites. Thus, as stated by Hudecheck, Sirén, Grichnik&Wincent (2020), the company recorded a net loss of more than $1.049 billion or nearly $4.00 per the diluted share as compared to e net income of more than $345 million and was also reported with the operating loss of more than %433 million in the first quarter of the present year. The net cash was decreased by $3,131 million; the deteriorating operating results and the lower cash from the working capital, because of the decline in the ticket sales,reflects the severe impact of COVID 19 on the airlines industry and Air Canada in particular(www.aircanada.com, 2020).
2.3 Evaluating the performance of the organization in present times, in comparison to the past
The performance of the Air Canada organization was very much disappointing and deteriorating after the emergence of the COVID 19 crisis in the first quarter of 2020. The company started to incur a huge loss, and as evidenced by the net loss of the company is $1,049 million now as compared to that of the net income of $ 345 million, which the company had incurred in 2019. The company also incurred an operating loss of more than $433 million in the first quarter of 2020 as compared to the operating income of $127 million in 2019. The airline company recorded the net loss of more than $.1.049 billion with the emergence of the COVID situation as compared to that of the net income of $345 million in the first quarter of the previous year. Moreover. As proposed by Nanni&Ulqinaku (2020), the first 6 months of 2020 involved the foreign exchange loss of more than $711 million whereas, it was a gain of $263 million within the foreign exchange during the same period of 2019. Thus, the first quarter of the present year reflected the abruptness and severity regarding the effects of COVID pandemic on the airline organization Air Canada along with the suspension of carriers to China since late January. The impacts got much more exacerbated in the month of March due to the mandated social distancing, government’s unprecedented travel restrictions within Canada, and across the globe along with the shutting down of economies.
Hence, as observed by Nepal (2020), the first quarter of 2020 was the one and only among the past 27 quarters of the company's operations which did not record the growth of the year to year operating revenue which resulted in significant financial damage to the company. The organization is also expected to reduce its operation by 85 to 90 percent in the second quarter of the present year and however, it will gradually get reduced to 75% as the continuous flow of the pandemic.
2.4 Analyzing the strategies for mitigating the adverse impact of COVID 19 on Air Canada
There are certain strategies which are going to be taken by Air Canada which may help them in mitigating the impact of COVID 19. As proposed by Nicola (2020), in the second quarter of the present year, the company expects the ASM system capacity to decline approximately by 50% as compared to the same period in 2019 that reflects the capacity reduction within all the key markets that are affected by the COVID 19. The capacity reduction is expected to be more than 75% and the company is going to proactively adjust these capacities as per the requirements (Niewiadomski, 2020). The combination of the lower prices of the jet fuel along with the projected saving of cost associated with the capacity reduction includes the workplace reduction and reduction of other programs. This general program of cost reduction is expected for mitigating the 50 to 60 percent of the organization’s total revenue loss in 2020’s second quarter (www.aircanada.com, 2020).
As suggested by Venter, Aunan, Chowdhury&Lelieveld (2020), the company in order to preserve the cash is starting to reduce cost and the program of capital deferral as company-wide that targets more than $500 million. Moreover, the airline company has suspended its program of share repurchase in the month of March 2020 Wang, Chen, Zhu, Wang & Zhang (2020). Air Canada has drawn down the revolving facility of credits that is US$ 600 million and additionally working with several parties for raining the additional liquidity for the next few years (Wen, Wang, Kozak, Liu &Hou, 2020). Thus, this will require pro-rata security for the unencumbered pool of assets. As stated inreports published in aircanada.mediaroom.com, (2020),the Canadian dollar may trade on an average of C$1.39 per US dollars regarding both the second and the remainder of 2020. Thus, the price of the jet fuel on an average will be 47 C$ cents per liter for the second quarter of the present year and will be 50 C$ per liter in the remainder of 2020 (economictimes.com, 2020).
2.5 Literature Gap
The existing literature focused on the impact of pandemic on the airlines industry in general but the impact of Covid 19 on the sales and operations of Air Canada in specific, has not been highlighted in any literature, owing to it being a fairly recent occurence. This is the gap which this research aims to address. The comparison between the past and the present performance of the company would allow formation of a perspective for other companies operating in this industry, vouching for its significance.
3. Research methodology
3.1 Introduction to the chapter
As stated by Fletcher (2017), Research Methodology refers to the specific techniques that are involved and are adopted within the research process for the collection, evaluation, and assemblage of the data. It helps in defining the tools, which have been utilized for gathering the relevant information within the specific research study that helps in determining the in-depth understanding of the topic and the subject it covers. The chapter incorporates the research onion, researcher philosophy, research design, research approach, sampling techniques, methods of data collection and its analysis along with the reliability and validity.
3.2 Research Onion
As opined by Saunders et al., (2009), research onion refers to the illustration of the stages that need to be covered while developing the research strategy. By viewing it from the outside, each of the layers within the onion helps in describing the more detailed stages of the research processes which can be incorporated in the study.
Figure 2: Research Onion
(Source: Saunders et al., 2009)
3.3 Research Philosophy and its justification
As viewed by Wiek& Lang (2016), the Research Philosophy is considered to be the belief about the ways in which the data regarding the phenomenon needs to be gathered, evaluated, and utilized for the research. This term refers to the summary, which is based on the experience of the research along with the interest, which thoroughly involves the past, present, and future. Thus, it helps in dealing with nature and enhances the resources for knowledge (Wiek& Lang, 2016). Thus, there are three types of research philosophies such as Realism, Positivism, and Interpretivism.
As the present research involves the Mixed Research methods, the researcher has used, aiming to execute both surveys as well as comparison with other quantitative secondary reports, both the positivism and interpretivism research philosophy. As proposed by Mohajan(2018), the interpretivism research philosophy helps in interpreting the study elements with the integration of human interest involving the social constructiveness, hermeneutics, and phenomenology and on the other hand, the Positivism research philosophy helps in gained the factual knowledge that gained by observation.
3.4 Research design and its justification
As mentioned by Attia& Edge (2017), the Research designs help for the provision of better analysis along with proper presentation regarding the study of the researcher, and thus, this design helps in outlining both the quantitative and qualitative research. Moreover, it denotes the application of the present methods for answering the specific question and thus it involves three types of design like Explanatory, Exploratory and Descriptive.
With the present research being of Mixed methods, so both the research designs like Explanatory and Exploratory have been used by the researchers. The explanatory research designs provide conclusive results that enhance the understanding of the researcher and the exploratory research design helps in providing an understanding of the problem of the topic (Ulmer, 2017).
3.5 Research approach and its justification
As evidenced by Ørngreen&Levinsen (2017), Research Approach refers to the plan and procedures, which involve the distinguished stages of assumptions, which are considered broad due to its detailed processes that are based upon the gathering, evaluation and interpretation of the data. Thus, there are two types of research approaches that are inductive and deductive.
As the present research is based on the Mixed research method, then both the inductive and deductive research design have been used by the researcher. The inductive research approach helps in producing the meaning of the data collected to identify the relationship patterns to build the theory and the deductive research approach helps in explaining the causal relationship among the variables and concepts.
3.7 Sampling size and techniques
As viewed by Clandinin Cave &Berendonk (2017), the Probability sampling technique helps the researcher in choosing the samples from the large population with methods like surveys, in this case. On the other hand, Non-probability sampling techniques have been used within the present research are the past data and records, which show the effects on its business before the pandemic and the effects that will happen after the pandemic. The sample size considered for primary quantitative survey, to be conducted online, through emails and portals, was 50 employees working with Air Canada while the sample size considered for the secondary quantitative analysis was 5 journals and annual reports, besides other relevant industry reports. The researcher has used both the probability and non-probability sampling techniques in this research involving mixed approaches.
3.8 Data collection
As explained by Page, Gilroy, Hurrio, Clark & Wilkinson (2017), the Data Collection refers to the method in which the data is gathered and the information is measured on the variables of the interest, within the established systematic manner which enables the researcher to answer the stated research question, testing if the hypothesis and the evaluation of the outcomes. Therefore, the present study utilizes the mixed method of research, which uses both the primary quantitative as well as secondary quantitative data for getting the ultimate result. Hence, the researcher created the questionnaire, including both open as well as close-ended questionsto conduct surveys online, owing to the ongoing lockdown phases in countries; these were attended by the employees and the customers of the Airline company. The secondary quantitative data will be collected from the annual and financial reports of Air Canada; the trends will be compared against the received data, for further analysis.
3.9 Data analysis
As stated by Cuervo?Cazurra, Mudambi, Pedersen &Piscitello (2017), Data analysis is the process of systematically implementing the statistical and logical techniques for describing as well as illustrating and evaluating the data. The primary quantitative data collected from the employees, through online surveys were analysed using graphs, tables and statistics concerning measures of central tendency, to reveal the significance of the findings. The past records of the airline company regarding its business and operation were also analyzed using thematic analysis. Further statistical analysis and evaluation of the findings, might consider the methods of SPSS.
3.10 Reliability, Validity and Ethical Considerations
As suggested by reliability, and validity is the concept utilized for evaluating the quality of the research. Thus, the present research is reliable as it provides the data collected through the survey questionnaires and the past and present records of the company. The validity of the research is ensured through the inclusion of already-published data and comparison of the data collected through survey with those retrieved from the literature and industry-reports, in order to evaluate and conclude on the research topic being analyzed in this study. However, in order to gather information through primary and secondary medium, entails confidentiality and anonymity. Hence to avoid any unethical means, the researcher plans to implement the data privacy act and ensure voluntary participation of respondents and ensures identity protection. The details received from the respondents will not be used for any commercial purposes. The information gathered will not be fabricated and there will be no biases towards findings from the data collected. Secondary information will be credited with the author's name to avoid intellectual property breakage. ?
3.11 Gantt Chart
The present research on research proposal assignment focuses upon the research question of “How is the global pandemic, COVID 19, impacting the sales and operations of Air Canada, in comparison to the past''. The research determines the past performance records of Air Canada before the COVID 19 emergence. It mentions the impacts of the COVID 19 on the sales and operation of the airline industry along with evaluation of its present performance of the organization as compared to that of its past. Furthermore the strategies adhered by the organization for mitigating the severe effects of the COVID 19 consequences.
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