Air Canada: Flying High With Information Technology

For the exclusive use of E. Johnson, 2020.
HEC045
Volume 12
Issue 2
June 2014
Air Canada: Flying High with Information Technology

Case prepared by Forough KARIMI-ALAGHEHBAND1 and Professor Suzanne RIVARD2
We are in a customer service industry. In this line of business, the differentiators are service level,
identification and innovation, but innovation is key. And innovating means staying on top of things,
knowing your business in order to understand what could make a difference. We are constantly
searching for new ways to use information technology. I have one person whose sole job is to look at
what’s out there from an innovation standpoint, what would be good for Air Canada. He’s looking at
what’s coming, and he shares. Also, in our outsourcing contract with IBM, there is a clause by which
they have to organize innovation sessions for us. And although our contract with Operation SYS does
not have a specific clause on innovation, they know that we like to innovate, and they’re coming to
show us a new system that they have developed that could help us cut costs. (Senior Vice-President,
E-Commerce and Chief Information Officer, Air Canada)
Managing the information resource of a firm that is focused both on “engaging with customers”3
and competing “more effectively on multiple levels against the low-pricing structures offered by
low-cost carriers”4 entailed many challenges, which the Air Canada CIO and her team had been
addressing in multiple ways.
Air Canada – The Company

Founded in 1937, Air Canada was Canada’s largest airline in 2011, serving over 32 million
customers annually. In 1989, Air Canada was privatized. The first years after privatization were
challenging. After four years of net losses (from 1990 to 1993), 1994 marked the return to
profitability.5 Air Canada acquired its main rival, Canadian Airlines, in 2001. As of 2011, it had
more than 170 destinations and was the world’s 15th largest commercial airline. In 1997, Air
Canada was a founding member of Star Alliance. Fourteen years later, the strategic partnership
had 27 partners, making it the world’s most inclusive air transportation network. Headquartered
in Montreal, Air Canada had hubs in Toronto, Montreal, Vancouver and Calgary
1
Forough Karimi-Alaghehband is an Assistant Professor (Lecturer) in the Department of Management Science at Lancaster
University.
2
Suzanne Rivard is a Professor in the Department of Information Technologies at HEC Montréal. She also holds the Chair in
Strategic Management of Information Technology.
3
Air Canada, Annual Report 2010, p. 8.
4
Air Canada, Annual Information Form 2009, p. 18.
5
Air Canada, Rapport annuel 1994, p. 42.
© HEC Montréal 2014
All rights reserved for all countries. Any translation or alteration in any form whatsoever is prohibited.
The International Journal of Case Studies in Management is published on-line (http://www.hec.ca/en/case_centre/ijcsm/), ISSN 1911-2599.
This case is intended to be used as the framework for an educational discussion and does not imply any judgement on the
administrative situation presented. Deposited under number 9 65 2014 001 with the HEC Montréal Case Centre, 3000, chemin de
la Côte-Sainte-Catherine, Montréal (Québec) Canada H3T 2A7.
This document is authorized for use only by Emily Johnson in MBA 608 Technology Management taught by GREGORY REINHARDT, University of Louisville from Sep 2020 to Mar 2021.
Its shares were listed on the Toronto Stock Exchange (TSX) under the symbol AC-B.TO. In the
2010s, Air Canada’s mission was “connecting Canada and the world.”1 To accomplish this
mission, and because of the ethnic diversity of Canada, which contributed to the high and
growing demand for international travel, Air Canada pursued an international growth strategy. In
2010, the company entered major partnerships with Lufthansa and United/Continental, which
significantly helped its growth strategy and connection mission. However, Air Canada had to
compete with strong and growing airlines in the domestic market (e.g., WestJet), the U.S. market
(e.g., Delta) and the international market (e.g., Air France-KLM and British Airways).
Air Canada’s vision was to build loyalty through passion and innovation.2 Hence, the company
followed a differentiation strategy that involved “engaging with customers, with a focus on
premium passengers and premium products.”3 However, cost reduction was still a very important
issue for the firm. Indeed, because the number one cost at Air Canada was fuel, and because the
company had no control over fuel costs, cost reduction in other parts of the business was crucial.
To this end, Air Canada initiated a Cost Transformation Program (CTP) in 2010 to modify its
cost structure and reduce costs across the company. The CTP allowed Air Canada “to compete
more effectively on multiple levels against the low-pricing structures offered by low-cost
carriers.”4 It focused on three main areas: operational process improvements, supplier contract
renegotiations and revenue productivity gains.5
Information Technology Use at Air Canada

Major airlines in general, and Air Canada in particular, depend heavily on information
technology (IT) for almost all their activities, ranging from booking passengers to balancing the
weight of an aircraft before flying. Air Canada also used IT to optimize its processes, such as the
bidding processes through which pilots and attendants choose their flights. This significantly
reduced operating costs.
The IT applications portfolio at Air Canada comprised both recent applications (front-end) and
legacy systems (back-end). For example, the passenger processing system was part of Air
Canada’s legacy systems and was maintained as a very solid platform. The new technologies and
interfaces (e.g., web check-in, iPhone and Blackberry applications) were built around the legacy
systems. The IT department was responsible for making sure that the modern interfaces and the
legacy back-end systems could co-exist and work together.
Three of Air Canada’s business branches were the main consumers of IT services: Customer
Service, Commercials, and Operations. Each branch had several departments. For instance,
Customer Service included airports, call-centres, in-flight services and customer relations. The
Commercials branch included, among other departments, marketing and product distribution.
And Operations comprised flight planning and aircraft maintenance.
1
From Air Canada’s website: http://www.aircanada.com/en/about/index.html.
2
From Air Canada’s website: http://www.aircanada.com/en/about/index.html.
3
4
Air Canada, Annual Information Form 2009, p. 18.
5
© HEC Montréal 2
In addition to being essential for running the company’s business and reducing its operating
costs, IT was considered an important tool for innovation. Over the years, Air Canada pioneered
the development of several innovations that were later used by other airlines. Kiosks, i.e.,
interactive computer terminals at airports that allow customers to check-in, print their boarding
passes and their baggage tags, change their seat selection and check their flight information for
instance, were one of the very first innovations introduced by Air Canada in 1998.
In 2007, Air Canada was the first carrier in the world to introduce Electronic Boarding Passes
using a 2D barcode technology.1 Using the Electronic Boarding Pass service, passengers checked
in either online, at a kiosk or on a mobile device, and then received the boarding pass by SMS or
e-mail. The 2D image sent to the passenger held all the information needed to pass through
security and boarding.
In 2009, Air Canada was the first North American carrier to develop iPhone® and Blackberry®
applications to allow passengers to find and track flights, check in and receive messages on their
devices (iPhone or Blackberry). In the same year, Air Canada also launched a self-service
rebooking tool for customers (linked to the passenger rebooking system), which allowed
passengers to rebook flights in case of a cancellation, without the help of an agent. The system
was used more than ever by customers when many flights were cancelled during the Icelandic
volcano eruption in April 2010.
Information Technology Outsourcing

In 1994, Air Canada signed a seven-year contract with IBM, under which IBM bought Air
Canada’s systems and applications, certain equipment and computer assets and began running
them on Air Canada’s behalf. The main motivation behind this decision was to reduce costs and
allow the airline to focus on its core business. A small management group (including a Sourcing
group and Business Analysts) and IT architects were retained in-house to set company-wide IT
standards and policies.
In 2000, one year before the end of the contract, Air Canada prepared a request for proposals
(RFP) to find a tier-one IT vendor with which to develop a partnership for innovation. This was
not done because Air Canada was dissatisfied with IBM’s services, but rather because corporate
policy did not allow for contract renewal without going to the market and trying to find a better
deal. In addition, Air Canada had a policy of sending RFPs out early enough (12-18 months
before the end of a contract, which in this case was in 2000) to signal to the market (i.e., potential
IT suppliers) that it was considering a change of vendor. An RFP was not launched simply to get
a better price from an existing vendor. Following this RFP, Air Canada received proposals from
several potential suppliers. IBM’s proposal was selected.
At this time, Air Canada’s motivation for outsourcing was more than cost reduction or a focus on
core competencies. The focus and objective were clearly innovation: “And in fact, some of the
words we put in the contract spoke to acting as if you [IBM] are Air Canada’s IT group, so you
1
http://www.cnw.ca/fr/releases/archive/October2009/15/c6801.html
© HEC Montréal 3
are bringing the innovation to Air Canada, just as if you were Air Canada employees” (Senior
Director, IT Sourcing). As a result, Air Canada partnered with IBM to include the innovation
concept. This would establish governance around innovation which went beyond IBM’s borders
when IBM itself did not have products ready for Air Canada.
In addition, in 2000, Air Canada realized that it needed a vendor specialized in

telecommunications: “we wanted a true network provider to provide that service for us” (Senior
Director, IT Sourcing). Air Canada chose Telecom as its telecommunications provider.
In 2001, Air Canada was still pursuing a single-vendor sourcing strategy for acquisition of its
systems and applications. Later, in 2003, the firm began to change to a multiple-vendor strategy
in order to benefit from specialized, best-of-breed airline products available in the market more
quickly and less expensively:
We’ve recognized that we’re not that special, and for running an airline, there are many things that
every airline has to do. You need a departure control system, you need an inventory management
system, and you can buy that. There are very smart companies that have invested a lot of money in
developing such applications, and they will serve our purpose very well. (Senior Director, IT
Sourcing)
Air Canada needed a capable supplier that knew how to deal with large airlines. It did not want to
choose a vendor it would have to “educate” about the demands of managing and running a large
air carrier. Finally it selected Operation SYS, a company that offered several applications that
suited its needs:
Operation SYS wasn’t the only choice, but it was a big vendor proven in the marketplace, a lot of
money, a very healthy company, a company that continued to invest in their products through
research and development. (Senior Director, IT Sourcing)
While close to 95% of Air Canada’s IT services were outsourced to multiple suppliers, a small
but critical team was brought back in-house in 2001. This team’s activities were related to the
customer experience (i.e., content management, design of screens and navigation flow on Air
Canada’s website, receiving and analyzing customer feedback, and sending emails to customers).
Why did Air Canada bring these activities back in-house?
For some activities, especially on the web where you need to be able to react very quickly, having
one less intermediary is much better. If, for example, [the Commercials branch] wants to make a
special offer to match a competitor’s price – if a competitor just announced a low price on a
particular route and we want to match it – between the time that Marketing decides to make the offer
and the time it goes live, there’s a very short time span. If you do it in-house, it can be done very
quickly. […] If you outsource, there are additional steps, additional layers, and it could take longer,
so it’s less attractive. So for the web [or] I think for anything that you have to do extremely quickly,
it’s more cost efficient to do it in-house. (Director, Marketing and Customer Experience)
In 2011, Air Canada was pursuing a multiple-vendor sourcing strategy. Because dealing with
multiple vendors brings unique challenges, Air Canada assigned its IT partner, IBM, to act as the
integrator. New applications offered by any existing or new vendor needed to be integrated with
what was already in place, and that was IBM’s role. To be able to integrate the newly acquired
systems with the existing ones, IBM needed to know Air Canada’s IT policies and standards.
Therefore, IBM acted as keeper and guardian of Air Canada’s corporate IT standards. Being the
© HEC Montréal 4
integrator, it had a view of the systems and their operations; it had a problem management team
and a process to identify the problem areas/vendors:
When you have a major incident (MI), a problem, something breaks, depending on how many
vendors have a piece of it, it becomes very complicated to know what has broken. It could be the
network, it could be an application server, it could be the application and sometimes that’s three or
four vendors who need to be on the phone saying okay, my network looks good. Okay who’s the
server person? Okay, my server is up. Okay, application person, what do you see? Or is it the
person’s workstation? (Senior Director, IT Sourcing)
To manage its outsourcing contracts with multiple vendors, Air Canada used a relational
approach:
[…] right now, I have a project that’s not working well, and personally, I’m convinced it’s because
the team is not building their relationship with the supplier. I’ll give an example: Operation Sys [the
supplier]. At one point, it really got tense. It was huge, what we were trying to do. And then the
project leader built a very close relationship with his counterpart. Things were difficult but we could
sit down, have a discussion, and get things moving. It is important to have a good relationship with
your supplier and to have the tough discussions with them. (Senior Vice-President, E-Commerce and
Chief Information Officer, Air Canada)
For Air Canada’s CIO, having a successful IT outsourcing contract meant being accountable for
the problems that arise and taking a collaborative approach with vendors to solve problems:
Recently, a supplier has been making a lot of human errors. I’m not happy with that. But you know,
what I always say is you can’t say because you’re outsourced, it’s the outsourcers’ fault. No. We
made the decision to outsource, we selected the outsourcer, we are accountable. We have to make it
work. (Senior Vice-President, E-Commerce and Chief Information Officer, Air Canada)
The Information Technology Department at Air Canada

In 2011, Air Canada’s IT department comprised seven functional units supported by a project
management office (PMO). Each unit was managed by a senior director who reported to the CIO
(see Appendix 1). This structure, however, was relatively new, as the department had gone
through many changes over the years.
Prior to 2003, a centralized IT department was responsible for providing IT services via its
suppliers to all the business branches. Each business department had a representative in the IT
department. In total, approximately 50 business analysts were responsible for collecting
information on the IT needs of the business lines, evaluating and coordinating them, and passing
them along to the IT vendor for implementation. The same procedure was required regardless of
whether the IT requirements (e.g., the development of a new system) were local (small, system-
specific requirements for the needs of a department) or spanned different branches (e.g., an email
system for all branches). Therefore, IT was perceived as a bottleneck that was working too slowly
and not responding to real business needs.
In 2003, the IT department was decentralized in an attempt to resolve this issue. Business
representatives were transferred from the IT department to the business departments in order to
be closer to the business and more aware of departmental needs. Moreover, these representatives
© HEC Montréal 5
were allowed to deal directly with the vendors. However, the infrastructure and reservation
system and any other system that spanned the branches remained under the Corporate IT
department’s control, since they were core elements that affected all business branches.
Corporate IT also remained responsible for IT policies and standards.
This decentralized IT structure brought new challenges though. Depending on the representative
responsible for a department’s IT needs, the department could either be very well served or
dissatisfied with its IT services. Some departments did not even know their in-department
representatives and would send their requests directly to the IT department. Each department
tended to develop applications that satisfied its local needs overlooking the fact that other units
could potentially benefit from the same application. What’s more, many departments would
initiate applications that would affect other departments. The lack of communication between
department representatives led to suboptimal prioritization and coordination, which resulted in
inefficiencies.
Moreover, since every new IT initiative had to be checked against corporate policies and
standards, departments had to confirm with Corporate IT that their developments met corporate
guidelines. However, some departments were approaching Corporate IT very late in the
development process. By that time, if they were violating IT standards, they had to either
redesign or adjust their project, potentially impacting implementation dates, or justify their
project and obtain an exception.
In 2010, the IT department was re-organized once again. In the new structure, instead of having
an IT representative for each business department, an IT representative was assigned to each of
the three main branches: Customer Service, Commercials and Operations. Hence, instead of
having a representative for each Customer Service Department (e.g., call-centre, airports, etc.), all
the departments within the unit now had a single representative, the IT Customer Service unit.
The head of the unit was a senior director (see Appendix 1).
The difference between the new structure and the centralized structure was that the
representatives (business analysts and the senior director leading them) resided in the business
branches they represented, reporting both to the CIO and their respective business vice-
presidents. In this new structure all the departments in one branch had a single senior
representative supported by the business analysts (one unit), whereas, in the previous
decentralized structure, each department had its own representative.1
Although each of the three units had separate responsibilities, they had one common goal: to link
the business side and IT. The three units also worked closely together to coordinate requests from
the business branches. They were responsible for developing a comprehensive view of business
needs and requirements, translating the needs into IT solutions (with the help of the other four IT
units) and passing them along to the vendors for implementation. The solutions had to add value
to the business, be in line with corporate IT standards, and potentially contribute to overall cost
savings. All three units sought to employ people who could speak the languages of both business
and technology.
1
Appendix 2 illustrates how the three structures – centralized, decentralized and hybrid – differ.
© HEC Montréal 6
The CIO’s office and the offices of IT Sourcing, Transformation IT, Customer Solutions and
Innovations, and Marketing and Customer Experience were all on the same floor of a building at
corporate headquarters. The offices of the three new units – IT Customer Service, IT
Commercials and IT Operations – were located within their respective business branch.
IT Sourcing
IT Sourcing was a group of six people responsible for the formulation and ongoing management
of contracts between Air Canada and its major IT suppliers. One of the group’s main
responsibilities was vendor selection. The unit, along with the Strategic Procurement Group,
decided who received RFPs. IT Sourcing was also aware of whether the company had a master
level agreement1 with any of the vendors.
IT Sourcing was responsible for ensuring that capable vendors were selected. Selection criteria
included knowledge of and experience with the airline industry and 24/7 support for key
applications and services. It was expected that chosen vendors would not be learning their trade
on Air Canada’s account. They should need only minimal coaching – or, ideally, no coaching at
all – to work with a large organization such as Air Canada. “So again, they’re not going to be
surprised by us wanting the help desk to always be open. If it was a vendor who was just starting
out, there might be a lot of surprises, a lot of education required” (Senior Director, IT Sourcing).
IT Sourcing also supported business by evaluating needs and choosing between onshore and
offshore services. For example, applications that involved an agile development methodology
(i.e., little need for thorough analysis and deep testing; “they are coding while you are talking,” as
the Senior Director, IT Sourcing, put it), such as e-commerce applications, were suitable for an
onshore model because business people needed to be right there with the programmers. On the
other hand, for complicated systems (e.g., a reservation system) requiring thorough analysis and
extensive testing, an off-shore model was more suitable because development could not be done
in a day.
IT contracts were drafted by Legal, Strategic Procurement, and IT Sourcing. The ongoing
management of the larger IT contracts was handled by IT Sourcing. Some of the key components
of the contracts included developing the right service level agreements (SLAs)2 for each vendor,
enforcing the SLAs and managing the contracts. IT Sourcing also designed the governance
structure for each supplier, which included the frequency of meetings between the parties, the
frequency of performance reports and reviews of SLAs, identification of key players and
identification of contact people in the supplier organization. The governance structures used for
the three main critical vendors were similar. In these cases, governance was intense: “You know,
there are executive reviews or direct reviews at the director level. There are quarterly meetings,
1
A master level agreement between Air Canada and a supplier entails that Air Canada and the supplier have agreed on many
items that the lawyers have spent a lot of time reviewing (e.g., liability insurance, loss compensation). When a master level
agreement is in place, it is easier for the parties (Air Canada and the supplier) to add a new function to the existing contract.
2
“Service level agreement” refers to the contractual obligations of the vendor to provide a certain level of service to the client
firm (in this case, Air Canada). For example, for the help desks, IBM agreed to provide 24/7 service. Therefore, anytime a
customer calls the help desk, a representative must be available to take the call.
© HEC Montréal 7
monthly meetings, and day-to-day meetings, again because they are our IT system. It’s almost as
if they were Air Canada personnel” (Senior Director, IT Sourcing).
Transformation IT
The Information Technology-Transformation Solutions (Transformation IT) unit comprised
16 people distributed in five teams. The two main teams were Architecture and Operations. The
other smaller teams were Employee Innovation, Business Intelligence and Data Warehouse, and
Security. All the team leaders reported to the senior director.
The Architecture team was in charge of maintaining a solid and robust IT infrastructure for Air
Canada and of modernizing the front-end applications (i.e., new technologies or interfaces). The
team’s main challenge was to ensure that the two sides – the modern front end and the legacy
back end – worked well together. The Architecture team was responsible for preparing an IT
roadmap for Air Canada, which included the company’s long-term strategies and vision of IT.
This roadmap covered all the strategic IT initiatives for the next five years. It did not include
small and local applications in each business department. Rather, it focused on the types of
technologies that could transform the company’s business processes:
We’re not sitting here with our little team trying to understand all the 400 or 500 specific
applications. The big stuff, yes. So there is a roadmap that incorporates the big transformational
projects, like bringing the [Boeing] 787 in, our whole big maintenance system, replacing that,
upgrading our reservation/departure [system], […] what I’d call strategic initiatives, strategic
applications. For business unit applications, like single business-unit type applications, we support
the integration of the application, but we’re not telling them when they should be in or out of that
application. (Senior Director, Information Technology, Transformation Solutions)
The Operations team was in charge of evaluating vendor performance, which was quite a
challenge in a multi-sourced environment. The team worked with IT Sourcing to prepare and
implement the right SLA for each vendor so as to ensure smooth and seamless service. The
Operations team also ran the operational excellence program, under which the team constantly
evaluated and improved the performance of the three main critical vendors and others as
warranted.
Transformation IT also set corporate IT policies and standards (e.g., personal credit card
information standards from the Security team) and then communicated these standards to both
IBM (because of its role as integrator) and the business branches: “So they [the business
branches] really look at IBM as an extension of our standards and policies, and they’re their
custodian of the standards” (Lead Architect). For example, if a business unit was planning
something that might not comply with standards and policies, IBM would contact Transformation
IT: “Hey, this business unit is trying to do something we don’t think fits the standards. What do
you think?” (Lead Architect). Transformation IT would then decide how to resolve the issue.
The Employee Innovation team’s mission was to bring innovation to Air Canada. A typical
example was a new tool and application for the people working “below the wing,” placing a new,
real-time technology into the hands of the people who load the luggage onto the aircraft.
© HEC Montréal 8
The unit was interested in employing people who were able to talk both languages: business and
IT. People in the unit needed to have a background in either the airline industry or the retail
industry.1 Since the airline in general, and the IT department and its units in particular, were
dynamic and agile, survivability, flexibility and adaptability were crucial for people in
Transformation IT. People on the Employee Innovation team needed to be IT enthusiasts. They
were expected to constantly challenge the status quo.
[…] that inquisitiveness, that passion to improve things have to be part of it, but this needs to be
balanced with some level of business acumen that understands the risks, the financial aspects. (Senior
Director, Information Technology, Transformation Solutions)
Customer Solutions and Innovations

The Customer Solutions and Innovations unit employed 54 people who managed 20 applications.
The main applications were aircanada.com, the check-in system, the reservation system, and all
of the self-service suites such as kiosks, web and mobile check-in. Twelve people in the unit were
responsible for innovation, which was mostly related to customers (i.e., external or above-the-
wing innovation).
The unit was responsible for “generating innovation, but at the same time making sure that the
products are reliable, robust, and will compete” (Director, Customer Solutions and Innovations).
The unit was therefore in constant interaction with the business branches, especially Customer
Service and Commercials. The unit employed an IT business analyst who worked closely with
the business side to create “business technology” (i.e., technology that actually supported the
business). Most often, the innovation process would start with a requirement from the business
side. Then IT business analysts would help the business to translate its needs into IT solutions
and add features to the solutions. Innovation was thus pursued jointly by IT and the business.
Sometimes, however, the innovation process started on the IT side, as the business believed that
there was no solution available to meet its requirements:
We know about what platforms are out there, what systems are out there, and we like to think that we
can… maybe when they think there’s no hope, they should come to us and we’ll find them an idea. I
think now that the technology is there, it’s rare that we don’t have technologies to carry out an idea.
It’s more, how will they change or transform their business processes, and this is where we have to
help them out as well. (Customer Solutions and Innovations)
The Customer Innovation team was responsible for technology watch. Its members attended
industry meetings. They were knowledgeable about the business and passionate about IT, and
this allowed them to create business technology. The team had to be responsive to external
changes, such as regulatory changes, and to internal changes, such as changes in business
requirements: “We have to be on our toes, we have to be able to come up with new concepts”
(Director, Customer Solutions and Innovations). Moreover, in order to ensure that new products
were robust, reliable and flexible, the Customer Solutions and Innovations unit was in constant
interaction with the Transformation IT unit and, especially, its Architecture team. The two units
worked closely together to improve the design of technology products, choose the right platform
1
The airline industry is similar to the retail industry inasmuch as airlines are also selling products.
© HEC Montréal 9
for the new products, and make the new products (i.e., applications) as flexible as possible for
future changes.
Marketing and Customer Experience

As the name implies, this unit was responsible for tracking and facilitating the customer’s
experience on the Air Canada website. Three teams worked in this unit: 1) the customer
experience team, including a web writer and two customer experience experts; 2) a three-person
web team; and 3) the Electronic Customer Relationship Management (e-CRM) team. The
customer experience team was responsible for website page design, the site navigation experience
and booking flow (e.g., figuring out why customers stopped at certain pages and did not complete
their purchase). It also provided the text and information on each web page to make the
experience as user-friendly as possible. Moreover, the team was responsible for receiving
customer feedback and acting on it. The team also performed “usability tests” to evaluate the
design of new websites or new functions. The second team, the web team, was responsible for
maintaining web content (e.g., special offers or changes in policy due to regulatory changes). The
last team, e-CRM, managed email communications with customers.
The sources of changes to Air Canada’s website were diverse. Some were internal (e.g., the
Commercials branch), others were external (e.g., customers). Marketing and Customer
Experience were responsible for gathering all the input from the different sources, prioritizing it
and taking action (e.g., changing the website accordingly). The Commercials branch was an
important internal source of changes, as it came up with revenue-generating ideas for the website.
Customers were an important source because they also shopped and booked in other places (e.g.,
different travel sites and the sites of other carriers), so they compared Air Canada’s website with
those of competitors. The Customer Experience team would modify the company’s website based
on information collected in customer surveys, the terms used by customers in Air Canada’s
search engine, and customers’ comments on the website: “‘I’m looking for information on a
stroller and I’m not finding it.’ So whenever we have these types of comments, we investigate
and take action” (Director, Marketing and Customer Experience). The team would also make
adjustments based on competitors’ websites.
Marketing and Customer Experience was responsible for the front end or the design of the web
pages. However, changes to the back end were done by the vendor(s)’ programmers:
I’d say in my department, which mostly takes care of the front end, we do everything in-house.
Things that are to be done in the back end… for example, if you introduce preferred seats [e.g., seats
with more legroom], you have to design the screens and how it’s going to be done, so that we do in-
house. But then the programming is done in the back end to make sure the amount associated with a
preferred seat gets recorded, and all that’s still outsourced. (Director, Marketing and Customer
Experience)
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IT Operations
IT Operations was in charge of all the systems pertaining to the airline’s operations, such as flight
operations and aircraft maintenance. In 2010, the unit employed 70 people1 (i.e., business
analysts), including both full-time employees and part-time contractors.
At the time, the unit had just finished transforming the operational systems (i.e., flight planning,
the weight and balance of the aircraft, and two systems that allowed pilots and attendants to
choose their flights). The main challenge of the transformation was to keep the airline alive
during its “heart transplant”:
In the industry, it’s pretty much one of the few projects of that magnitude that have been undertaken,
and the main challenge of such a project, it’s as if I am performing your heart transplant, so the
complexity is in the planning around it and all the interfaces with your system. In this case, there
were over 250 interfaces with the other system, and obviously what I’m doing in a heart transplant is
keeping you alive at the same time; the airline has to continue to run. And this in a sense was
probably one of the main challenges. (Senior Director, IT Operations)
Also, in 2010, the unit was in the middle of changing the aircraft maintenance system, which was
25 years old. This system maintained all the data about all the parts of an aircraft. For example, it
had data on the age of thousands of parts in each aircraft and the scheduled times for changing
each part. As for the introduction of the Boeing 787 – a “computer with wings” – IT Operations
along with business departments and IT units were working on its strategic impacts:
The aircraft has wireless connections. There’s going to be more than 500 different pieces of software
in the aircraft. So when it arrives at the gate, there’s wireless LAN, a wireless connection, a Wi-Fi
connection that’s going to enter in [to] action to download information from the aircraft to the gate
and upload software patches, too.
What are we going to do with this aircraft? We need to have a very good understanding of its
maintenance, the flight operation aspect, the technology, understanding what Boeing is going to do
with it, understanding what the market, meaning the other carriers, is going to do, and be able to
integrate all that to develop a good roadmap. So I would say it [IT Operations] needs a broad
understanding of the business in general, of the industry. (Senior Director, IT Operations)
IT Operations worked closely with Transformation IT because all the new systems needed to be
supported by the airline’s IT infrastructure and to fit into the current architecture. IT Operations
and Transformation IT worked closely together to ensure that the best available platform was
chosen for each system and that each system complied with corporate standards and policies.
When the projects moved out of the implementation/testing mode and into the steady mode, IT
Sourcing helped to implement the right SLA with each of the vendors involved and managed the
contracts for the remaining contract time.
The IT Operations unit (the newly added unit) was in charge of systems relating to airline and
aircraft operations (e.g., the flight planning system and the maintenance system). In contrast, the
1
The number of employees was relatively high because the unit was in the midst of changing the aircrafts’ maintenance system.
Also, Air Canada was going to use a new aircraft (i.e., the Boeing 787) in the years to come, which would affect operations and
the systems that support operations. The employees of IT Operations were in charge of analyzing these impacts.
© HEC Montréal 11
Operations team at Transformation IT was in charge of IT operations for all vendors and all
systems. It was basically in charge of how vendors operated or worked.
IT Commercials
In 2010, a few months after the creation of the new units, the Senior Director of Commercial
Information Systems (IT Commercials) was creating her team of 10 to 15 cross-functional people
(from different departments of the Commercials branch) who possessed a solid understanding of
both the airline and the business environment.
IT Commercials worked closely with IT Customer Service to ensure that all needs were
coordinated between the two branches (since the systems needed by one branch could also be
needed by or affect the other). For example, when IT Commercials wanted to add preferred seats
to the Air Canada website, IT Customer Service also had to add them to the call centres (for
consistency in all service points). IT Commercials also worked closely with Customer Solutions
and Innovations to help the business side translate their needs and product definitions into IT
solutions. IT Commercials was also an important source of change for Marketing and Customer
Experience. For example, when the Commercials branch decided to add an online class upgrade
(e.g., from economy to business class for certain flights) to the company website, this branch
channelled the request through IT Commercials to Marketing and Customer Experience:
So where there’s a lot of benefit is that now the folks in the commercial branch can actually focus on
what sort of product they want, the product definition. And when I say product definition, I mean
what it is that they need, whether it’s a new product or a product enhancement. So they have defined
the specifications, the concept, they’re responsible for that, but they’re also responsible for vetting it
with the other departments so that, if there’s a product owner within the commercial branch, then
they will come to me and my team and they’ll say, “Okay now, I want you to go and make it
happen.” So our role will be to implement and then support whatever system is put into place. (Senior
Director, Commercial Information Systems)
For the Senior Director of IT Commercials, the main challenge lied in bringing the business
departments together, since they were accustomed to working independently:
The main challenge of this new role is really to build relationships within the branches, breaking
down the silos between departments, obviously, because these departments have been working in
isolation for a long time, doing things their way, which is not necessarily a bad thing, but they’ve just
not necessarily been communicating, even amongst the branches. So I would say the biggest
challenge is to build the relationships. I think that’s key, and that was my first objective, to start
building the relationships and start the communication process across departments. So it’s about
bringing people to the table. (Senior Director, Commercial Information Systems)
IT Commercials measured its success in terms of customer satisfaction. Since its customers were
inside the commercial branch, the success of IT Commercials was determined by the branch’s
satisfaction with the systems and the solutions that were implemented. IT Commercials also
needed to create realistic expectations in business branches (by engaging and motivating different
stakeholders) so that they could deliver solutions that met business expectations.
© HEC Montréal 12
IT Customer Service
The Customer Service Information Systems (IT Customer Service) was a unit of 20 people who
coordinated IT needs across call centres, airports, in-flight services and customer relations. The
unit was in charge of any system or application (i.e., implementing and providing support) that
covered the customer service departments. The unit’s main challenge, similar to the other two
new units, was to find people who could communicate with both the business side and the IT
side:
I think one of the biggest challenges is having individuals who can speak the languages of both sides
of the equation, so that they’re able to understand the business impact. Being able to develop business
cases, having the knowledge to do so, to understand which projects have merit and which don’t. Also,
being able to then turn around and translate that into technical documents or technical conversations.
So that you can manage the vendors in order to satisfy the end users. (Senior Director, Customer
Service Information Systems)
The unit worked closely with Customer Solutions and Innovations in a collaborative approach to
source solutions for business requirements. Developing mobile applications is one example of
their work:
Employees [are] dealing with mobile applications, as well as customers. But if a requirement comes
to me from my airports branch, that they want a new mobile application and I’m not sure which
direction to go in terms of the technology because there are options out there, then I would engage
with the Innovations team to get some input on industry trends and the options out there. (Senior
Director, Customer Service Information Systems)
IT Customer Service worked closely with Transformation IT to ensure that their initiatives
complied with corporate standards and policies. Depending on the type of project (a new
initiative or a change/enhancement to an existing system), IT Customer Service either issued an
RFP for a competitive bid to find the right vendor or asked an existing vendor to carry out the
project. In addition, depending on the dollar value of the new initiatives to be acquired, IT
Customer Service might perform the RFP and vendor selection processes with or without help
from IT Sourcing. When a new initiative was above a certain expenditure level, IT Sourcing
helped IT Customer Service prepare an RFP, determine a list of potential suppliers to receive the
RFP and, finally, select the vendor.
IT Customer Service also changed and adjusted its types of projects depending on the economic
cycle of the airline. In 2010, in the midst of the introduction of the Cost Transformation Program,
IT Customer Service was focused on the type of projects that could contribute to overall savings.
Moreover, the unit was flexible in order to accommodate changes in the airline environment:
From month to month, things can change drastically, and you’ve got to be able to adapt to that.
Dealing with the commercial side of the business, you have to be quite flexible, and it’s important to
be able to change strategies quite quickly. (Senior Director, Customer Service Information Systems)
The Group of Seven

The four senior directors of the IT units and the three senior directors of the newly added units
formed a group whose members communicated intensely with one another, both formally and
© HEC Montréal 13
informally. The proximity of the senior IT directors’ offices facilitated face-to-face, informal
communication. “Basically it [a new initiative] starts in the hallway. And then we create a
SWOT1 team” (Senior Director, Information Technology, Transformation Solutions).
The directors called themselves the Group of Seven (G7). In addition to frequent informal
communication, they held formal monthly meetings: “The Group of Seven meets every month for
us to understand: What are you working on? What’s coming up? How can I support you? What
are you going to need from me? So we have monthly discussions to just make certain that there’s
as much synergy as possible” (Senior Director, IT Sourcing).
The G7 also attended a staff meeting every other week with the CIO. The senior directors
communicated and coordinated their needs and ideas beforehand, through informal
communications and also in their own G7 meetings. Therefore, they spoke with a single voice.
Since the CIO attended weekly executive meetings with the CEO and other business vice-
presidents, she had firsthand knowledge of the airline’s directions and high-level goals and
strategies, and she talked about them at her staff meetings. In the following G7 meeting, the
senior directors would continue discussing the airline’s goals and initiatives mentioned by the
CIO at the meeting and how they could support those initiatives.
The G7 and the CIO also held a yearly budget meeting. Each year at the end of summer, the
group spent a month working on the budget for the following year. The G7 first prepared a list of
all the projects that the business side wanted to work on:
We ask Business about all the IT projects that they think they’re going to be working on, and all of
that money will come out of an IT budget. So it is the CIO who has the budget for any IT work. We
get an overview formally once a year as to what it is that the business wants to work on. But as far as
big projects are concerned, we already know about them. A project that’s going to take two or three
years, we’re either starting it, or we’re in year one, two or three. (Senior Director, IT Sourcing)
After learning about the projects, the G7 would prioritize initiatives/projects for the coming year:
We also reduce the list [of projects] and we speak as a group with the business side and IT to
understand their priorities, dependencies. Is it a commercial initiative? Is it a legal initiative? Is it
mandated by Transport Canada? We set those priorities and then we agree on the plan for the
following year. So again, we have alignment at the director and VP level on what’s important to
accomplish next year. And by seeing where the business is going, we can determine if we have more
infrastructure work to do or if we have to make an environment more robust. This is the opportunity
for us to understand as well, not only do I have product development to do but I also have
infrastructure development to do to support the business needs. (Senior Director, IT Sourcing)
The budget exercise was not new to the IT department. However, the department’s new structure
made the exercise easier and facilitated the alignment of IT with business:
Because I’ll be able to speak with these three colleagues and say: “What are you working on? Show
me your plan in advance of the budget.” So it will be less of a surprise when we actually get to the
budget exercise itself. (Senior Director, IT Sourcing)
1
Strengths, weaknesses, opportunities and threat (SWOT) analysis.
© HEC Montréal 14
For the G7, being agile and responsive to the business side was the ultimate goal. The Senior
Director, IT Sourcing, explained the environment in which Air Canada operated: “Knowing our
competitors, that’s the easy part; watching WestJet who is a strong competitor or Porter who is
successful with their operations at Toronto Island Airport. It is easy for our commercial people to
understand this kind of business challenge. But fuel, volcanoes, disease, wars… it’s completely
outside of our control, but we have to cope.” And how can IT help the business side cope? “Well,
I think it’s by being very nimble,” she says. “Putting things in place in advance, so that we don’t
say ‘Oh, what a great idea, it’s going to take a year to do.’”
Continue to Innovate, Continue to Learn

Innovation was an imperative for the Air Canada Group: “Knowing your business in order to
understand what could make a difference.” The CIO believed that in order to innovate, “you have
to get away from the day-to-day at times, and think about what could make a difference in the
business, because otherwise you’ll always be putting out fires instead of thinking.” To innovate,
she added “you need to think in terms of trends. You know your business, you say, OK, is there
something here?”
For Air Canada, constant innovation with IT was the key differentiator. It served as a nexus of
identity, a point of departure that would allow the company to fly high.
2014-03-24
© HEC Montréal 15
Appendix 1
Air Canada IT Department – Organizational Chart
© HEC Montréal 16
Appendix 2
Three Types of IT Department Structure
Centralized IT Hybrid IT Decentralized IT

Department Department Department
Adapted from: Rockart, J.F., Earl, M.J., Ross, J.W., “Eight Imperatives for the New IT Organization,” Sloan Management Review, Fall 1996, p. 52.
© HEC Montréal 17
Appendix 3
Air Canada’s Fleet1
1
Source: Air Canada’s Annual Report (2011; p. 34), available at:
http://www.aircanada.com/en/about/investor/reports.html (accessed: Dec. 9, 2013).
© HEC Montréal 18
Appendix 4
Key Financial Figures for Air Canada1
1
Source: Air Canada’s Annual Report (2011; p. 2), available at:
http://www.aircanada.com/en/about/investor/reports.html (accessed Dec. 9, 2013).
© HEC Montréal 19
Appendix 5
Air Canada’s Market Share1
1
Source: Air Canada website, Investor relations, Speeches and Presentations (Archives: February 2011, p. 4)
http://www.aircanada.com/en/about/media/presentations/archive.html#faq:1-* (accessed Dec. 9, 2013).
© HEC Montréal 20

Air Canada: Flying High With Information Technology

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Air Canada: Flying High with Information Technology

Air Canada – The Company

Information Technology Use at Air Canada

Information Technology Outsourcing

In addition, in 2000, Air Canada realized that it needed a vendor specialized in

The Information Technology Department at Air Canada

Customer Solutions and Innovations

Marketing and Customer Experience

The Group of Seven

Continue to Innovate, Continue to Learn

Centralized IT Hybrid IT Decentralized IT

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