1) What were Air Canadas strategies since 2009 to improve financial performance

and control of risks?

2) Discuss the sources of risk in Air Canadas business.
What strategies are applied for risk mitigation?
3) Do you think that Air Canadas risk management practices are appropriate? If
yes, why? If not, why?
1. CATASTROPHIC RISK :- Despite flying be the safest form of passenger travel but still
aviationinsurancewas considered very important because it could generate potential losses to a
very high extentevenfrom a single event .A large commercial aircraft was typically insured for
$100 million-$250 millionandits liability coverage ranged between $1.5 million -$2 billion.
2.OPERATIONAL RISK:-Operational risk had the potential for high frequency given the
volumeof passengers and flights. To manage these issues the used:-1.All airline equipment
required stringentprograms of preventative maintenance and safety2.The IT INFRASTRUCTURE
had back-up systems andcontingency plans in place.3
3. Human resource planning ensures additional capacity was available in the events of adealy or
sicknessnow quadrant wise description risk management of Air Canada
Quadrant 1in particular board of directors were most concerned with the risk quadrant 1 that
were beyond their control.AIR CANADA and the airline industry in general were vulnerable to
frequentand dramaticchanges in interest rate ,pension reserves,foreign exchange,severe
weather,fuel costs andeven their ownstock prices.So indirectly, they need to understand that
they they were in a big issue asthey were beingbanged by a lot of problems together which they needed to
avoid it but no other optionwith them .QUADRANT:-2INGENERAL,theboardofdirectorswerebeingsatisfiedthatAIRCANADAhadtheinsurancerequiredtoquadrant2risksasthetooktheAVIATIONINSURANCEatthatparticulartimeQUADRANT3:-
NOWinthethirdquadrant they started undertaking risk .they were now in a position tohedge jet fuel upto
a position of 34% for 2010 and 8 % for 2011 .FUEL PRICES WERE a relativelyimportant part
in consideration aseven a $1 increase in the cost of fuel collectively cost an increase by$425
million in additional operatingcosts per year .QUADRANT 4 :- IN QUADRANT 4 ,they started
using the safety measures as they werealready able toreduce risk by the 3
rd
quadrants,so now they started preventing the reduced risks .INTERESTRATERISKANDLIQUIDITYRISK: -
atfixed rate and 40 % at a floating rate .Because the interest rates on debt ws prevailing majorly
onfloatingcould definitely reach the situation of liquidity risk as stated above they were needed
to usethe swaps andinterest on cash reserves as well.