Canada 's Flag Carrier And Largest Domestic, U.s. Trans Border Market

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Air Canada is Canada’s flag carrier and largest domestic, U.S. trans-border and international airline and the largest provider of scheduled passenger services in the Canadian market, the Canada-U.S. trans-border market and the international market to and from Canada (Annual Report 2014). Historically speaking, it was founded in 1937, provides scheduled and charter air transport for passengers and cargo to 178 destinations worldwide. Canada 's national airline originated from the Canadian federal government 's 1936 creation of Trans-Canada Airlines (TCA), which began operating their first transcontinental flight routes in 1938. In 1965, TCA was renamed Air Canada following government approval. After the deregulation of the Canadian airline…show more content…
In terms of financial results, the annual report of both companies show the WestJet is much more financial healthy than Air Canada. We will look at the ratios for both companies, as financial ratio analysis provides answers to several questions: is the entity primarily financed by foreign sources of assets, do the customers pay promptly and in accordance with the contracted agreement, are the operating costs too high and do they endanger the long-term stability and business performance (VSBDC, 2004 & Žager, et al. 2012). Ratios are used by outsiders to evaluate the corporation (earnings/share, P/E ratio) and are used within the corporation to measure such things as efficiency and effectiveness (Cotts, et al. 2004). Let’s start by looking at Air Canada ratios: 1. Acid Test ratio: FY2014=0.83 – FY2013=0.88 2. Current Ratio: FY2014=0.98 – FY2013=1.03 3. Return on Equity: FY2014=(0.09) – FY2013=(0.01) 4. Debt Ratio: FY2014=110.6% – FY2013= 114.8% In comparison, here are WestJet’s ratios: 1. Acid Test ratio: FY2014=1.10 – FY2013=0.97 2. Current Ratio: FY2014=1.29 – FY2013=1.09 3. Return on Equity: FY2014=0.16 – FY2013=0.17 4. Debt Ratio: FY2014=161% – FY2013= 161% Looking at the acid test ratio, we see that WestJet has a ratio of over 1.0 in 2014, which is usually considered satisfactory (Wood, et al. 2013). Air Canada, in contrast, has posted two straight years under 1.0, which could hint at some cash flow problems. The current

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