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9-Reporting and Analyzing Long-Lived Assets

9-Reporting and Analyzing Long-Lived Assets

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Published by: tibip12345 on Oct 17, 2009
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chapter 9
Reporting and AnalyzingLong-Lived Assets
Accounting Matters!
Tumult in the Skies
Air Canada has experienced a lot of turbulence in recent years. In 2000, things looked bright with theacquisition of insolvent Canadian Airlines. But, three years later, Air Canada itself was seekingbankruptcy protection, having suffered from increased competition from discount carriers like WestJet,as well as the fallout from the terrorist attacks of September 11, 2001, the Iraq war, and the SARSoutbreak—all of which significantly reduced travel in general.Canada's largest airline then re-emerged from bankruptcy protection in October 2004 as a restructuredand streamlined air carrier. But the twists and turns this story has taken in the past five years have lefteveryone wondering what's going to happen next.The 2004 restructuring plan focused on reducing operating costs, strengthening the balance sheet, andreorganizing the corporate structure. Air Canada had reduced its debt from approximately $12 billion toless than $5 billion. It also raised $1.1 billion in new equity capital and had approximately $1.9 billion of cash on hand.Various businesses segments, including Air Canada Jazz, Destina.ca, Touram, Air Canada TechnicalServices, Air Canada Cargo, and Air Canada Groundhandling, now operate as separate legal entitiesunder parent holding company ACE Aviation Holdings Inc.The airline no longer flies older F-28, DC-9, B737, and B747 aircraft, having replaced them with newer,more fuel-efficient aircraft and aircraft better able to handle longer-range, nonstop flights. In doing so, itreduced the number of aircraft types to save on maintenance, spare parts inventory, and crew training.
http://edugen.wiley.com/edugen/courses/crs1562/pc/c09/content/kimmel6792c09_9_1.xform?course=crs1562&id=ref (1 of 3)11/03/2008 8:24:57 PM
Along with the restructuring came the unveiling of a new look for the airline, including an updateddesign and colour scheme for its fleet; new uniforms for its 6,700 flight attendants and 2,900 airportcustomer service agents; a new in-flight entertainment system; and lie-flat seats for international,executive-class passengers.The changes were to be introduced over the course of 2005 both “strategically and economically” inorder to minimize costs. Painting the airplanes would take place over two years, according to theairline's regular maintenance program. The marketing campaign was also produced within existingmarketing budgets.Air Canada has come a long way since Trans-Canada Airlines, its predecessor, was launched in 1937.And the company has been able to reposition itself several times since it changed from a Crowncorporation to a public company in 1989. We’ll have to keep an eye on the skies to see how well theselatest developments fly for both the company and its shareholders.
Air Canada: www.aircanada.com  
The Navigator
http://edugen.wiley.com/edugen/courses/crs1562/pc/c09/content/kimmel6792c09_9_1.xform?course=crs1562&id=ref (2 of 3)11/03/2008 8:24:57 PM
Feature Story 
Study Objectives 
Chapter Preview 
Read text and answer
Before You Go On 
Using the Decision Toolkit 
Summary of Study Objectives 
Review the
Decision Toolkit—ASummary 
Demonstration Problem 
Self-Study Questions 
Complete assignments
Copyright © 2008 John Wiley & Sons Canada, Ltd. All rights reserved.
http://edugen.wiley.com/edugen/courses/crs1562/pc/c09/content/kimmel6792c09_9_1.xform?course=crs1562&id=ref (3 of 3)11/03/2008 8:24:57 PM

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