Reporting and AnalyzingLong-Lived Assets
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.
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