1. November 8, 2000 A debriefing report Integration of Canadian Airlines Jacques Cherrier November No

2. 2 The presentation Overview of the integration task Key deliverables from an IT perspective Zoom in on Marketing and YM: the lessons learned –Project management, IT –Users (revenue controllers…) –Methodology (Optimization, forecasting….)

3. 3 Special thanks Jeffrey Kastner, Manager IT solutions Pierre Chouinard and Elaine Drury (with the project team)

4. 4 The task at hand

5. 5 1999 : 2 major airlines

6. 6 Air Canada, 2001 The new Air Canada is now the 11th largest carrier in the world Expanding our fleet, currently 376 aircraft Flying more than 2000 non-stop flights per day Over 30 million passengers to 150 destinations

7. 7 The Key deliverables in 2000 Integrated the Air Canada and Canadian schedule Merged the airport operations, including changing terminals at Toronto's Lester B. Pearson International Airport Combined the Reservations and Flight Operations systems. Hired and trained over 1,700 new employees Upgraded airport facilities for better customer service

8. 8 The Business Challenge Two Major airlines of similar size and complexity Different work groups representation Canadian Airline financial difficulties

9. 9 IT as a key partner

10. 10 The IT Context Complex technology infrastructure Smorgasbord of technologies Systems are highly intertwined and must all work together reliably More than 300 applications supporting functions such as passenger reservations, seat inventory management, flight scheduling, load planning and forecasting for each aircraft, the frequent flyer programs, flight departure control, invoicing, payroll, and so on.

11. 11 Reservation system Reservation system is at the core of the airline business Many of the problems encountered during the early days of integration can be attributed to having two separate reservation systems Air Canada had its own Reservation System (RES III) and Canadian was based on Sabre technology Decided to consolidate to Air Canada's systems –Mainly due to implementation and training considerations One million Canadian Airlines reservations were successfully transferred to the Air Canada computer reservations system

12. 12 RES effort Monumental task of over 100,000 PD of work executed in 9 months Twice the size of Y2K preparation in one quarter of the time More complex than Y2K effect on system capacities business process changes training issues new functionalities to introduce massive moves of personnel and equipment data merging dependant on great unknowns in business direction

13. 13 Airport systems Developed special front-end software that enabled use of the Air Canada computer terminals to access records on Canadian system Trained 470 Canadian employees on Air Canada's system Self-service Express Check-in Kiosks Originally put into production in 1999 Helped to mitigate many of the line-ups at airports

14. 14 Project Management Office Managed and controlled about 125 IT projects Also managed many of the business-related projects Project management disciplines throughout Tight change control Drew heavily on Y2K project experience

15. 15 Next steps Single operating carrier code planned for June 2001 Improving the airline profitability –YM and related tactical systems –Scheduling deployment to leverage the global network –Improved pricing decision making At Air Canada, IT has established its credibility as a strategic business enabler

16. 16 Focus on Marketing

17. 17 Marketing IT Interview with P. Chouinard, Project Manager Marketing IT

18. 18 The mandate Target set of applications was Air Canada, with existing functionality, even though some of the CP systems provided additional functions No attempt was made to "optimize" the target portfolio of applications by substituting "better" CP applications, or introducing additional functionality to AC applications

19. 19 Do Get the business fully on board. –AC Marketing set up its own Integration group, with formal plans and activities. This was critical at cut-over, migration would not have happened without this. Set up a separate group to handle all changes to the hardware, network, etc. Make sure you have the right people. Make the necessary adjustments as soon as problems are identified. Communication, communication, communication…

20. 20 Don’t Don't make everything cut-over critical; advance or delay implementations as much as you can. Don't attempt to make historical data perfectly compatible with the target applications; you may waste a lot of energy here. –If it is not compatible, define alternate solutions; or drop it.

21. 21 User Perspective Interview with E. Drury, Project Leader Marketing

22. 22 The goal Data integrity had to be maintained –Quality of AC data should not be compromised by the introduction of CP Implementation was a Fixed date –All was accomplished except some historical data back load that carried over the RESIII migration date

23. 23 Lessons learned Manage “scope creep”; define Business Requirements as much as possible Identify all impacted areas –If not, there will be friction with IT and Project Management to deliver what is required due to resource constraint Reliance on “external consultants” made life difficult –Turnover –Sharing plan, progress reports...

24. 24 Lessons learned (cont’d) Effort was underestimated to manage CP on top of AC`s current route structure –new controllers without experience and little market knowledge –methodological challenge (forecast, setting allocations…)

25. 25 YM methodology OR experiences

26. 26 Different philosophy and related systems From a Virtual Nesting (Financial Bucket) system to a Fare class Leg Based system with Bid Price OD control Similar type of MI system but with different perspectives –Allocation by bucket versus booking classes... No change to the AC optimization logic

27. 27 Forecasting (leg based demand) Historical CP data with actual bookings but no forecast was ìmported Forecast at cutover –Sponsorship was effective on parallel routes where both AC and CP had flown –For some non-parallel routes sponsorship was applied (e.g. US short haul; OD 1 = OD 2 ) –For most non-parallel, manual allocation setting (e.g. International destinations…) Revert to normal production process after `X` weeks –Different per type of markets

28. 28 Revenue input Revenue input for YM derived from AC data The average yield on CP lower than AC’s level Applied the ODF and Leg based fare from AC to the parallel routes For the non-parallel routes, values where derived from an average Yield per mile from logical market cluster

29. 29 Lessons learned Need for calibration (cutover and on-going) –User requires system/OR experts –Make sure you are present and pro-active Fine tune parameters and YM component as market particularities emerged –e.g. OD fares used in the BP calculations at cutover versus reality HKG-YVR = X$ with HKG- YYZ is only $100 more for a 3,000 mile add-on journey

30. 30 Lessons learned (cont’d) There will be an impact on the stability of the forecast –Flight consolidation, stimulated demand… –Difficult to provide valid revenue outlook –No real solution but monitoring and calibration Do not expect that historical fare input to be readily usable –The mix may not be what the host airline is desiring –Data may not be packaged as required (different rules for OD trip building) It is more important to turn up with a reasonable scenario and adjust as actual input come in –Market realities will be integrated as the business progresses