Air Canada Rouge offers customers iPads for use while in flight. But even as the popularity of the iPads grew among passengers, the devices the airline had purchased were becoming obsolete.
Air Canada Rouge teamed with IBM Global Financing, which bought back the older iPads and facilitated the lease of new devices with a customized 3-year, fixed-term contract.
Decreasescapital expenses by converting rapidly depreciating devices into a predictable operating expense
Supportscontinued growth by facilitating the acquisition of additional devices when needed
Safeguardscustomer satisfaction with a built-in timeline for upgrades to new technology
Business challenge story
Avoiding a costly outlaySince its founding, Air Canada Rouge has provided customers with iPads to use on the plane, either as part of an airfare upgrade or for a small fee while in flight. With access to the organization’s private entertainment app, the iPads are exceptionally popular among passengers.
However, the airline’s 1,440 original 16 GB iPad Air devices became outdated when Apple introduced the iPad Air 2. They no longer supported the airline’s entertainment app, and they had only half as much storage as the new generation of tablets. Not wanting to write off a partially depreciated capital expenditure and eager to upgrade the devices without another prohibitive outlay, Air Canada Rouge turned to IBM Global Financing.
“IBM was able to offer us a customized solution that made both strategic and financial sense,” says Anton Vidgen, senior director, customer and technology at Air Canada Rouge.
A customized lease contractIBM Asset Recovery Solutions helped Air Canada Rouge offset the original iPad purchase with a buyback program. It then developed a lease agreement so that the airline could procure 1,540 new iPads quickly, with a 3-year term and a price that will remain fixed for the duration of the contract.
“IBM bought up all of our old devices and provided us with new devices within three weeks of getting the contract signed. Not many companies can move that quickly,” notes Vidgen.
Air Canada Rouge’s business has grown, with new airplanes and new destinations, since the company secured the new iPad Air 2 devices, and the IBM Global Financing team continues to support that growth with speed and flexibility. Today, the airline is leasing 2,400 iPads with help from IBM, and Vidgen expects that number to grow again soon.
“For large enterprises, growth can sometimes happen quite slowly. But with this relationship and contract infrastructure, we are able to expand our program with ease,” says Vidgen.
Keeping expenses predictableAir Canada Rouge chose to lease its iPads on a 3-year term that also shifts the iPads from a capital expense, which can depreciate quickly, to an operational expense, which allows for easier budgeting and creates a clear timeline for future upgrades.
“With predictable and stable cash outflows, we have all of the information we need to plan for our next technology refresh,” says Vidgen.
About Air Canada Rouge
Established in 2013 and based in Toronto, Canada, Air Canada Rouge is a wholly owned subsidiary of Air Canada. With a fleet of more than 35 airplanes, Air Canada Rouge travels to 60 popular destinations in Canada, the US, the Caribbean, Mexico, South America, Europe, Asia and Africa.
- Buyback Program
- Global Financing