Porter of China Airline

In: Business and Management

Submitted By kevinlee029
Words 2564
Pages 11
Chinese Airline Industry

The airline industry is very a volatile and slow growing industry. Many times the revenue does not go up in the same rate as the expenses. It is one of the industries that have one of the lowest returns on investment in many parts of the world. It is nearly impossible to enter the industry and extremely difficult to stay in business in many countries, especially in China. Since the majority of the airlines in China are stated-owned, new entrant would have many disadvantages. New entrants have to find suppliers that offers them acceptable price and also to attract travellers to accept their service. In addition, new entrants face competition amount other airlines as well as other substitute products for airlines. Other factors such as economic downturns and government regulations also prevent new entrant from entering the industry. Therefore new entrants are very hard to enter the industry in China.

The major business in the airline industry is for passengers. However, there are a small portion of the airline are for shipping purposes. The shipping airlines are usually in a separate base and act as a subsidiary company of a big airline. There are three major airline companies that play the roles of oligopoly in the Chinese airline market. The “Big Three” are called China Eastern Airline, China Southern Airline and Air China Airline. Each of the airlines hold around 30% of the total market share in China and the remaining 10% belongs to all other small airlines. The majority of the “big three” shares are owned by the government and also some of the small airlines. There are very few private airlines in the industry. Many private and other small airlines are merged with the “big three” in the past years. Few factors had affected the Chinese airline industry in the past 10 years. The 9/11 had small impact on the airline industry around…...

Similar Documents

5 Porters of Airline Industry

...5 porters of airline industry Threat of New Entrants is low   The airline industry is so saturated that there is hardly space for a newcomer even to squeeze its way in. The main concern for this is the cost of entry. The airline industry is one of the most expensive industries, due to the cost of buying and leasing aircrafts, safety and security measures, customer service and manpower. Another major barrier to entry is the brand name of existing airlines and it is really difficult to lure customers out of their existing brands. Power of Suppliers is low. The airline suppliers are mainly aircraft manufacturers, airports, fuel companies and there isn't a lot of cutthroat competition among suppliers. Also, the likelihood of a supplier integrating vertically is rare. Power of Buyers is medium to and increasing The cost involved with switching airplanes is decreasing as customers can access internet easily to compare and buy air tickets online nowadays. With emerge of budget airlines like Jetstar and AirAsia, more customers including travel agents and individuals prefer to take the budget airlines rather than full service airlines Availability of Substitutes is low For international airlines, the threat is quite low as airline is the only way for travelling to long destinations. Eg   from Australia to USA. For national airlines, the threat might be a little higher than international carriers as passengers can use ground travel like train or bus as substitute. By......

Words: 317 - Pages: 2

Porters

...Porters The Airline is one of the major industries in the world today and is majorly affected by Michael Porter's "Five Forces" model. The following write up conducts an analysis on how the model affects the airline industry today. The central force of Porter's model is Internal Rivalry within the Industry. In case of the Airline industry, this is the most important force today, especially since the market is completely saturated. There are more service providers than needed in both local as well as international markets. The various airlines are competing for the same customer, which also results in strengthening the buyer power, another of Porter's forces. Moreover, a lot of airlines such as Qatar Airways and Emirates have a brand name which they have to defend so they compete in doing so. The airlines are continually competing against each other in terms of prices, technology, in-flight entertainment, customer services and many more areas. The net result of this competition between companies is an overall slow market growth rate. One of the forces that Porter describes is Entry into the industry. In the world today, the airline industry is so saturated that there is hardly space for a newcomer even to squeeze its way in. The biggest for this is the cost of entry. The airline industry is one of the most expensive industries, due to the cost of buying and leasing aircrafts, safety and security measures, customer service and manpower. Another major barrier to entry is......

Words: 334 - Pages: 2

Business Strategy Case Study on China Airline

... Executive summary China Airlines Ltd. (CAL) is a Taiwan-based airline. It was founded in 1959. In the early years, it undertook mostly military contract work. It was then declared as the official airline of Taiwan in 1968. Early on, CAL had a lot of problems including poor safety in 1990s which severely discredited the image, faulty pilot recruitment policies, lax maintenance systems, high cost operational structure, inefficient corporate culture, and strained political relations between China and Taiwan which prohibited the airline from launching flights to route in China. On top of that, the economic crisis caused the company huge loss. However, CAL put remarkable efforts to revive their business to profitibility. This report provides analysis, evaluation, and recommendation for China Airlines. Strategic Difficulties • Outrageous crashes record (safety issue): there were 12 fatal crashes in its history that heavily discredited the image and revenue of CAL. All due to low standard of recruiting and training captain, pilots and crews, wrong policies and low standard of maintenance at the time (cost-cutting in maintenance), and desperate responses to save its image. • Constrain on China and Taiwan relationship: Taiwan’s airlines (flights and cargo) were required to land in Hong Kong or Macau before entering the mainland China, which wasted time and added extra unnecessary costs. Moreover, tourists travelling from China were not allowed to travel to Taiwan......

Words: 2574 - Pages: 11

China Airlines

...Introduction In Dec 2010, China airlines Ltd, announced that it had recorded sales revenues of 138.14 Million dollar as for flights carrying people. The company’s Sales Revenue increased by 41 % from Dec 2009 in which the company had achieved 98 Million Dollars. This increase was followed after the company’s announcement in January 2010 that its recorded Sales reached an amount of 358 Million dollars in Dec 2009 including civil and cargo services. These numbers show a huge deficit in the total revenue of flights carrying civilians where the main source of profitability was based and focused on Cargo flights services. Still CAL, China airlines Ltd, didn’t complete its Mission well in terms of increasing profitability and developing its services in order to boost its revenues. Still Civil flights consider covering 38% of the company’s recorded sales. In our paper we stated the company’s Vision, Mission, and Objectives in order to state a plan for developing the company’s civil flights using an edited Business Model. CAL’s problem was in its high costs among competitors who used the LCC (low cost control) in their business in order to create a competitive advantage. In our paper we edited the company’s business model in which we entered some of LCC programs that may attract more customers and compete strongly with competitors. For that CAL developed its systems to be number one leading systems among other airlines especially those in emerging markets such as Mainland china.......

Words: 6547 - Pages: 27

American Airlines Foreign Direct Investment in China

...American Airlines Foreign Direct Investment Plan University of Phoenix June 8, 2009 American Airlines Foreign Direct Investment Plan American Airlines has decided to expand operations into the greater China market. A thorough analysis of the marketplace has taken place and the final remaining detail that needs to be defined is the airlines strategy for the foreign direct investment (FDI) that will be required to service successfully the Chinese travel market. While much of the expansion into the China market will leverage local resources, direct investment in the Chinese infrastructure will be needed. As such, the FDI analysis will focus on the expansion of airport facilities, airport and city ticket offices and a reservation center. The structure of the FDI analysis will include an executive summary of American Airlines overall China strategy, modes of entry and associated risks, funding of the initiative and contingency plan should the airline need to change strategies mid implementation. Executive Summary American Airlines and American Eagle (firms owned by AMR) serve some 250 destinations in approximately 40 countries including destinations in Europe, the Americas, and Asia-Pacific. The combined aircraft of both carriers comprise of 900 airplanes with 625 of those being jets. On any given day the airline transports 270,000 passengers on approximately 3,300 flights to over 170 destinations worldwide. Additionally, American Airlines is part......

Words: 2483 - Pages: 10

Accounting Analysis of the China Eastern Airlines Corporation Limited

...Consolidated Balance Sheet P.29 EXECUTIVE SUMMARY The China Eastern Airlines Corporation Limited (the “CEA”) is one of the three major airlines (Air China, China Southern Airline & China Eastern Airline) in Mainland China and it has been listed on the Hong Kong Stock Exchange (Stock Code 0670) in April 2006. It has been ranked the world’s top 5 airlines in terms of number of passengers which reaches 73 million per year. The turnover is RMB$85.2 billion per year which includes an over 50% increment against 2008. With the rapid growth on demand, they own over 430 aircrafts to serve domestic and international routes. To the aviation industry, the financial risk management is a key factor of the company to reach the positive net profit because there are a variety of financial risks to impact the business, such as market risk (including currency risk, fair value interest rate risk, cash flow interest rate risk and fuel price risk), credit risk and liquidity risk. CEA utilizes the leverage on the currency exchange to reduce the fuel expenses and achieving good cost control. From the ratio analysis, the performance of Year 2010 and 2011 were most successful because the ROE of 2010 and 2011 got the duo peak at 35.5% and 24.1% respectively. Moreover, CEA earned more operating profits from its assets in these 2 years as ROA (5.2% on 2010 & 4.2% on 2011) was generally high. Comparing with the China Southern Airline (the “CSA”), the ROE was relative lower on 2010 and......

Words: 7555 - Pages: 31

Comparing of the Performance of Malaysia Airlines and China Southern Airlines

...[pic] ACFI 3217 International Development in Accounting Comparing of the performance of Malaysia Airlines and China Southern Airlines Summary The purpose of this report was discovering and analyzing the performance of Malaysia Airlines and China Southern Airlines; and the benefits and problems in the U.S. adopting of IFRS will be mentioned. First, it evaluates the performance of Malaysia Airlines and China Southern Airlines through five ratios analysis which is profitability, liquidity/solvency, working capital efficiency, long term financial structure and investors’ perspective. Next, on basic of part one analysis, discuss the limitations of financial reporting, meanwhile, companies from different countries which are using different accounting standards should be noticed. Follow on; depend on the situation of financial report, using the SWOT methods to analyze the primary challenges faced by Malaysia Airlines and China Southern Airlines. Finally, discuss the positive and negative of U.S. adopting IFRS. Contents 1. Introduction 1 2. Ratio analysis of the MAS and CZ 1 3. SWTO analysis of the MAS and the CZ 12 3.1. Strengths 12 3.2. Weaknesses 13 3.3. Opportunities 15 3.4. Threats 16 4. The benefits and problems if US adopt IFRS 18 5. Conclusion 26 6. Reference 27 7. Appendices 36 7.1. Appendices 1—Analysis Current Ratio 36 7.2. Appendices 2—Analysis Quick Ratio 36 ......

Words: 8151 - Pages: 33

Http: //Www.Docshare.Com/Doc/6695/Airline-Industry-and-Porters-Five-Forces

...com/doc/6695/Airline-industry-and-Porters-five-forceshttp://www.docshare.com/doc/6695/Airline-industry-and-Porters-five-forceshttp://www.docshare.com/doc/6695/Airline-industry-and-Porters-five-forceshttp://www.docshare.com/doc/6695/Airline-industry-and-Porters-five-forceshttp://www.docshare.com/doc/6695/Airline-industry-and-Porters-five-forceshttp://www.docshare.com/doc/6695/Airline-industry-and-Porters-five-forceshttp://www.docshare.com/doc/6695/Airline-industry-and-Porters-five-forceshttp://www.docshare.com/doc/6695/Airline-industry-and-Porters-five-forceshttp://www.docshare.com/doc/6695/Airline-industry-and-Porters-five-forceshttp://www.docshare.com/doc/6695/Airline-industry-and-Porters-five-forceshttp://www.docshare.com/doc/6695/Airline-industry-and-Porters-five-forceshttp://www.docshare.com/doc/6695/Airline-industry-and-Porters-five-forceshttp://www.docshare.com/doc/6695/Airline-industry-and-Porters-five-forceshttp://www.docshare.com/doc/6695/Airline-industry-and-Porters-five-forceshttp://www.docshare.com/doc/6695/Airline-industry-and-Porters-five-forceshttp://www.docshare.com/doc/6695/Airline-industry-and-Porters-five-forceshttp://www.docshare.com/doc/6695/Airline-industry-and-Porters-five-forceshttp://www.docshare.com/doc/6695/Airline-industry-and-Porters-five-forceshttp://www.docshare.com/doc/6695/Airline-industry-and-Porters-five-forceshttp://www.docshare.com/doc/6695/Airline-industry-and-Porters-five-forceshttp://www.docshare.com/doc/6695/Airline-industry-and-Porter......

Words: 672 - Pages: 3

Case Analysis of Porter Airlines and Their Business Level Strategy

... Through Their Expansion Plans, How will Porter Airlines Effectively Utilize Their Low-Cost Business Level Strategy to Increase Their Customer Base? Table of Contents Executive Summary…………………………………………………………………….p. 3 Porter Airlines…………………………………………………………………………..p. 4 The Expansion..………………………………………………………………………...p. 4 What is Organizational Strategy………………………………………………………..p. 7 Porter Airlines Business Level Strategy………………………………………………..p. 9 Core Competencies …………………………………………………………….p. 9 Competitive Advantage………………………………………...………………p.12 Low Cost Business Level Strategy………………………………………...…..p. 13 Low Cost Business- Level Structure………………………………………………….p. 15 Conclusion…………………………………………………………………………….p. 17 Appendix……………………………………………………………………………...p. 18 References…………………………………………………………………………….p. 20 Executive Summary Porter asserts that their secret to success relies in combining a low-cost business-level strategy with a focus on higher yield passengers who value premium service (Preville, 2014). The company has been profitable for the last two years, and as a result has been focusing efforts on expanding their domain and customer base. After conducting an interview with an operations manager at the company, Ashley Hammill, I was able to acquire information about the company’s expansion plans, business strategy and structure (See Appendix A). I will be using the information provided by her primarily, with some secondary sources allowing me to go into further detail about the......

Words: 4579 - Pages: 19

Porter Airlines

...Porter Airlines Case Brief Embry-Riddle Aeronautical University Background Porter Airlines is another unlikely success story in the fierce and cutthroat regional airline industry. Founded in 2002 by Robert Deluce, a regional airline veteran, Porter Airlines wanted to take advantage of a small but crucial market in the Toronto area and grow from that beginning. The Toronto area is considered Canada’s financial hub and thus created a large number of business travelers. Deluce’s strategic vision for Porter was to start with exceptional customer service and combine that with numerous flight options by instituting a quick turnaround system for departures and arrivals. He also wanted a competitive but low cost fare structure with the intent to gain a healthy market share in a short period of time. Porter wanted to use a single turbo prop airplane fleet that would have low maintenance costs and would be efficient to run over short distances. This would allow Porter to offer more flights at lower capacities yet still be able to make a profit. Deluce also wanted his working environment to be friendly but efficient and he leads by example. Deluce has also been known to come down to the terminal to greet notable passengers—governors, cabinet ministers—when they arrive. As one observer put it to me, “He runs his airline like a family restaurant.” (Preville, 2013) Air Canada, its subsidiaries and affiliates dominated the Canada airline industry and they often......

Words: 1148 - Pages: 5

Porter Airlines Strategic Analysis

...Executive Summary Porter Airlines, a short-haul commercial airliner established in 2002, have enjoyed significant and steady growth since inception. The concern now is to devise a solution that will allow Porter to continue its controlled expansion strategy, as it has been so successful and integral to the growth of the company over the past several years. Situation Analysis Porter Airlines operates in a fiercely competitive airline industry, where competitors compete based on price, service, and comfort of passengers, and frequently engages in predatory practices to squeeze out smaller players in the market. The performance of the company depends on external environment factors, such as economic factors of oil and fare prices that will influence margins, or political factors impacting the future bridge and accessibility improvements to the city center airport. Porter’s competitive advantage is linked to the convenience of the Toronto City Center Airport, such as proximity to business core and expedited security and check-in times. Additionally, a critical success factor for Porter is to maintain the commercial exclusivity on the airport, to take advantage of cost savings as a result of being the owner, tenant, and operator. Competitive advantage is also a result of operating a single class of aircraft that has significant cost and operational efficiencies. Alternatives and Recommendation ------------------------------------------------- Several alternatives were......

Words: 3097 - Pages: 13

Porter Airlines

...Introduction: Porter Airlines has managed to find success where many small carrier airlines have not. The company has survived predator competition from Air Canada to become a recognized brand in South Eastern Canada for the time-sensitive business traveller segment. The company has developed a loyal customer base and continues to capitalize on its strengths which include it location, ownership of the Billy Bishop Airport. Despite its success the company is currently focused on expanding its operational efforts both nationally and cross-border to the US and must consider a variety of options which can achieve this. Situational Analysis: External Environment: PESTEL: Political: Porter operates largely within Canada. Its home terminal is located in Toronto so it largely affected by the political environment in Canada, at large, but more specifically by the political environment in Ontario. The local and national political environment in Canada is relatively stable as there are no significant unrests in the country to impact the operations of the Porter Airlines. Economic: The economic environment in Canada has also been stable in recent years. Inflation rates are currently decreasing and lower than the GDP growth rate of 2.63% . The stabilization of oil prices will lead to savings for companies since fuel costs are a major expense for most airlines. Tax policies are favourable for Canadian corporations. However, the Canadian dollar has been experiencing recent......

Words: 2062 - Pages: 9

Porter Airlines Critique

...Porter Airlines Critique Assignment 1. A comfortable and safe passenger jet is the basement of excellent customer service. If Porter raises the bar of customer service, Bombardier will have to react (i.e. modify or upgrade aircrafts) to meet Porter’s demand. But airline industry is highly competitive and has relatively low margin, while the cost to improve customer service can be rather high. Even if Bombardier can react fast enough to meet the ever-changing demand from airlines, how does it negotiate the high cost associated with R&D with airlines? Bombardier must consider the cost and benefit before accepting airlines’ offer. Another issue become more salient as Bombardier is losing its supplier power. Its performance on stock market is unsatisfying, and it desperately needs more support and orders from airlines (Van Praet, 2015). Therefore Bombardier’s reliance on Porter grows bigger, undermining its bargaining power when making offers with airlines. On the other hand, to compete with Air Canada and Westjet, Porter is considering to expand its destinations, that is, to include in more long-haul routes to attract customers (Owram, 2015). Although Bombardier C-series has the capacity to meet Porter’s expansion plan for now, it’s hard to say whether Bombardier has the capability to meet Porter’s expansion in the long run. By then Porter can turn to Boeing or Airbus for more advanced long-haul airplanes. Consequently, Bombardier’s poor performance and Porter’s......

Words: 1299 - Pages: 6

China Airlines Swot Analysis

...China Airlines Ltd. SWOT Analysis SWOT Analysis examines the company’s, key business structure and operations, history and products and provides summary an analysis of its key revenue lines and strategy. China Airlines (CAL) is principally engaged in the provision of airline services. The company offers two major services, passenger transport and cargo transport. The company operates flights to 89 cities in 29 countries. It is headquartered in Taipei, Taiwan and employs more than 10.000 people. This report provides all the important information on China Airlines Ltd. and contains a study of the major internal and external factors affecting China Airlines Ltd. in the form of a SWOT analysis. Strengths 1. Fleet age: The average age of their fleet was only 5.6 years, making it one of the youngest and most updated fleet in the world. Their products such as their aircrafts, services and flight networks are more superior to those of Chinese counterparts. 2. Joint Venture: CAL entered a joint venture with Koos Development Corporation to form Mandarin airline in 1991, so that the airline could carry out services to Canada and Australia where CAL itself was directly banned from operating. 3. Branding: By rebranding the Airline with the Taiwanese flag and slogan “blossom everyday” CAL gained new entry to European countries like Amsterdam, Rome, Frankfurt and Vienne. 4. Aviation Market: In 2007 CAL captures one 4th of the aviation market in Taiwan making it the country’s......

Words: 956 - Pages: 4

China Airlines

...China Airlines 1.) The airline industry allowed for both good and bad macro enviroment because of the financial issues of the airlines in the 2000’s. Due to major airlines being in debt, they had to rollback their operations and outsource more of their routes to the regional airlines (Lohman, pg. 201). This then created opportunities for regional airlines to expand their service areas. By being able to expand their service, this enabled them to compete with low-cost carriers. Overall, the airline industry correlates with the economy. The recent recession and the post 9/11 fear-of-flying effect hurt the airline industry. The regional airline industry had the same problems as the major airline industry when it comes to increasing fuel costs and competitive pressures for low-cost carriers, like Southwest Airlines. This shows the relationship between the regional and national airline industry. Although the regional airline industry was able to gain some opportunities from the recession, they still had to deal with a lot of the same problems as the national industry. 2.) Which Rivalry among competitors- Within the regional airline industry, there exist fierce competition. Factors like major and low-cost carrier competitors and low-buyer demand have contributed to this competition. Threat of new entrants- The regional airline industry has a low threat of entry. It takes large capital investments to......

Words: 1485 - Pages: 6