Industry Analysis Case Study

Case Title:

Air China and the Chinese Aviation Industry

Abstract:
By 2005, Air China was the only profitable carrier among the three major airlines in China. The other two, China Southern and China Eastern, were making losses. The low cost carriers also were struggling. By contrast, the Chinese aviation market had become the second largest in the world after the US, carrying 138 million passengers in 2005. Apart from that, Chinese airlines ordered a large number of new aircrafts in 2005. Analysts felt that government interference in matters related operations was the main reason behind airlines’ poor performance. Though government was reforming the airline industry to make the Chinese airlines more competitive, experts doubted Air China’s ability to remain profitable in the long run.

The case discusses in detail the evolution of China’s aviation industry to its present form as well as government reforms. It also discusses Air China and its operations. The concluding section attempts to highlight the challenges that the Chinese aviation industry (particularly Air China) faces. It also tries to raise a question regarding the structure of the industry in future.

Pedagogical Objectives:

• To understand the evolution of China’s aviation industry
• To understand government reforms that shape the structure of the industry
• To discuss competitive dynamics of Chinese aviation industry
• To analyse the competitive advantages of Air China
• To analyse Air China’s ability to sustain profitability in the long run.

Keywords : Air China; Okay Airways; Shanghai Airlines; CAAC (Civil Aviation Administration of China); Industry Analysis Case Study; CNAC (China National Aviation Corporation); China Southern; China Eastern; Chinese aviation industry; China Aviation Oil Holding Company; Beijing Capital International Airport