Business Case Studies, Mergers, Acquisitions and Takeovers Case Study, China Eastern Airlines,Shanghai's Last Samurai

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Mergers, Acquisitions and Takeovers Case Study

Case Title:

China Eastern Airlines: Shanghai's Last Samurai?

Publication Year : 2007

Authors: Sai Prasanna, Rajendar Singh Rathore

Industry: Transportation


Case Code: MAA0093

Teaching Note: Available

Structured Assignment: Available

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With a backdrop of regulatory economic conditions in China, the case study presents the restructuring initiatives of its civil aviation industry in different phases. Growing liberalisation and deregulation in the global airline industry, coupled with China's entry into WTO opened the gates to foreign competition. Entry of foreign carriers intensified competition in the industry and domestic carriers began to lose their market share to foreign rivals. Infrastructural and industrial constraints added to the existing woes and restricted the growth and profitability of the domestic carriers. One such carrier rattled by the highly protected and regulated conditions was China Eastern Airlines (CEA). Saddled with debt and restructuring problems, CEA was bleeding cash and was looking for private investment, which would not only provide financial assistance but also improve operational efficiencies. Two important contenders competing for a significant stake in CEA were - Singapore Airlines (SIA)-Temasek and Air China-Cathay Pacific. While SIA would benefit from the booming aviation market in China, SIA's proven success may help CEA's revival. However, Air China tries to trump the deal. Given this scenario, should CEA invite foreign investment to improve its efficiencies or should it restructure its capital and operational base by merging with the domestic Air China?

Pedagogical Objectives:

  • To discuss the developments in China's civil aviation industry and their implications on domestic and foreign carriers
  • To assess the competitive dynamics of China's civil aviation industry, amid increasing liberalisation
  • To evaluate CEA's business model and the possible factors that contributed to its failure to sustain growth
  • To analyse the critical aspects - like cost controls, profitability and growth - of companies operating in a protected and restricted economy
  • To assess CEA's growth options amid intense competition from domestic and foreign rivals.Players and structure of the US subprime mortgage industry
  • Benefits and issues surrounding the subprime mortgage market.

Keywords : Air China; China Southern Airlines; Dragonair; Cathay Pacific; Singapore Airlines; Civil Aviation Administration of China (CAAC); Load Factor and Capacity Utilisation; Code-sharing Agreements; Mergers,Acquisitions,Alliances Case Study; Foreign Strategic Investment; Competition in Chinese Aviation Industry; Financial Crunch, Industrial Constraints; Aircraft Manufacturing; Airline Inefficiencies; Beijing; Shanghai and Guangzhou

Contents : 
Civil Aviation in China
Traffic Volume in China’s Airline Industry
China Eastern Airlines – Growth and the Troubled Times
China Eastern Airlines’ Destinations
Singapore Airlines’ Destinationsew Chapter Begins

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