An Evaluation of the Business and Financial Performance of Air China Limited Between 1 January 2009 and 31 December 2011

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Oxford Brookes University

Research and Analysis Project

The business and financial performance of Air China Limited over 2007 to 2009

November 2011

Introduction
Until the 1980s civil airline services in China were controlled by the military. However, the responsibility was turned over to the Civil Aviation Administration of China (CAAC), the market for passenger services and airline in China has boomed. This boom has been driven by growing internal demand for flight services, relaxed restrictions on international trade, a growing tourism industry and the return of Hong Kong to Chinese rule in 1997. As the number of airlines has grown so China has become a major market for the aircraft manufacturers such as Boeing and Airbus. Leading airlines such as Cathay Pacific, Dragonair and China Southern Airlines, revenues have grown annually along with passenger numbers, cargo tonnage and routes. In tandem with this growth has gone the further development of China’s aviation infrastructure with new airports under construction and existing ones being expanded. Growth is virtually assured as the Chinese government has pledged to double the 1994 passenger and cargo totals by 2000 as part of the current Ninth Five Year Plan. China’s domestic airline industry stands in stark contrast to the rest of the Asian players. The current situation leaves China as the most dynamic passenger airline market in Asia at present. Projections of tourist numbers and new aircraft purchases indicate that China will be a major international passenger airline market by any international standard. Thus, it became a keen competitor to Hong Kong airline companies.

China’s per capita will hit USD3,000 by 2010 from USD1,000 in 2001. In the past ten years, there is a big change in the standard of living in Chinese people, the consumption pattern has changed, and there is a trend on continuous growth on the demand of aviation industry in China.

Rapid economic growth in China benefits most industries in mainland. Aviation industry is one of the most beneficiary industries. As a result of the government's decision to split the operating divisions of Civil Aviation Administration of China (CAAC) into separate airlines. The CAAC was restructured in late 1987 and divided into six airlines, namely Air China, China Eastern, China Southern, China Northern, China Southwest, and China Northwest. Air China, based in Beijing, was given chief responsibility for intercontinental flights, and took over the CAAC's long haul aircraft and routes when it was granted its autonomy on July 1, 1988.

Air China is the only national flag carrier of China and the exclusive airline partner of the 2008 Beijing Olympic Games is the People's Republic of China's state-owned and it is the second-largest commercial airline after China Southern Airlines. It focuses on both international and domestic airlines. Air China's main hubs are Beijing Capital International Airport, Chengdu Shuangliu International Airport and Shanghai Pudong International Airport, with other focus cities at Hangzhou Xiaoshan International Airport, Chongqing Jiangbei International Airport, Tianjin Binhai International Airport and Hohhot Baita International Airport. Air China currently flies to approximately 120 destinations; the most destinations from its own Beijing hub.

Company’s background

In October 2002, the former Air China combined China National Aviation Company and China Southwest Airlines and formed the China Aviation Group Company. On December 15th, 2004, Air China successfully listed in Hong Kong (HK Exchange: 0753 and London (trading code: AIRC), with a leading position in China's civil aviation industry, with 23,000 employee with total capital around CNY 15.933 billion.

Its enterprise spirit emphasizes on serving the world with a warm heart. Its mission is to "meet the requirements of customers and create mutual values". It aims...
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