HNA case study
HNA Case Study
1. What contributed to HNA’s success in the China Airline Industry?
1. China’s prosperous market conditions
Rising middle class (rising per capita income)
Entry into WTO growth in imports and exports
Migration of rural population into urban cities
Influx of foreign investment
2. Deregulation of civil aviation market
3. Strategic Decisions:
Unconventional approach for a regional start up airline – chose to compete as a trunk line feeder
Development of feeder routes in Western China – consistent with government plan to develop the “Silk Road”
Effective acquisitions that helped them to expand faster
4. Effective utilization of capital markets (internal and external) to expand operational scale and lower operating costs
5. Culture
Encompasses Chinese culture and Western modern management
Lazy Ant Theory and Swapping System
6. Quality
Excellent flight safety standards
Punctuality rate is first in China
7. Clear Strategy: To be low cost provider
Focused on cost structure and operating efficiency
Cost per ASK was very low
Lower maintenance cost
Similar model of planes
Ran aircrafts longer
Investment in technology
Lower staffing cost per ASK
8. Started outside CAAC – did not have to adhere to government standard. Forced them to be more aggressive
9. Strong Interrelation among the blocks of businesses contributes to increasing revenue for their airline business
2. What are the challenges that the company faces at both the business and corporate levels?
Business Unit
Price of Oil (airline)
High financing costs (airline)
Entry of budget hotel competitors (hotel)
Entry of upscale international franchise (Hilton etc) into hotel industry (hotel)
Credit rating firm downgraded the airline to second lowest rating
Corporate level
High debt level puts the company into difficulty of raising funds to expand
Relative industries block – important to maintain relevance to its airline business
3. Was the company’s increasing
1. What contributed to HNA’s success in the China Airline Industry?
1. China’s prosperous market conditions
Rising middle class (rising per capita income)
Entry into WTO growth in imports and exports
Migration of rural population into urban cities
Influx of foreign investment
2. Deregulation of civil aviation market
3. Strategic Decisions:
Unconventional approach for a regional start up airline – chose to compete as a trunk line feeder
Development of feeder routes in Western China – consistent with government plan to develop the “Silk Road”
Effective acquisitions that helped them to expand faster
4. Effective utilization of capital markets (internal and external) to expand operational scale and lower operating costs
5. Culture
Encompasses Chinese culture and Western modern management
Lazy Ant Theory and Swapping System
6. Quality
Excellent flight safety standards
Punctuality rate is first in China
7. Clear Strategy: To be low cost provider
Focused on cost structure and operating efficiency
Cost per ASK was very low
Lower maintenance cost
Similar model of planes
Ran aircrafts longer
Investment in technology
Lower staffing cost per ASK
8. Started outside CAAC – did not have to adhere to government standard. Forced them to be more aggressive
9. Strong Interrelation among the blocks of businesses contributes to increasing revenue for their airline business
2. What are the challenges that the company faces at both the business and corporate levels?
Business Unit
Price of Oil (airline)
High financing costs (airline)
Entry of budget hotel competitors (hotel)
Entry of upscale international franchise (Hilton etc) into hotel industry (hotel)
Credit rating firm downgraded the airline to second lowest rating
Corporate level
High debt level puts the company into difficulty of raising funds to expand
Relative industries block – important to maintain relevance to its airline business
3. Was the company’s increasing