Hna China Air

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Executive Summary

The HNA group re-launched its commercial carriers under a new entity: Grand China Air; their strategy was to create a brand where its four major airlines (Hainan, Shanxi, Xinhua, and Chang’an airlines can compete globally. They have delivered very good financial returns and have expanded throughout the Chinese market in a relative short period of time.

HNA is not a governments entity. this allowed them to expand very rapidly by increase the size of its equity from stock markets around the world considering the Chinese state run companies are being heavily funded by the government. HNA’s fundamental lies in the free-market system. This shows in the company’s core values and they are continuously investing money for the most innovative business practices.

The expanding Chinese economy has made the state-run companies to pursue international markets and focus on large metropolitan areas of china. HNA has continuously focused on remote areas of china, and took measures to secure domestic markets when competition left for major cities. The economic circumstances in china has made possible for an airline company to invest in local governments and actually see quantitative returns in a relative short period of time.

Competitors of HNA has a strong support from the government. This creates an incentive for these companies to practice risky business, since they are not fully liable of their actions. It is impossible for HNA to beat competition on price alone. These companies are heavily invested in international megacities cities and large domestic cities. When they underwent their new identity: Grand Central Air, Chen had planned expansions and launches to Africa, Europe, as well as the US; the company worked extremely close and built relationships with central and local officials and they committed to continuously show positive results.

HNA needs to stick to their core plan to develop local Chinese markets, while the Chinese economy continues to expand. They should also concentrate resources on international destinations that are new to china; and emphasize less on major international hubs due to stiff competition.HNA will need to lobby for an equitable treatment from the Chinese government. This ideological shift has already began taken place; HNA needs to co-operate with other companies in a similar position as them and bring this issue to the government.

The HNA group re-launched its commercial carriers under a new entity: Grand China Air; their strategy was to create a brand where its four major airlines (Hainan, Shanxi, Xinhua, and Chang’an airlines can compete globally. Their target is to be a world-class airline and to be a world-class company. Their mission was to be a unique player, while seizing opportunity and continuously to grow. Their capitalist and free market principles has had success despite being positioned in a regulated Chinese market.

This report will examine the general environment of HNA and its Industry; its competitive model and its direct competition. The second half will focus on the HNA group by highlighting its strength , competitive edge and its weaknesses. This report will be summarized by a recommendation guide for HNA.

General Environment & Industry Driving Forces

“The Big Three” was managed by the Civil Aviation Agency of China (CAAC), funding for the Big three was never an issue; all three carriers were recognized globally, domestically; they had a lot of traffic volume, routes, and fleet. The government did not fund the HNA, they sold their shares in return for investments for expansion. As a result, HNA cannot position themselves in term of cost leadership. The CAAC’s heavy hand over the control of price, competition is not based on price. Engaging in a possible price war with competition is not rational in present circumstances.

The open skies agreement enabled growth for travel; prior to this agreement, airlines could not fly...
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