Hainan Airlines: En route to direct competition

Hainan Airlines: En route to
Direct Competition

Agenda
! Hainan Airlines – A glimpse
! Chinese Aviation Industry – Background
! Hainan Airlines Company
! The Competitors – CSA, Air China, CEA,

China Sky Aviation Alliance
! Hainan Airlines – Moving Forward

Hainan Airlines – A glimpse
! Timeline – Dec 26th 2001
! CEO – Chen Feng
! Acquired three airlines in the last three years
! Growing rapidly - China’s fifth largest in fleet size
! Apprehension about HNA’s future
! Plotting a new competitive strategy is top priority

Chinese Aviation Industry – Background
! Civil Aviation Administration of China (CAAC) regulates

China Airline industry.
! Domestic Routes:
!
!

CAAC responsible for allocating rights to airlines
Foreign airlines are not permitted in the domestic market

! Aircraft:
!
!
!

All CAAC airlines are required to purchase aircraft through
China Aviation Supplies Import and Export Corporation(CASC)
CASC, CAAC and State planning commission had to approve airline purchases.
Non-CAAC controlled airlines can source their own aircraft

Chinese Aviation Industry – Background
! Airfares:
! CAAC established all domestic airfares
! Discounting was forbidden
! May 2001: CAAC liberalized airfares - approved air ticket discounts of up to 40% on 15 domestic routes.
! Still 1100 domestic routes under CAAC control
! International airfares are not subject to regulation
! Industry Consolidation:
! Around 1980’s - CAAC was liberal in allocating routes and encouraged domestic carriers
! Regional governments across China decide to operate their own airlines.
! By 1999 – There were 26 independent airlines covering 1,122 domestic routes

Chinese Aviation Industry – Background
! Industry Consolidation:
! During 2001 – CAAC embarked on consolidation initiative aimed to withstand foreign competition
! Merges 10 air carriers into three CAAC controlled