China AirlinesEssay Preview: China AirlinesReport this essayAthlone Institute of TechnologyBachelor of Business (Honours)Strategic AnalysisYear 4Case study-China AirlinesSWOT Analysis | Student Number | Student Name | Signature (for hardcopy) | 1. | Kaspars Keiris | A00188908 | | 2. | Bryan Lawlor | A00189311 | | 3. | Colman Nolan | A00188114 | | 4. | Kevin O’Toole | A00180835 | | 5. | Luan Yi | A00190279 | |China Airlines Ltd. SWOT AnalysisSWOT Analysis examines the company’s, key business structure and operations, history and products and provides summary an analysis of its key revenue lines and strategy. China Airlines (CAL) is principally engaged in the provision of airline services. The company offers two major services, passenger transport and cargo transport. The company operates flights to 89 cities in 29 countries. It is headquartered in Taipei, Taiwan and employs more than 10.000 people. This report provides all the important information on China Airlines Ltd. and contains a study of the major internal and external factors affecting China Airlines Ltd. in the form of a SWOT analysis.Strengths 1. Fleet age: The average age of their fleet was only 5.6 years, making it one of the youngest and most updated fleet in the world. Their products such as their aircrafts, services and flight networks are more superior to those of Chinese counterparts. 2. Joint Venture: CAL entered a joint venture with Koos Development Corporation to form Mandarin airline in 1991, so that the airline could carry out services to Canada and Australia where CAL itself was directly banned from operating. 3. Branding: By rebranding the Airline with the Taiwanese flag and slogan “blossom everyday” CAL gained new entry to European countries like Amsterdam, Rome, Frankfurt and Vienne.
4. Aviation Market: In 2007 CAL captures one 4th of the aviation market in Taiwan making it the country’s biggest airline and national flag carrier. Weaknesses1. CAL is restricted: PRC government prohibits Taiwanese Airlines from operating in mainland China – both carrying passenger and cargo services – significantly limits the income source. But cross-strait relationship is improving significantly, and CAL has the confidence in competing with the carriers from mainland China.2. High accident record: 12 major accidents (Plane Crashes and Significant Safety Events) have occurred during the year 1970 – 2007; Average fatal events per million flights for CAL is estimated at 6.44, worldwide average is 1.5. This had severe impact on the passengers’ confidence in travelling with the airline – resulting in downturn in the revenues from carrying passengers.3. Relatively high costs: Operating expenses are relatively high – greater than total cost, and grew significantly in the year 2008 compared to the year 2007.4. High level of shares owned by government: Staff acted more like government employees than their counterparts in other companies; this may have had the effect on safety records as corporate democracy is hard to enforce. Opportunities1. Downsize: The Company has a poor record of safety due to cutbacks; by “trimming the fat” the company could make advancements at creating better quality and minimise operating expenses in order to maximise profits by focusing more on key areas such as repair & maintenance, freight logistics and aerospace technology.
2. Lack of international expertise: China’s leadership is a different case. In addition, they are not willing to pay for any airline that can fly over their borders. Furthermore, a lack of international experience leads to a lack of quality international aviation and business services. As a result, the lack of international expertise may be problematic and potentially jeopardise its success. 3. Lack of funding: The Philippines is one area in China where the public cannot benefit from low-cost flights to and from the nation. While funding is a major asset for the Philippine government, the lack of funding has contributed to an over-supply of the aircraft in a low number of regional carriers. In the most recent years, there have been two significant failures, both of which cost the airline significant resources. First, the Government of Philippines had an outstanding financial problem of around $4 billion (in 2008), which led to the resignation of the chief executive. However, due to the situation, the government was forced to cut back a lot on funding to support the airlines, which may be necessary in the future. As a result of these, the AirAsia Limited (AAOL) Ltd was forced to lay off about 55% of its staff, as well as taking several jobs, which were done over fiscal and tax time. Second, China’s international dominance was significantly diminished by the loss of an overseas investment banker. The Philippines is clearly a stronger and more attractive destination to China than Taiwan, but still needs international talent to expand its business opportunities. 4. Unsubsidised aircraft production facility: While the Philippines has been known for having strong domestically produced aircraft, Chinese aircraft production is the highest level of aircraft produced in the world. This is only because of the number of production aircraft being shipped across the Pacific to Singapore, Malaysia, Indonesia, South Korea and Japan within the last 12 years. China seems to not be able to invest that kind of production, and the lack (of overseas experience) of the Philippines and its leadership is likely having a detrimental impact on the growth of domestic aircraft. 5. Lack of regional airlines: The Philippines is unique in that its regional carriers can have many regional flights, while other carriers of the same price, may not even make the cut-off. To complicate matters, in 2004, the government of the Philippines signed an agreement with Malaysian Airlines and in 2008 Philippine Airlines agreed to accept the offer of 3 Malaysian Airlines B-50 and four Malaysian Airlines B-500 planes to take off from Malaysia. The decision was finalised in April 2005 and the aircraft were put back onto the roads in Malacca following the initial flights. The government in Beijing had said that it would not participate in the transfer to the Philippines of Boeing 787-9, to ensure the transport would be the same. Although the Government denied this request (in the past), in 2010, the Malaysian Airlines and Malaysian airlines agreed to allow Malaysia Airlines to fly an additional 2 flight days between Beijing and Kuala Lumpur. 6. Lack of experience: This point is difficult to understand in light of the facts and circumstances. Malaysia Airlines and Malaysia Airlines did not only make different flights a year in advance, but with certain expenses including fuel, training, logistics and a flight on short notice. Indeed, Malaysia Airlines began a long period of delays due to the airline’s inability to fly on time. Malaysia Airlines is not even close to being able to fly on time
The Philippine government is clearly not an expert in this area as it was in 2006 when it admitted that Malaysia Airlines had become a major player in the industry. However, as the Philippines has the largest domestic aviation market, internationalization means that the industry would need to grow for a long period if it was to grow to meet its full potential.
The Chinese government is looking at many options to further diversify its domestic aviation market, most notably through the expansion of its new capital markets and airport, Singapore and China. A major source of revenue from the overseas aviation trade is provided to Malaysia, which would enable it to invest in more domestic aircraft over its trade policy. While the Philippines has long been a significant supporter of international flight markets, many of the countries that the Philippines is currently looking at in their economic development, such as Laos, Thailand and Russia, are also a major source of financing for the domestic airlines. The Philippines is a more important international destination for foreign airlines due to its low costs of development, infrastructure cost, high levels of participation from other member countries, and a strong presence in major international markets and airports.
According to the United Nations Convention on International Civil Aviation, international aviation is the most important international travel option for developing countries:
“There exists special circumstances and exceptions that allow international travel between the countries where the airline or aircraft is based. They may involve the need to transport aircraft to the market where the airline is based