Establishment of Differentiation Competitive Advantage for Spring Airlines
Date Issued
2015
Date
2015
Author(s)
Zhang, Xiu-Zhi
Abstract
In the history of Chinese civil aviation industry, facing the situation which three top state owned airlines still take the leading position, the private airlines are only a flash in the pan, or will push the Chinese civil aviation industry reform forward in the 21st century? Reviewing the history, 2004 was a watershed of Chinese civil aviation industry reform. After establishment of Spring Airlines, Yuneyao Airlines, Okay Airways, East Star Airlines etc., the fledgling private airlines filled a niche in the civil aviation market long dominated by stated owned companies. But the market is unpredictable, survival of the fittest. Within a few years, the status of these private airlines are not identical.Unlike Spring airlines and Juneyao Airlines still in operating, East Star Airlines went bankrupt; United Eagle Airlines and Northeast Airlines were nationalized as bad management; Okay Airways also once stopped operating in short term. Since the end of 2013, Chinese civil aviation industry has been ushering in a new round of development again for the private airlines. Civil Aviation Administration of China (CAAC) has approved the application of preparatory establishment for Fuzhou Airlines, JiuYuan Airlines, Loong Airlines, Ruili Airlines. Especially the private airlines will lead this new development trend. But it will be tested by market whether these new airlines could grow up. Since China has entered WTO, more and more foreign airlines constantly develop and occupy the civil aviation market to second and third -tier cities in China, and high speed railway network also quickly takes shape, which will all impact the short haul aviation market for low-cost airlines. On the other hand, the three top state-owned airlines still hold much good resource, such as the aviation right and timetable. In the face of fierce competition from domestic and foreign airlines, even high speed railway, how will the private airlines win more market shares that will be the key factor to success. The world famous strategy scholar, Michael E. Porter points out, the differentiation is an important factor for competition strategy, and a main source of competition advantage. As the homogeneity of civil aviation industry, the differentiated competition is an important approach to establish the competition advantage. The companies must depend on the differentiated operation to win the market, if not, it will have to usher in a new round of merger and reorganization once again. As the first low-cost airlines in China, Spring Airlines had only 2 fleets and 10 domestic routes from the beginning in 2005. Through the hard operation,it had 39 fleets and 64 domestic routes , which always keep about 95% of average load factor and more than 11 hours per day of operated aircraft utilization at the end of 2013. The passenger traffic and turnover of passenger traffic increased to 10.55 millions and 16.494 billions in 2013 from 0.18 millions and 0.234 billions in 2005. Spring Airlines has become a leading low-cost airline in Greater China. Under the guide of the differentiated competition and blue ocean strategy, the article systematically analyzes the developing course of Spring Airlines on low-cost business model in the past 9 years. On the base of the previous study, through combining with the economics and management science, and using empirical analysis method, we evaluate the implementation process of Spring Airlines’ differentiated competition strategy for discussing the effects of differentiated competition advantages and its problems to improve. We comprehensivly study how to establish the differentiated competition advantages of Spring Airlines which will provide some useful reference for the development of Chinese low-cost airlines and the construction of our powerful nation by the civil aviation industry.
Subjects
Differentiated competition advantage
Low-cost airlines
Spring Airlines
Type
thesis