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Overview of Airlines Industry in China

Overview of Airlines Industry in China

Ø Industry Performance

Chinas airlines industry, including scheduled and chartered passenger air transportation, witnessed brisk boom after 2003’s SARS crisis, as China’s economic growth bolstered the rapidly increasing demand for business and leisure travel.

As of 31/10/2008, Chinese airlines own 1256 aircrafts totally. Civil Aviation Administration of China, the regulator of China’s airlines market, expects the figure to rise to 1550 in 2010.

Total market value in terms of revenue amounted to $22 billion in 2007, with compound annual growth rate (CAGR) of 20.8% for the period spanning 2003-2007. Total market volume in terms of passengers enplaned amounted to 182.2 million in 2007, with CAGR of 16.2% for the period 2003-2007.

The woe of the industry loomed large in early 2008; natural disasters and global financial crisis cooled down the demand for travel. The inherent operational inefficiency of China’s state-owned airlines exacerbated the bottom line during economic downturn, making all major airlines end up in red in 2008. The industry is set to decelerate its growth in following periods, with a forecast of 0.9% CAGR in passengers enplaned between 2007-2012(Datamonitor), compared with 16.2% of the previous 5-year period

Ø Market Structure

Three oligopolistic companies currently dominated the market----China eastern Airlines (NYSE:CEA), china Southern Airlines (NYSE:ZNH) and Air China (HKG:0753), each holding almost one third of the total industry value

 

China Airlines Industry Value: $ million 2007

Ø Main Players

Among three leading companies, Air China has the least number of employees, less than half of that in ZNH and CEA respectively

Employee Number in China’s Leading Airlines Companies: 2008

Source: company filings

During fiscal year 2008, all three airlines ended up in red. ZNH generated the most revenue among three leading companies, while CEA generated the least revenue, making its loss almost 165% of the loss of Air China and more than three times of the loss incurred by ZNH.

Revenue: $ million in 2008

Source: company filings

Net income: $ million in 2008

Source: company fillings

 

Profit margin: % in 2008

Source: company fillings

 

 

 

 
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