Chinese Airline Industry

The airline industry is very a volatile and slow growing industry. Many times the revenue does not go up in the same rate as the expenses. It is one of the industries that have one of the lowest returns on investment in many parts of the world. It is nearly impossible to enter the industry and extremely difficult to stay in business in many countries, especially in China. Since the majority of the airlines in China are stated-owned, new entrant would have many disadvantages. New entrants have to find suppliers that offers them acceptable price and also to attract travellers to accept their service. In addition, new entrants face competition amount other airlines as well as other substitute products for airlines. Other factors such as economic downturns and government regulations also prevent new entrant from entering the industry. Therefore new entrants are very hard to enter the industry in China.

The major business in the airline industry is for passengers. However, there are a small portion of the airline are for shipping purposes. The shipping airlines are usually in a separate base and act as a subsidiary company of a big airline. There are three major airline companies that play the roles of oligopoly in the Chinese airline market. The “Big Three” are called China Eastern Airline, China Southern Airline and Air China Airline. Each of the airlines hold around 30% of the total market share in China and the remaining 10% belongs to all other small airlines. The majority of the “big three” shares are owned by the government and also some of the small airlines. There are very few private airlines in the industry. Many private and other small airlines are merged with the “big three” in the past years. Few factors had affected the Chinese airline industry in the past 10 years. The 9/11 had small impact on the airline industry around