Airline Industry

Airline Industry

Air Canada

In considering the profit margins that account for the airline, the profitability was consistently and persistently frail. Frameworks employed to ratify the same include the separation of the Civil Aviation Administration of China’s administrative, regulatory and government roles from any direct management by the daily operations of the airports and airlines commercially. Zhang, David and Round (2008) suggest that “the associated changes included the growth of the number of carriers regionally, which were established and maintained locally by the management to support the confined economy.” When considering the airline in Canada, a similar process was undertaken to improve the profitability, help both the economy, and supply sufficient profit for maintenance and upgrading of the carrier services.

Differences in the Deregulations between US and China

The price deregulation that occurred in China to regulate airfares is somewhat different from that of the US. As the article argues, “it can be viewed that the policy applied to regulate China’s air fares within the domestic market has been successful, without having to be as formal as the deregulation plan such as the one implemented in the US (Zhang et al., 2008).” The article compares both the deregulation acts and identifies that the system that was used in the United States proceeded in a manner that was well organized and planned as compared to that of China (Yuhua, Zhang & Aming, 2016). It states that “US plan of deregulation moved on in a well-planned way as a result of the Act of the Deregulation. In comparison, the deregulation of China under the Airfare reform of 2004 scheme did not seem to have any known intentions to modify the air policy flexibility, showing that the Civil Aviation Administration of China was not determined to accept full freedom of price fluctuations at that time.”

The article demonstrates how China faced the problem of managing the arrivals and departure of passengers, which had already been implemented by the US airline deregulation (Yuhua et al., 2016). The article states that “China suffered the delinquent of how to develop a spoke-and-hub scheme in place of the linear systems they had, which resulted in a surge of departures followed by another one groundswell of arrivals at the hub for linking passengers, which was well developed in the US succeeding the airline deregulation.”

Similarities in the Deregulations between US and China

In both states, the article argues that the airline mergers in the 1980’s were permitted to move forward without being opposed by the authorities behind the antitrust. The article complements that “Also similar is the fact that a large percentage of the airline mergers in the US were allowed to go ahead without any serious challenges from the antitrust authorities of the US.” In the case of China, the association occurred since there were no antitrust authorities to restrict them (Yuhua et al., 2016). The article argues that “China’s lack of antitrust challenge was possible since there were no effective antitrust laws.”

The report acknowledges that during the 1978 Airline Deregulation, a large part of the first airlines in the US experienced fluctuations in their profits that resulted in incurring losses. The events led to the “development of a sequence of defined actions that would increase how competitive the prices were, including the development of computer programs that would reserve the airline slots for persons, and flyers.” The same similar case appeared to be followed by China following the 1997 airfare relaxation policy. The article continues to add that Chinese airlines were obliged to undertake consolidation strategies when faced with economic complications to avoid catastrophic bankruptcy, which would otherwise be of great effect in the state.

Recent Developments in China’s Arline Deregulation

As a response to rapid growth of airlines, since 2007 the Civil Aviation Administration of China has depressed the rate at which they are accepting new carriers in response to the exponential growth of airlines and as a concern for safety in aviation (Yuhua et al., 2016). Also, market consolidation has been held up in high esteems regardless of growing of the industry since some privately owned airline companies have been rendered bankrupt due to the effect of the financial crisis between 2007 and 2008.

The future of China’s airline is bright because there are enough workforce, skills and the capital to introduce, maintain and implement new ideas in the carrier services. The upcoming generation is responsible for ensuring that at least the deregulation cycle is completed. According to Yuhua et al., (2016), “local airlines in China will not be obliged to go through the endorsement measures and it will only be essential to report the conclusion to fly on a precise route to the Civil Aviation Administration of China. Another objective is to remove the price floor set up in the 2004 Affair reform system, even though this modification had effects on the commercial airline valuing policy in reality.” The door to domestic investors has also been opened and regulations have seen that such investors can enter the civil aviation industry (Zhang et al., 2008). The air deregulation process is still in progress and will continue to be in this state until China airline can be fully deregulated.

References

Zhang, Y. David K. Round, (2n008). Journal of Air Transport Management obtained from https://www.elsevier.com/locate/jairtraman

Yuhua, Z. and Zhang, Aming, (2016). Air Transport Development. Available at https://ssrn.com/abstract=2886163 or https://dx.doi.org/10.2139/ssrn.288163

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