The airline industry has undergone significant restructuring in recent years. Airlines, formerly rivals in a highly regulated industry, have become opportunistic seekers of co-operation. In today's world, mega-carriers and small airlines are working together rather than competing with one another.
Forms of co-operation include sub-contracting, code sharing, franchising and the formation of global marketing networks. Such alliances allow firms to focus on their respective core competencies, while drawing the benefits of scale economies. In essence, co-operation among rivals has led to increased competitiveness. This has accelerated the trend of joint marketing, and the airline industry has become characterized by the desire to belong to a global network. The tendency has been to strive for a global presence.
The case of Air China
Air China was founded on the 1st of July 1955. Its headquarters is based in Beijing. It engages in international and domestic passenger and cargo flight services. To unify its facility image and simplify its repairs and maintenances, its fleet of 118 aircraft exclusively consists of Boeing models. It has established hub-spoke style passenger and cargo transport network. The hub of this network is Beijing International Airport.
The company is operating 339 routes, which consists of 53 international and 286 domestic, operating more than 1,000 scheduled flights on weekly basis, serving 29 cities in 19 countries. About 66 per cent of its revenue was sourced from the domestic market. Since 2004, Air China has experienced dramatic changes in both the international and domestic market.
Growing domestic market
Fierce competition and sluggish market demand has forced the company to turn its business focus on the fast growing domestic ma ...