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Abstract

With a backdrop of regulatory economic conditions in China, the case study presents the restructuring initiatives of its civil aviation industry in different phases. Growing liberalisation and deregulation in the global airline industry, coupled with China's entry into world trade organisation (WTO) opened the gates to foreign competition. Entry of foreign carriers intensified competition in the industry and domestic carriers began to lose their market share to foreign rivals. Infrastructural and industrial constraints added to the existing woes and restricted the growth and profitability of the domestic carriers. One such carrier rattled by the highly protected and regulated conditions was China Eastern Airlines (CEA). Saddled with debt and restructuring problems, CEA was bleeding cash and was looking for private investment, which would not only provide financial assistance but also improve operational efficiencies. Two important contenders competing for a significant stake in CEA were - Singapore Airlines (SIA)-Temasek and Air China-Cathay Pacific. While SIA would benefit from the booming aviation market in China, SIA's proven success may help CEA's revival. However, Air China tries to trump the deal. Given this scenario, should CEA invite foreign investment to improve its efficiencies or should it restructure its capital and operational base by merging with the domestic Air China?
Location:
Other setting(s):
2008

About

Abstract

With a backdrop of regulatory economic conditions in China, the case study presents the restructuring initiatives of its civil aviation industry in different phases. Growing liberalisation and deregulation in the global airline industry, coupled with China's entry into world trade organisation (WTO) opened the gates to foreign competition. Entry of foreign carriers intensified competition in the industry and domestic carriers began to lose their market share to foreign rivals. Infrastructural and industrial constraints added to the existing woes and restricted the growth and profitability of the domestic carriers. One such carrier rattled by the highly protected and regulated conditions was China Eastern Airlines (CEA). Saddled with debt and restructuring problems, CEA was bleeding cash and was looking for private investment, which would not only provide financial assistance but also improve operational efficiencies. Two important contenders competing for a significant stake in CEA were - Singapore Airlines (SIA)-Temasek and Air China-Cathay Pacific. While SIA would benefit from the booming aviation market in China, SIA's proven success may help CEA's revival. However, Air China tries to trump the deal. Given this scenario, should CEA invite foreign investment to improve its efficiencies or should it restructure its capital and operational base by merging with the domestic Air China?

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Location:
Other setting(s):
2008

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