Problems at China Airlines Essay Sample

1. 0 Designation and Prioritization of Key Issues/ Problems

In 1959. China Airlines Limited ( CAL ) was the flagship bearer of the Republic of China ( ROC ) . However. it is non wholly state-owned. The China Aviation Development Foundation ( CADF ) had a about 54 percent interest in CAL.

Cardinal issues: Poor safety record in the 1990s badly tarnished its trade name image besides take downing rider traffic. Faulty pilot enlisting policies. slack care systems. high cost operational construction. inefficient corporate civilization of company added to its problems. Labored political dealingss between mainland China and Taiwan prohibited the air hose from establishing flights to paths in China.

After that. CAL mounting jobs prompted it to look for ways to reconstruct its image. The attempts were focused on bettering its trade name image and recovering consumer assurance. CAL sought to prosecute rigorous safety norms. increase its care installations. hire trained experient pilots from foreign states and besides better cross-strait dealingss between Taiwan and mainland China. Finally CAL succeeded to hit their end by undergone many alterations. attempts and enterprises.

2. 0 Application of Theory and Critical Analysis

2. 1 SWOT Analysis

SWOT analysis is utile for an organisation because it provides a good model for reexamining scheme. place and way to a concern. This is because SWOT analysis involves stipulating the aim of the concern venture or undertaking and placing the internal and external factors that are favourable and unfavourable to accomplishing company’s aim ( Mind Tools Corporate. n. d. ) .

2. 1. 1 Strengths

The internal strengths of CAL was ab initio operate undertook largely the military contract work. Besides that. in 1968. CAL was declared as the official air hoses of Taiwan and get down to runing domestic services across the island and at 1969 the air hose was enlisted by the International Air conveyance Association ( IATA ) . CAL built a monolithic care installation at Chiang Kai Shek Airport and expanded the other countries. Due to rebranding and unveiled a new trade name logo. CAL was deriving the landing rights in many metropoliss. In 1996. CAL went in a code-sharing agreement with American Airlines for trans-Pacific paths.

2. 1. 2 Failings

CAL has much failing that cause the air hose gross revenues lessening. the most serious job was the awful safety record of the air hose which frequents air hoses catastrophes and the pilot mistakes and hapless care processs. The pilot do non hold appropriate preparation procedure and bad hiring policies. which most are the ex-air force background of the airline’s pilots. However. the air hose crew was besides insufficiently trained to manage the exigency state of affairs and besides fail to give proper direction to people. CAL besides has the low criterion of care and careless sing the flight simulators and developing clip of pilots. Harmonizing to this instance. the safety events of CAL in the old 37 old ages entire happen 12 serious incidents that cause estimates 806 people died.

2. 1. 3 Opportunities

The joint venture between the CAL entered and the Koos Development Corporation is to organize the Mandarin Airlines. the intent was to get away the diplomatic menace. While. the gap of direct cross sound paths helped the CAL to take advantage of booming air power market in China. International rider and the fear services was the CAL was to concentrate more on it to better the domestic operations.

2. 1. 4 Menaces

CAL has several menaces that was external menaces. the United Nations ( UN ) functionary accepted communist PRC as Taiwan legal authorities and the airline’s rank of the ICAO was revoked. The cancellation by the UN cause the CAL lost the international contracts with Japan. Malaysia. and Korea. Besides that. the rail and route services web has been improved on the island make the CAL suffered with it. The relation between mainland China and Taiwan remained labored due to the dissension sing the political position of Taiwan. CAL has besides faced competition from the China-based Low Cost Carrier ( LCC ) and at 2001. the terrorist onslaughts US has hamper the air hoses concern.

2. 2 Business Model

A company’s concern theoretical account describes the basic agencies by which it creates value. delivers value to consumers and collects gross from clients to cover costs and give an attractive net income ( Hamel. 2013 ) . There have two important elements of company’s concern theoretical account which are ( 1 ) client value proposition and ( 2 ) net income expression.

2. 2. 1 Customer Value Proposition

China Airlines enter into confederations with of import international air hoses to spread out its planetary webs. introduced new paths. expanded lading concern. enhanced in-flight services and develop its cares and safety installations. Besides. it besides supplying e-services on its web site to give convenience to their clients. China Airlines besides implemented Dynasty Flyer Program ( DFP ) to offer members a scope of considerate. value added services.

2. 2. 2 Net income Formula

Gross Coevals: China Airlines uses DFP to promote returned clients as they can gain each milage when traveled with CAL or any of its take parting spouse services. ( China Airlines. n. d. ) . It will straight hike up the gross revenues and therefore generates higher gross revenues grosss. Besides. the addition in rider and lading services to mainland China helps to force its gross up. Net income Margin: Most of costs arise from gate rental. fix and cares of aeroplane. insurance and public-service corporations. which are classified as fixed costs. Variable costs include fuel. labour. and others. To increase the net income border. China Airline introduced new paths and develops its cares and safety installations and others to cut down its fixed cost per path. Once the breakeven volume is reached. CAL’s grosss from extra gross revenues are about pure net income.

2. 3 Best-Cost Provider Strategy

China Airline Limited ( CAL ) can be regarded as lowest quality air hose. yet non the 1 with lowest cost. Therefore. when they decided to follow several attempts to resuscitate its image to vie in air hose section. CAL employed a authoritative best-cost supplier scheme. Best-cost supplier schemes interest out a in-between land between pursing a low-priced advantage and a distinction advantage between appealing to the wide market as a whole and a narrow market niche ( Thompson. Peteraf. Gamble & A ; Strickland. 2012. p205 ) . In instance survey. it mentioned while CAL continued with its concern theoretical account which operated as an FSA by prosecuting a different set of schemes to command operational costs and garner net incomes. it besides planned to follow some features of LCCs to take down operational costs. CAL took the undermentioned stairss in crafting and implementing its resurgence scheme: • Procured new aircraft which are safety to wing. In 2007. with merely three aircraft types. doing it one of the youngest fleet in the universe which is merely mean 5. 6 old ages. In 2008. removed two Being B747-400s and added a new Airbus A330-300 which mean fleet age of 6. 2 old ages to do them comparable in public presentation and safety to other air hose.

They believe that cut downing the sorts of aircraft it operated can assist CAL salvage cost since there are merely four aircraft in entire. • Endeavoring to capture all available economic systems of graduated table by confederations with of import international air hoses to spread out its planetary webs. introduced new paths and expanded lading concern in order to extinguish transportation clip and cut down operational cost. • Making distinction as superior merchandise characteristics by heightening in-flight client services and developed higher-quality care compared to before to hike gross revenues. Hence. riders will be more assurance with the security of aircraft and satisfied with CAL’s services. • Improve supply concatenation efficiency by introduced a series of e-services on its web site and provided two check-in booths in Taiwan. This has expressed riders booking and buying procedure at the same clip. Therefore. it can cut down operational cost and quality since work force is unnecessary and human mistake can be eliminated. • Started employed pilots who had renowned international air hoses.

Although this alterations may increase CAL operational cost in short term. yet. the cost may diminish in long term. This is because those pilots can cut down fatal events during operations. hence CAL do non necessitate to offer any accident compensation. Therefore. in long tern it will assist be film editing and increase CAL repute. • Target on value-conscious purchasers by appealing supernumeraries and functionality at an appealing low or “fair” monetary value. In instance survey. CAL making publicity by continued with its Dynasty Flyer Program ( DFP ) in 1989. and launched the Dynasty Package Program in 2005. Both plan offered assorted value added services to elite members such as supplying option of upgrading their engagement for a better cabin. enjoyed better comfortss. cod milage points and redeem. convenient option of reassigning awards to nominative relations and friends. six old ages rank. acquire latest information and could avail plan benefits online.

CAL’s best-cost supplier scheme has helped it received the “Best Overall Airlines” and “Best Cargo Airlines” classs in the 2004 Skyliners Awards. From the Airline & A ; Airport Customer Satisfaction Survey. CAL ranked the highes worldwide for its “First Class” service. 2nd second best for “Economy Class” . and the “Best Cabin Staff” for both Business and Economy Class. In 2005. CAL registered an addition in gross of 14. 5 per centum and 13 per centum in rider and lading concern. As compared to 2004. CAL’s entire operational gross increased by 13 per centum in 2005 and reached NT $ 108. 6 billion. Insurance fees were besides reduced by insurance companies by 45 per centum in 2006 which reflect the fact that the air hose had been win back trust by its all-around attempts.

3. 0 Recommendation and principle

CAL was non making good all along. in fact. it have bad repute. hapless direction. corrupted company system. and despicable company civilization before 1990s. Start from the late ninetiess. CAL was successful in revamping its image as apparent from the fact that rider traffic increased through the attempt undergone runing from organisational Reconstruction to new merchandise and visual aspect. It had turned its image about and the resurgence attempts contributed the growing and restored of consumer assurance. The climb of net income from these sequences should be affecting aggressive corporate societal duty ( CSR ) by making a socially and environmentally witting concern and contribution implement by CAL. non merely as an duty and grasp to the support of society. but a commiseration from the old losingss. This position was supported by Taylor ( 2012 ) which stated that by incorporating CSR in a concern activities. these corporate concerns will bask a stronger fiscal public presentation and profitableness. heighten employee dealingss. productiveness and invention. better dealingss with investors. place possible new ventures. and construct a stronger repute and stigmatization.


China Airlines. n. d. . Dynasty Flyer Program. accessed 23/4/2013.
hypertext transfer protocol: //calec. china-airlines. com/club/enroll. aspx? lang=e

Hamel. G 2013. The Relationship between Business Model and the Strategy. Demand Media. accessed 23/4/2013. hypertext transfer protocol: //smallbusiness. chron. com/relationship-between-business-model-strategy-25963. hypertext markup language

MindTools Corporate. n. d. . SWOT Analysis: Discover New Opportunities. Manage and Eliminate Threats. accessed 22/4/2013. hypertext transfer protocol: //www. mindtools. com/pages/article/newTMC_05. htm

Taylor. D 2012. Ghana Business: The Importance of Using Corporate Social Responsibility ( CSR ) . Development Wing. accessed 24/4/2013. hypertext transfer protocol: //corporatesocialresponsibilitygh. com/ ? p=36

Thompson. AA. Peteraf. MA. Gamble. JE & A ; Strickland. AJ 2012. Crafting and Executive Strategy. The Quest for Competitive Advantage: Concepts and Cases 18th edition. McGraw-Hill Irwin. New York. USA.

Purkayastha. D. Faheem. H & A ; Samanta. M 2010. Problems at China Airlines. IBS Center for Management Research. India.

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