Problems at China Airlines

Case Code: BSTR368 Case Length: 22 Pages Period: 2001-2010 Pub Date: 2010 Teaching Note: Not Available

Price: Rs.300 Organization: China Airlines Ltd. Industry: Aviation Industry Countries: Taiwan Themes: Political environment, Regulatory environment, Operations

Abstract Case Intro 1 Case Intro 2 Excerpts

Abstract

This case deals with the problems faced by Taiwan-based full service airline, China Airlines Ltd. (CAL). Much of its trouble was attributed to its poor safety record in the 1990s that severely tarnished its brand image besides lowering passenger traffic. In addition to this, analysts felt that faulty pilot recruitment policies, lenient flight crew training process, lax maintenance systems, high cost operational structure, inefficient corporate culture, and the cost-cutting policies of the management which sacrificed safety standards added to its woes. The strained political relations between mainland China and Taiwan which prohibited the airline from launching flights to routes in China only compounded its problems.

The airline's mounting problems prompted it to seek measures to restore its image. Its initial efforts were focused on improving its brand image and regaining consumer confidence. The airline sought to pursue stringent safety norms, increase its maintenance facilities, and hire trained and experienced pilots from foreign countries.

The airline also focused on improving cross-strait relations between Taiwan and mainland China since the Chinese aviation market offered a tremendous opportunity to it. To some extent, the airline's revival efforts helped it in revamping its image as was evident from the fact that it witnessed an increase in passenger traffic.

In addition, with the improvement of the cross-strait relations between mainland China and Taiwan from 2008, the airline was expected to enhance its prospects by tapping the cross-strait passenger traffic, experts pointed out. Some critics opined that while improved cross-strait relations offered CAL an opportunity, it also meant increased competition from low cost mainland China Airlines, which could hamper CAL's prospects in the long run. The airline, however, remained positive and expected to return to profitability in 2010.

Issues

The case is structured to achieve the following teaching objectives

• Understand the reasons for China Airlines' problems
• Understand how politics could affect the business prospects of an organization
• Analyze the initiatives adopted by China Airlines to restore consumer confidence and bring the company back into profits
• Analyze how China Airlines could benefit from the improvements in cross-strait relations between Taiwan and mainland China
• Explore other ways in which China Airlines can bring the company back into profits

Contents

Introduction
Background Note
CAL's Difficulties
Revival Efforts
Improving Cross-Strait Relations
The Benefits
The Other View
Looking Ahead
Exhibits

Keywords

Political environment, Regulatory environment, Operations, Cross-Strait relations, Cross-strait trade, Organizational reconstruction, Poor safety record, Redesigning safety procedures, Recruitment policies, Simplified fleet, e-Ticketing technology, Point-to-Point services, Hub-and-Spoke networks, Taiwanese Airline industry

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