Problems at China Airlines

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This case study was compiled from published sources, and is intended to be used as a basis for class discussion. It is not intended to illustrate either effective or ineffective handling of a management situation. Nor is it a primary information source.

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Case Details:


Case Code : BSTR368 For delivery in electronic format: Rs. 300;
For delivery through courier (within India): Rs. 300 + Shipping & Handling Charges extra


Political environment / Regulatory environment / Operations
Case Length : 22 Pages
Period : 2001-2010
Pub Date : 2010
Teaching Note : Not Available
Organization : China Airlines Ltd.
Industry : Aviation Industry
Countries : Taiwan


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.

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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.


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.


  Page No.
Introduction 1
Background Note 2
CAL's Difficulties 5
Revival Efforts 9
Improving Cross-Strait Relations 13
The Benefits 14
The Other View 16
Looking Ahead 16
Exhibits 17


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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