Air China is on a mission to not only become China's largest domestic carrier, but it also wants to be mentioned in the same breath as well-known names in the business as Cathay Pacific, Lufthansa and Singapore Airlines. Leading the charge is its chairman Kong Dong, under whom China's flag carrier has not just turned around its fortunes, but also gained a strategic direction that has positioned it for sustained growth. "Kong Dong is putting through a business transformation, has a clear mission and an innovative strategic direction," commented the judges.
It was very different for many years in the Chinese airline market. Domestic carriers had weak business structures, overcapacity on both domestic and international routes and an over-reliance on the government. In many ways, they epitomised highly inefficient state-owned operations. All of that began to change with the consolidation of the airline industry in 2002 into three major groups.
Beijing-based Air China has been on the rise since Kong became its chairman in 2008, bringing business acumen and political connections to a company that lacked both. Before that, he helmed China National Aviation Corp, China Ocean Helicopter Company and Shenzhen Airport Group. In 2002, post-consolidation, he became deputy general manager of Air China's parent firm, China National Aviation Holding Company.
Together with Cai Jianjiang, Air China's young and highly regarded president and chief executive, Kong pushed for a broad-based plan that tackled and revamped every facet of the business - route network, overall capacity, fleet, revenue programmes, cost base, cargo and alliances.
Air China turned heavy losses into record profits and is poised to profit from the resurgence of the Chinese economy.
Under Kong, Air China has also expanded its reach. It has increased its stake in Hong Kong's flag carrier Cathay Pacific to 29.9% - just below the mandatory takeover offer limit - and forged a closer relationship with the airline. Cathay and Air China have also started a cargo joint venture in Shanghai, taking on both the international players and local carriers like China Southern Airlines and China Eastern Airlines.
Air China also won the battle for control of Shenzen Airlines, giving it a strategic foothold in the important southern China region. It also has established bases in several cities, including Shanghai, Chengdu and Wuhan, which give it a strong growth position and a competitive edge against its local rivals.
Led by Kong, Air China's management team won its spurs during the recent economic crisis. A rapid readjustment of capacity meant that it focused on the higher-yield, higher-demand domestic market, and reduced its international services. Its sales and marketing strategy refocused on frequent flyers and higher-end passengers, allowing it to grow its premium class revenue while demand in the segment fell worldwide.
There are numerous challenges. International carriers are expanding, providing even more competition to China's airlines. Domestic overcapacity remains a worry, while the Chinese government's ambitious plans to link major cities with a high-speed rail network could impact the aviation market.
Under Kong, Air China has demonstrated that a large airline can respond nimbly to rapidly changing market conditions. It is positioned for both near-term and long-term growth and, just like its country, becoming a global force.
Source: Airline Business
