Evolution theory in practice

One after another in the course of 2008, private airlines like OK, UE and East Star ran into trouble, while Spring, Juneyao and Shenzhen Airlines reported surprising surpluses.

Juneyao 'Lucky' Airlines is another successful private aviation company amid the gloomy economy. [China.org.cn]

Associate Professor Zou Jianhun with the Civil Aviation Management Institute of China (CAMIC) points out that Spring Airlines forms a mutual complementary relationship with its parent company's tourism business, each contributing to the others' success, while Juneyao Group has years of experience in plane chartering.

What is also worth noticing is that the two airlines above have relatively simple share and capital relationships, whereas OK Air and UE have far higher numbers of shareholders, leading in practice to inefficiency in communication. OK's ex-President Liu also admits balancing conflicting interests among so many shareholders was a problem.

Lawyer Zhang Qihuai believes a restructuring will take place in the private civil aviation industry. Aviation administration will take advantage of the opportunity to share out the "cake" by reallocating routes among public and private airline operators.

Prof. Zou thinks that in this reshuffling process companies with good standing and high credibility will continue to survive, whereas some others who entered the trade only to raise capital will be acquired by other companies as they originally intended, but at a far lower price.

Spring Air's Chairman Wang Zhenghua, Juneyao Air's Wang Junjin, East Star's Lan Shili, UE's Li Jining, and OK's President Liu Jieyin, did try to join forces to defend their common interests, and prop each other up. However, the loose coalition they formed failed to have any practical impact in the end, and agreed cooperation measures were not implemented.

Prof. Zou goes on to point out that even if the private carriers can ride out the storm this year they should avoid trying to compete in the main markets; instead they should target other options like exploring extensions into tourist areas or less popular lines that might be eligible for government subsidies, or trying to win business through pricing strategies, service models, and so on.