Chinas airline industry deregulation: assessing the impact on the operational performance of dominant carriers

Abstract

This paper analyses the operational efficiency of the big three Chinese airline carriers post deregulation from the managerial perspective, using empirical data and by means of parametric methods in order to further understand the potential this market has for its dominant carriers. The analysis uses financial and operational data for the three dominant carriers in the Chinese airline industry and estimates the effect deregulation has had over a period from 1994-2012 to the dominant carriers. This analysis validates that the Chinese airline industry operational efficiency as measured by revenue and cash flow generation ability is positively associated with the load factor within a period that includes deregulatory initiatives. This finding highlights that the airlines have reacted positively post deregulation and have reasonably coped with competitive forces. Thus a further airline industry convergence is expected, on a global scale. This convergence will positively affect the Chinese airline industry, which in turn will benefit the passengers in terms of technology innovation, prices and welfare status.