Feb 10, 2021 in Business

Airline Industry in Germany and China
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As many other industries in the world, the airline industry experienced a great deal of changes following the beginning of the 2007 financial crisis. The airline industry has been shaky in the recent years due to the rising costs of operating and the constant challenges from all the competitive companies that are on the market. One of the most important drawbacks in the success of the airline industry all over the world is the costs the airlines have to pay to the airports for using their services. The airline industry is a complicated machine that depends on many factors in the process of guaranteeing the most pleasant service to their customers. The costs of operating and developing an airline are immense and the successful management of an airline requires a vast amount of research and accurate cost and price evaluation among all the competitors. Now, let us explore the development and changes that occurred in the airline industry of China and Germany between 2007 and 2012.

 

All through the history, there has always been a strong correlation between the economic activity of a country and its transportation sector. According to European Parliament, by the end of 2007, the economic shakedown has been felt in the airline industry of Germany as strong as in other countries. The negative consequences have been greatly felt by the high cost airlines in comparison to the low cost companies. Even though both types of companies, low cost and luxury airlines, have tried to implement a variety of strategic actions, there were many unfavorable conditions that led to the creation of obstacles in the successful operation of the airline industry as a whole in Germany. Such airline companies as Air Berlin and Jet Executive had to cut down on their personnel and readopt their programs in order to keep afloat. In many cases, the companies had to create new routes and link their efforts to other companies in order to provide the service that their customers were used to. On the other hand, some companies decided to invest widely in the expansion of their routes in order to better serve the customers. The innovations implemented by the airline industry had the scope to substantially improve productivity and growth in output.

The Chinese airline industry experienced a different type of expansion through the years. All through history, the airline industry in China has been sponsored by an influx of foreign investments; however, the investments into the Chinese airline industry slowed down from 2002 on because of the regulations that were imposed by the Chinese government. Later, Franke and John claimed that the regulations were revised in the way that the small air companies in China had been regrouped into Air China and allowed the share of foreign ownership to be raised to 49%, which gave the foreign investors more control over the management of the industry as a whole. There were many positive changes in the cargo section of the airline business in China due to the rising demand for cargo transportation services. Thus, the Chinese cargo transportation airline business experienced fast expansion with the help of foreign companies such as Shenzhen Airlines and Lufthansa Cargo, which jointly improved the cargo service by establishing Jade Cargo International Company. On the other hand, the passenger airlines were less interested in deepening any financial relationships with foreign investors. The Air China and China Southern were two companies that were able to achieve positive results all through 2010, and this gave them abilities to triple their assets and profits during a period of eight years. The airline company China Eastern went through a financial struggle; with the help of foreign investment, it was able to recoup by restructuring its managing strategies by 2010.

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A similarity to notice between the German and Chinese airline industries is that both countries struggled during the financial crisis that followed 2008. The difference was the way in which each of the states managed to go through the difficult times. The regulatory government politics of China often placed many constraints on the free development of business on the Chinese territory, while the German open market incentives have helped gain positive results during the recession in a faster manner. The expansion of the railways in China diminished the number of people using the airlines since it was cheaper and available in a lot more directions. The main obstacle and thus difference between the German and Chinese airline industry is the use of strong international marketing strategies that Germany has been utilizing for a long time now. China is not yet able to compete with such empowered rival as the German airlines since its operation is widely based on foreign investors who may be skeptical at times; however, the recent positive position of the government on the issue of foreign investment have placed a step forward in the growth of the main Chinese airline carriers. European Parliament assumed that the German low cost airline companies registered an increasing positive trend during the 2007 and 2011 period, which proves that lowering the cost of tickets may have been the best strategy in attracting more customers during difficult financial periods in the airline industry. The high-class airline companies in Germany, however, experienced more losses because they did not use the low cost politics during the recession. Even though some of the well-known airline companies were able to keep their loyal customers who were used to the high quality service, the negative consequences that came with the recession were greatly felt for a few years after. Moreover, there were minimal efforts from the governments of both countries to help the airline industry during the times of the financial crisis, which represents another similarity in terms of the comparison of the airline industry.

 
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Most businesses have to take pro-active decisions that would bring about changes in the near future. In the case of the German airline industry, the economic factor played a decisive role for the future of many small and large German airlines. The majority of the airlines in Germany had to pursue different economic measures in order to survive the recession and revitalize the profits for the companies. At the same time, the investor's confidence in the future was at its lowest level in 2011, which certainly moved the airline industry to rethink the strategies of surviving the negative effects of the recession. Even Lufthansa airline, being the strongest German airline company, had to increasingly expose to new emerging markets in order to keep going during the tough financial times. The challenges of 2008 and 2009 economic situation became more accentuated in 2010 when there was no significant improvement and the European political system did not aid the stimulation of the economies in most European countries. Therefore, the population's credibility in the fight with the recession by the political forces did not strengthen the consumer confidence in the future in any way and decreased the use of the airline industry continuously. The Chinese airline industry has also been affected by the economic crisis that occurred after 2007; however, the timely influx of foreign investment helped the transition seem more manageable. Moreover, if to take into account political perspective, there is an evident rise of taxes in China. For example, Franke and John speculate that the charge for landing and fuel was increased by 5% in 2007, compared with previous years. Furthermore, the legal aspect and government regulations in China placed a few obstacles for the airline industry there as well. However, there were numerous attempts by the Chinese government to restructure the airline business in order to attract more investors and create a smoother move to a better future for the industry. Despite all the challenges that the Chinese airline industry has faced during the recession, it still managed to total a revenue of 25.2 billion dollars in 2009, which depicts a 12% increase in the compound annual growth rate from 2005 to 2009. The industry's volume of customers served reached 223 million in 2009, and it is expected to further increase in the next three years, which characterizes the social factor of the industry. The Chinese airline industry should apply developed safety measures. In this case, it is highly recommended to employ better amenities on board as well as on the ground.

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All in all, in the 21st century, the airline industry faced a big variety of problems concerning the costs of operating and demands of the modern market. During crisis, one can see the dramatic deterioration of the airline industry. After 2009, the majority of airlines began to get on the right track. It is explicit in the number of new routes in the territory of China and Germany. If to take into consideration the above comparison of these countries, it is evident that the German airlines recouped faster after the economic crisis. In the case of China, the transition out of the economic crisis was slower, but the reorganization of the political influence on businesses there has made it possible to see new prospects for the long run.

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