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China Southern Airlines SWOT & PESTLE Analysis

Last Updated : 22 May, 2017

OVERVIEW

Name of the Company: China Southern Airlines

Business Sector: Aviation

Operating Geography: Asia, China, Global

About the Company: China Southern Airlines is China’s largest airline and world's fourth-largest airline measured by passengers carried. It was established in 1988 and is headquartered in Guangzhou, China. It is a state owned enterprise and has over 100,000 employees as of 2016. Its subsidiaries include Xiamen Airlines, Shantou Airlines, Guizhou Airlines, Zhuhai Airlines, Chongqing Airlines and Henan Airlines.

Revenue: RMB 114,981 million – FY ending Dec 31st 2016

SWOT & PESTLE Analysis

The SWOT analysis for China Southern Airlines is presented below:
Strengths
Weaknesses
1. Largest Chinese airline with a fleet of more than 700 passenger and cargo aircraft and wide global network
2. Relatively young aircraft fleet with an average age of 6.6 years which results in low operating cost
3. Strong technology infrastructure and own flight training college
1. Major dependency on the China-Australia route accounting to 22% Available Seats Kilometer (ASK)
2. High foreign currency liabilities, especially in US$ which will increase interest expenses in wake of depreciating RMB
Opportunities
Threats
1. Strategic tie-up with American Airlines will improve market share and access to diverse locations
2. China trips per capita well below that of western markets underscoring the strong market potential
3. China to become world’s largest aviation market by 2024, according to IATA aided by rapid growth in outbound travel
1. Formidable competition from domestic players like with China Eastern Airlines and Air China.
2. Significant depreciation of the RMB to result in foreign exchange losses for China Southern
3. Expansion of high-speed railway network across China will impact growth in air travel
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Strengths

1) Largest Chinese airline with a fleet of more than 700 passenger and cargo aircraft and wide global network: China Southern Airlines is the largest Chinese carrier with a fleet of more than 700 passenger and cargo aircraft, the most by an Asian airline. The carrier is well developed network across more than 1000 destinations across 177 countries globally with passenger traffic amounting to nearly 115 million in FY16. With the SKYTEAM alliance the airline group it has been the top Chinese carrier for 38 consecutive years and also has the best safety record amongst Chinese airlines for 17 years. China Southern Group is also the leading carrier across China – Australia and New Zealand, China – South Asia and Central Asia routes and also across the newly formed “One Belt and One Road” network.

China Southern Airlines SWOT analysis has been conducted by senior analysts from Barakaat Consulting.

References

1. China Southern Airlines Company Limited Annual Report 2016: http://www.csair.com/en/about/touzizheguanxiz/yejibaogao/2017/resource/2b330bd44bb25c033bdf27927779a7dd.pdf

2. China Southern Airlines: Upside From International Expansion And Growing Chinese Air Travel Demand: https://seekingalpha.com/article/4073083-china-southern-airlines-upside-international-expansion-growing-chinese-air-travel-demand?page=6

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The PESTLE analysis for China Southern Airlines is presented below:
Political
Economical
1. Being a state-owned enterprise, it has good rapport with the government and Civil Aviation Administration of China
2. Any major strain in Chinese- US relations will affect business growth in the North American sector
1. Oil prices are expected to remain around $50 a barrel, aiding operational margins
2. Strategic foreign investments from American Airlines to help in improving efficiency and competitiveness
Social
Technological
1. China trips per capita well below that of Europe and North America, underscoring the strong market opportunity present
2. Rising per capita income and untapped tourism potential in China to aid aviation growth
1. Completion of “China Southern e-travel” project to drive online sales
2. Tie-up with American Airlines will help China Southern on innovation via technology transfer.
3. Own flight training college in Australia and in-house maintenance reduces technology costs for China Southern
Legal
Environmental
1. China Southern has to deal with thousands of customers globally and may be subject to lawsuits in case of service deficiencies1. China Southern’s pursuit of fleet optimization, route optimization and low-carbon travel resulted in significant savings in FY16
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Political

1. Being a state-owned enterprise, it has good rapport with the government and Civil Aviation Administration of China: China Southern Airlines being majorly owned by the government enjoys support from the administration and the aviation authority. The management has a direct connect to the highest levels of government or the relevant ministries. It enjoys facilities like preferential bank loans, subsidies and business through mass government booking contracts. Also when aviation policies are formulated, government carriers like China Southern get a friendly ear from political administration.

For the detailed PESTLE report on China Southern Airlines please contact: support@swotandpestle.com

China Southern Airlines SWOT analysis has been conducted by senior analysts from Barakaat Consulting.

References

1. China Southern Airlines Company Limited Annual Report 2016: http://www.csair.com/en/about/touzizheguanxiz/yejibaogao/2017/resource/2b330bd44bb25c033bdf27927779a7dd.pdf

2. China Southern Airlines: Upside From International Expansion And Growing Chinese Air Travel Demand: https://seekingalpha.com/article/4073083-china-southern-airlines-upside-international-expansion-growing-chinese-air-travel-demand?page=6

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