Research Of Market Innovation And Competition Of Chinese Airline Industry

The technical advance and demand expansion lead the sky opening and liberalization to be prevailing trend since 80's of the 20th century. However, Chinese airline industry is still in high monopolization and the lagging market innovation makes the whole industry in deeper disadvantages than international airline industries. Although Chinese government has done some reforms and made a little of improvement about the management scheme and subordinate relationship to administrative organs which lead China become one of big airline countries, these were not the virtual marketing innovations because there were still deep layer contradictions and problems unsolved, such as small scale, excess competition, low international competitive capacity, industry structure unbalance, abnormal price system and high operational cost. In the face of drastic market competition, threat from other transportation and international airline invading, Chinese airline industry encounters austere challenges which require the deep market opening and innovation. Compared with other competitive industries, the airline industry holds the most important function at the aiming of persistence development of whole national economy, being the Asia physical distribution center and world manufacture center in the opening economy epoch.During the progress of the development and reforms of airline industry in China, there are five main reforms led by the General Administration of Civil Aviation of China for resolving the big problems faced by the airline industry. The reforms are (1) restructure of three main airline companies (2) floating airline ticket pricing (3) reform of landing fare of airline (4) reform of airline ticket agency (5) reform of opening among the airline industry. The problems relating with these five reforms are urgent to be solved and they are conducing to enhancing the competitive edge, improving the performance and pushing the development in phase of whole airline industry. So this dissertation focuses on the problems relating to four reforms among them and applies theory of industry, information economics and cooperative game theory etc. to build quantitative model and analyze problems all above to give some good suggestions for the strength and booming of airline industry in China.The main contents and conclusions are summarized as follows:1. Fist, this dissertation comprehensively introduces the main research opinions about airline industry, analyzes the defects and shortages, shows the characteristics of industrial structure and economy and applies the network externality, two-sided theories and cooperative game theories. Then the main contents and structure are summarized as well as the academic innovation of this dissertation.2. Based on the basic venation that elementary market reforms, two segmentations and restructures, this dissertation briefly describes the evolvement of Chinese airline industry structure and market opening. In relation to several important reforms among the airline industry at present, this dissertation shows the key problems needed being analyzed and solved are as follows: horizontal segmentation and hub-and-spoke network competition, two-sided market and agent game, vertical segmentation and airline landing fare reform, market opening and airline alliance. All above are the necessary prerequisite and foundation of later chapters.3. Based on the background of horizontal segmentation of Chinese airline industry, this dissertation studies the competition between point-to-point network and hub-and-spoke network by introducing the economy of frequency of airline and depicting the characteristics of time value of airline traveler. Then this paper builds rational demand function and analyzes the intensity of economy of frequency how to change the competition equilibriums. Moreover the discrimination of access fare and cross subsidization are discovered. The results show that hub-and-spoke network has more strategy advantage and it sustains the behavior of government taking administration power dividing up and restructuring the airline market aiming at building hub-and-spoke network for more competitive advantages. At the same time, it explains the puzzle that the market concentration has been enhanced instead of reducing and why the contestable theory fails after un-regulation. Finally, it gives suggestion that government should take care of the discrimination of access fare and cross subsidization and makes rational regulations in the operation of hub-and-spoke network of airline.4. This dissertation applies the two-sided market theories in the game among airlines, agent platforms and consumers. The results show that two-side market structure and special characteristics of Chinese airline industry lead the huge profit transfer to agent platforms and airlines and consumers suffer great harm. The agent system at present does great harm on the effect and progress of the market innovation. Then two suggestions are brought forward to solve this problem.5. Based on the vertical segment of Chinese airline industry, this dissertation discusses the price game between of airlines and airports. The airline landing fare reforms are analyzed as the key problem by Shapley model and Owen model of cooperative game theories and results show that not only the practiced bills but also the new draft are not able to improve the fairness and efficiency and the benefits among different airlines and airports are not taken good care. Then full enclosing floating prices regulation is put forward based.6. Based on the airline liberation and airline alliance prevailing over the whole word, this dissertation discusses the international airline alliance competition in the condition of multi-markets and multi-products. The results show that airline alliance can bring about additional profits and the consumer surplus and social welfare are also improved in the condition of big product differentiated degree. The government should take care of the market competition in the condition of low product differentiated degree and makes rational regulations.The primary innovations include:1. This dissertation puts forward the characteristic of economies of frequency which is the specific form of network externality of airline industry, depicts different time value among the consumer, builds up simplified model comparing the traditional point-to-point network with the hub-and-spoke network and discusses discrimination of access fare and cross subsidization problems. The results explain the abstruse puzzle of market concentration rising abnormally and failure of contestable theories in the airline industry after un-regulation in America. Moreover, it gives theoretical support to administrative behaviors taken by Chinese government to recombine the airlines for strategic aiming at building several hub-and-spoke networks.2. This dissertation applies new two-sided market theories, describes the characteristics of unilateral excluding agent platform, high switching cost, three arrangements of consumers and airline demand function oriented by the market shares. Then it discuss the price game among airlines, ticket agents and consumers which gives support to the opinion that huge profit transferring to agent platforms and the high profit of oligarchy enshrouded by ostensible perfect competition conditions. Moreover two suggestions are brought forward.3. This dissertation applies cooperative game theories in the empirical analysis and comparing between practiced airline landing fare bill and the new draft bill, discusses the cross subsidization and the fairness and efficiency of partial closing floating price regulation. Then it gives the suggestion of full closing floating price regulation which can keep the fairness and improve the efficiency of new draft bill, balance the benefits among different airlines and airports and promote the whole airline unisonous growing.4. Based on the multi-markets and multi-products characteristics, this dissertation builds up multi-markets demand function and discusses endogenic price game behaviors of airline alliance in the differentiated product market. All airlines are inclined to take price follower strategy among after alliance and alliance gets more profits, the consumer surplus and social welfare are enhanced in the market with big differentiated degree and reduced on the contrary.