Platform Firm Entering Into Civil Aviation Industry And Vertical Integration Opportunity

In recent years,civil aviation market which used to have strong characteristics of monopoly,highlighted network and high requirement for capital,ushered in a few of new asset-light entrants of platform firms,such as C-trip who purchased the ten percent shares of the China Eastern Airlines,tickets agencies platform providers such like elong.com and Qunaer.com are planning to establish their own airlines one after one,Shun Feng express,one of them,had set up the express airlines and Yuan Tong express has begun to prepare to build its own planes team.Observation of the Spring airline who used to base on the business of travelling agents and the Jun Yao group who focused on the charter or private jet established the Ji Xiang airlines,they have been developing in the civil aviation industry over ten years and got successes.As the development of two-side theory those enterprises should be categorized to platform firms and this phenomenon also should be included to solve the problem of the path of platform firms entering into civil aviation industry.Platform firms could enter into this industry,of course,due to the relaxation of entry and regulations,also the speedy growth of civil aviation market.However,these external elements,which are just the necessary conditions for this phenomenon,still can’t answer why they become successful.Meanwhile it also can’t answer if the phenomenon has universal meanings and whether there are some internal connections as looking at the failures example of Ying Lian airlines.The observers of the industry still consider the platform firms entry as single case.They attribute the successes of Spring airlines to great leadership and extra-low-cost control strategy and think it is a compromise action that C-trip group squeezes the market space of agents.Even we can figure out what happened through the views of enterprises boundary theory,vertical relationship theory,two-side theory and civil aviation regulation theory,the answer is not perfect on the concern of its pertinence and explanatory power.Build a mode of game analysis considering firms’ entering,vertical integration itself and market structure vertical integration.It analyzes and quantifies the platform firms’ choice of pursuing profits maximization through market scale and norm of profit balance.It analyzes the situations of platform firms before and after entering the industry and the gaming among the competitors and the results before and after the vertical integration.It compares the results of conducting the vertical integration with these don’t conduct vertical integration.And at last put all market structure elements into this game mode which builds an analysis frame based on the different market behaviors and choices.In the process of analysis it answers why airlines want to squeeze the platform firms out,why platform firms are alive still under the conditions of strong competition and its profits decided by airlines,why platform firms choose vertical integration and if the strategy works,and whether this strategy still works under the market structure of oligopoly and monopoly.Final it gets a synthetic evaluation model to exam how vertical integration makes an achievement.It builds a index of platform synergy which quantifies and concretes the process of vertical integration.The index combines with financial and operation data of firms forms a second class synthetic assessment system.All above makes it possible that exam the business achievements are in line with vertical integration.From the points of view of results of game-model and examine-model.platform firms’ vertical integration is effective.Ticket and travelling agents and logistic enterprises used to be slack and inefficiency,turned to be a new status of high-efficiency through technology advancing and making use of expending of civil aviation market.They possessed the enterprises characteristics of "new economy" and competition advantages and change the structure of industry used to be into to new two sides market and take a great place in the market.Platform firms’ appearing is inevitability because of the market structure.All traditional airlines’ fighting is just fears against to the market trend.Platform firms with the help of two-side market structure turned the advantages of platform into airlines’ management advantages through vertical integration.It broke through asset specificity barrier and finished the process of entering into this monopoly field through realizing profits.The conclusions of this paper provide some advices for entering into civil aviation industry and how to raise efficiency of airlines effectively.Also,it provides some clues or suggestions for civil aviation regulation reform,especially for supply side reform and mix-ownership reform.It showed us inspirations on different ideas,content and methodology.