Comparative Analysis of Airlines: Air India versus Air China

This report provides a comprehensive comparison of Air India and Air China, two major airlines. It begins with an introduction outlining the scope and objectives of the study, followed by a literature review that explores the market structures, demand factors, fleet sizes, human resources, cost factors, and financial performance of both airlines. The research methodology includes research questions, a research approach, design, data collection methods, and ethical considerations. The discussion and results section presents a detailed analysis of key performance indicators, including GDP and flight revenue comparisons, profit rates of return, airline rankings, price comparisons, Z-scores, descriptive statistics (traffic, capacity, and load factors), and aircraft utilization. The report concludes with key findings, contributions, limitations, and suggestions for future research, along with a bibliography and appendices containing supporting data and analyses. The study aims to evaluate the financial and non-financial performances of the two companies, with a focus on the efficiency of Air China compared to its competitor, Air India. The analysis includes market segmentation, consumer sectors, and revenue generation, highlighting the challenges faced by Air India due to financial losses and obsolete aircraft, and the government support for both airlines.

A COMPARISON OF AIRLINES :AIR INDIA V/S AIR CHINA
A COMPARISON OF
AIRLINES :AIR INDIA V/S
AIR CHINA
Re
2019

11
Table of Contents
Chapter One- Introduction.................................................................................................................4
Chapter Two- Literature Review.......................................................................................................7
Background.......................................................................................................................................7
Air India and Air China Marker Structure.........................................................................................7
Demand factors and Income elasticity...............................................................................................9
Fleet Size and Capacity of Airlines.................................................................................................10
Human resource and Corporate benefit for the airlines....................................................................12
Cost Factors.....................................................................................................................................12
Revenue and Expenditure................................................................................................................14
Chapter Three- Research Objective and Methodology..................................................................16
Research Questions and Hypothesis................................................................................................16
Research Approach..........................................................................................................................17
Research Design and technique.......................................................................................................17
Data collection and Sampling..........................................................................................................18
Ethical consideration.......................................................................................................................19
Chapter Four -Discussion and Results.............................................................................................20
Compare GDP and flight revenue (2009-2017)...............................................................................20
Profit rate of return of Air china and Air India................................................................................22
Rank of Airline in their country.......................................................................................................23
Price comparison of Air India and Air China..................................................................................25
Z score of Air India and Air China..................................................................................................26
Descriptive statistics........................................................................................................................27
Traffic..........................................................................................................................................27
Capacity.......................................................................................................................................28
Load Factor..................................................................................................................................29
Air India aircraft flown................................................................................................................31
Air India tonne kilometre performers..........................................................................................31
Chapter Five......................................................................................................................................32
Conclusions.....................................................................................................................................32
Contribution.....................................................................................................................................33
Limitation........................................................................................................................................33

11 Future Study....................................................................................................................................34
Bibliography.........................................................................................................................................34
Appendix...............................................................................................................................................0
A) GDP of China...............................................................................................................................0
A 1) GDP of Indian............................................................................................................................1
B) Profit rate of return.......................................................................................................................2
C)Z score of Air India and Air China................................................................................................3
D)Descriptive statistics......................................................................................................................5
Air Traffic.......................................................................................................................................5
Capacity.........................................................................................................................................6
Load Factor....................................................................................................................................7
AIRCRAFT FLOWN..........................................................................................................................8
CARGO CARRIED............................................................................................................................8
TONNE KILOMETRE PERFORMED ss...............................................................................................9

11
DECLARATION
ABSTRACT
Focus of the current study is to show the comparison of the two of airlines such as Air India
and Air china and reflects its overall performance. The researcher evaluates the financial and
non-financial performances of above mention two companies. This study favours Air China
in comparison to its competitor as the efficiency of this entity is better than its rival. Criteria
that show the increasing performance of this company is capacity of fuel and the efficiency of
aircraft, market segmentation, Consumer sectors, and revenues. The financial condition of
Air India is not as good as this entity faces losses for 1 decade. 4 obsolete aircrafts held by air
India hols reasons for increasing debts that arises the wounding up of the business. The
declining efficiency of Air India stabilizes by the government of India who injects capital in
this company to recover all the losses. While, in terms of growth in the aviation industry, Air
China beats its competitors by remaining in a topmost position.
Chapter One- Introduction
China is a very populous country as compared to India comprises of more than 1.40 billion
people living in China while 1.31 in India. Every country gives proper attention in reducing
its nation’s population as this increases the poverty and unemployment in the nation. A
higher population of China is signifies higher proportion of poverty and unemployment in the
nation which is suitable for its economy. Frequent growth of the aviation market will directly
results into higher needs and the expectations of its users. In results of this action, the level of
the customer’s satisfaction of the passengers towards the services of the airlines gets
increases and also creates value to the economy. In determining the position of the airlines,
the gross domestic product of two of the airline is compared with each other. As per the
authentic source, gives insight about the economic status of India by stating its gross
domestic product. GDP of India in comparison to its rival economy is 4.19% (India’s
economic status, 2018). This website helped in collecting reliable information about the
economic structure of China and India in assessing the overall performance of these two
airlines. Charts and graphs prepared by considering appropriate data to compare the fact
related to China and its rival nation. The positioning of Air India and its opponent gives a
new angle to the entire research. The business scale of two of the economies is analysed in
determining the worth of the businesses.

11 The size of both of the airline is a large scale due to the spreading of their branches all over
the world (Bosch and Pinto-Garay, 2018). For determining the worth of two of the airlines, its
market structure is compared. Declining of the market structure Air India holds a strong
reason for arising the situation of bankruptcy but on another hand, the share held by an entity
in the international market is higher that is 15.39% (Air India’s business scale,
2018). Business share held by air India in the local or domestic region is less than the share
held by its rival company. However, the market share held by Air China is 16.55% (China’s
business size, 2018) which is higher as compared to its competitor. Air China beats Air India
in terms of capturing a higher share in the market. In return, Air India remains in the
competitive race to fight against its opponent in the international market. The government of
China supports its national carrier by offering expanded infrastructure in the form of new
airports to help its airlines.
The capital injects by the government in Air India as a majority of a shareholder in this
airline to recover its declining position. 980 crores invested as capital in this airline by the
majority of a shareholder to overcome the declining position of the firm due to continuous
losses of this airline from the past 10 years (980 crores invested in Air India, 2018). India and
China get financial support from their government as their economy considers these airlines
as the pride of their nation. Air India’s revenue arises from flight is lower than its competitor
due to the aircrafts held by the same is less efficient to raise the revenue. An airline earns
majority of its earning comes from operating an aircraft. 425 Aircrafts held by Air China in
comparison to its opponent consists of only 140 aircraft. The less number of aircraft held by
Air India in comparison to its rival is due to 4 obsolete aircraft. The efficiency of Air India
gets affected as the number of total aircraft gets decreases from 140 to 136 (Fleet Details,
2018). More than half of the tourist in India come from China as per the national satiates data
of the year 2017.
The Altman Z score method is preferred to determine the Profitability and liquidity of two
airlines consider for this assignment. Out of which the statistical score of Air India is lesser as
compare to its competitor. Methods of statistics are considered as an important tool in testing
the validity of the collected data. Two handy and complete tools of statistics used for data
analysis in this research are descriptive and Z score. Integrated package tools in the form of
descriptive stats will help in determining the positioning of these airlines. This package
consists of some of the main tools such as mean, median, mode, standard deviation and range
in predicting the future performance. Value of these airlines will check in this analysis to
determine and comparing the factors affecting its performances in the global market.
Sudden changes in the aviation industry negatively affect the airlines operating in it are like
the owners bound to raise the flight prices. The market structure of the companies will get
suppressed when its existing customers will look more quality in a reasonable prices from the
business of its rivals. Air China and Air India is considered as the national flight carriers of
their countries which are public airlines having a majority of shares of the government.

11 The price comparison chart reveals that the flight ticket of Air China is higher than Air India.
Due to bankrupt situations of Air India charges lesser prices as compared to its competitor to
steal the attention of the passengers.
Strategic action is considered by an examiner in its study by considering all the facts and data
related to the topic of the study. They give preferences to the inductive research approach in
collecting the data for this thesis. This approach involves the selection of aims and the
objectives and disregarding the creation of hypotheses or assumptions to support the research.
Experimental design method selected as per the nature of this study to evaluate the relation
among the performance of the airlines consider for this study. Two of the airlines are
operating their businesses in a similar industry. It is considered in assessing the revenue
generates from the flights with is relation with the GDP of the country and how it affects each
other in a relative sense. Consequently, the Z score is based on some criteria’s such as
working capital ratio and other ratios to determine the capability of the companies in funding
the total assets held in an entity.
Chapter Two- Literature Review
Background
A literature review showing a comparison of two airlines and its relation with each other as
they operate in a same industry but are from different economies. Aim of the research is to
evaluate the efficiency of Air China and Air India to recognize the factors affecting the
performance of airlines. This phase of the dissertation aims to fill the gaps of the previous
research in a current research study. An earlier study performed by the research scholars on
the airlines, aviation industry or any of the companies in the past will utilize for the current
assignment (Cerri, Thøgersen&Testa, 2019). In this review, an investigator emphasizes a
highlight of the important areas of discussion in justifying the performance of these
companies. The main motive of an examiner is to determine the future reactions of the market
for which the market structure of both the company is observed. Current and future goals
developed to accomplish the same in a given timeline (Campos, Mendes, Valle & Scott,
2018). Some of the parameters used in analysing the growth of the airlines are the elasticity
of income, value addition to the business and the occupancy of the plans of an entity.

11 It is essential to strengthening the current plans of the airlines as an entity utilizes its existing
plans to move ahead in the future.
Air India and Air China Marker Structure
As per recent article, the image of Air India is portraying as a loss making unit. This article
shows that Air India has no reason to exist in the market as they are suffering from losses in
its domestic market. Growth of Air India is nil as the government support this entity by
investing 2800 crore in this airline. Apart from that, the earning of Air India from all of its
sources are 403 crores in two financial periods. Air India captures 12.4% of the domestic
market without showing any changes in its performance. The airlines have 12.4% of the
market share in the last month and 14.8% in previous years. However, having 16.55% in the
global market (, 2018). Indian economy invites majority of the tourists from its rival country
china as this move gets succeeded when 253128 tourists arrived from China.
However, the prime minister of India interacts with the president of China to flourishes the
trade among the countries as these meetings is about in creating new opportunities about the
tourism and the culture in the countries. Aviation industry of India is showing increment from
one period to another as the revenue passenger kilometre for the national airline that rises to
18.7% in the previous period. Aim of this airline is to be on atop position by achieving its aim
of considering the third-largest aviation market in the world till 2020. Aim to increase the
fleet size to 800 aircraft in the year 2020.
As per the study of (Market structure of Air China, 2018), Air China is world recognized
airline having 110 million of travellers in all across the world. This is a very recognized
airline in front of the people due to its 425 active aircraft satisfying the higher expectations of
the customers. The services of these airlines spread in the 42+ countries in the world,
capturing 180+ airports in 2018 show the efficiency of this entity. The entity lists itself with
the Hong Kong stock exchange to get the fruitful results of the stock market as the current
market capitalization of the enterprise is 13.87 billion is a result of this action. The
success of an airline depends on the alliances formed by an entity with other string
businesses. In accordance with this principle, the airline enters into an agreement with the
premium airline in 2007. These airlines provide premium services to cater to the needs of its
users throughout 193 countries and to 131+ locations. Moreover, the aviation market of
China enjoys the topmost position as compare to its rivals due to the quality of the services
offers to its users. The vision of Air China is to consider the largest aviation market by the
end of 2022 and enjoys a higher share in the world.
For comparing the annual growth and the performance of the airlines, it is essential to assess
the reactions of the entire aviation industry. However, India and China is compared with each
other to get a glimpse of two country’s aviation industry in explaining the positioning in their
own economies.

11 Demand factors and Income elasticity
The researcher explains the important concept of economics that is microeconomic concept
of income elasticity of demand. This concept helps in describing the market demand of Air
India and Air china. This approach helps in analysing the ratio of changes takes places
between the income and the market demand of the flights. An examiner describes the effect
of the fluctuations in the market demand on booking flights in the airline as this gets deviates
with the changes in their income of a user. An entity owner needs to consider some of the
factors before crafting the pricing strategy for its products. This is essential to detect in
advance about the effect of one sector on another and also resolves the problem faces by the
society.
As per the study of (Dana and Greenfield, 2019, pp.1-17), some of the factors held
responsible for changing the demand in the market are competition, preferences of travellers,
price of substitute goods in the market, trends in the aviation market, fashion in the market
and the expectations of the customers. It is mandatory for Air India and Air China to consider
all the factors that holds responsible for bringing changes in the selling price of its products.
Innovation in the market is introduces by an entity to get rid of excess competition in the
market and also to beat its rivals. Needs and desires of the customers are considered before
creating the services. An entity offer ancillary services to its users in meeting the increasing
tastes and the preferences of the customers. Amenities such as rest room, pubs or cafes, relief
in the cancelling and refund, baggage services will lure the attention of the users.
These will consider as a strategic action to increase the image of an entity among its users
which, in turn, suppresses the effect of the competition in the entire industry. A user always
looking for an airline which fulfils its demands and offer final product in an affordable range.
However, an entity observed the changes take places in the income level of the customers in
deciding the prices accordingly to increase its sales. Classes such as economy, first and
business class are offered to the airline owner to its customers. There is a direct relationship
between the interest and the income as increase in income will result in the interest and
decrease in income will decrease its interest. The prices decided by an entity by considering
this methodology to boost its sales from one period to another.
An airline updates the list of the products or services by introducing innovation in its
services to steal the attention of the customers. This enhances the travelling experience of a
passenger before boarding a flight as they get virtual experience of boarding a flight to

11 increase the sales. The user’s gets assurance about the services offered to them by the airlines
as they get to know everything using the virtual simulation. Basic thing require by every user
while boarding a flight is to get comfort. This will act as an innovative way to create loyal
and trustworthy customers and maintain positive relationships with them. This will also
decreases the complaint ratio of the customers after barding their flights as they assured about
the services before travelling. Important elements consider by an entity is the satisfaction of
the customer to survive for a more period in the service industry (Ramanust, Punluekdej, and
Nakvichien, 2018). An entity introduces lounge services for the travellers to relax in the area
as this maintains a positive relationship with the current and the potential users.
Fleet Size and Capacity of Airlines
Fleet is a common term showing the group of aircrafts held by two of the airlines such
as Air India and Air China. These entities operate its businesses in a same industry to cater
the needs of its users. The fleet size of Air China is better than its rivals as air china consists
no obsolete aircrafts in comparison to its opponent. Air china consists of 425 aircrafts in a
good condition while the fleet size of Air India consists of only 140.
Strength of an airline reflects in the number of aircrafts which is require in creating different
sources of generating revenues to cover up all the costs and the expenses. Currently, 124
aircraft held by Air India without considering its subsidiary companies under this head. The
details of fleet of this airline are 22 Airbuses comprises of A319, 320 and 321 which are
revenue-generating units for Air India. Airline is facing a situation of losses from the past 10
years which require improvement by increasing the aircrafts. Obsolete aircrafts of an airline
increases the losses faced by this entity and also denotes poor operation management. 4
aircrafts out of 34 are not working as they are not under the operation stage and do not
generate revenues. Air China delivers its first flight service through its Airbus A350-900
having a capacity of 312 seats including 32 business, 24 premium economy and 256
economies.
First Air bus introduces by airlines would generate positive outcomes of all the customers
(Rott et al., 2018). Consequently, airbus of Air India starts its Airbus 321 with 170 economy
seats and 12 businesses having an occupancy ratio of 80%. The occupancy ratio of its Airbus
is less than its rivals.

11 ICP launches long term fleet expansion plan for this company to meet the deficiency of the
occupancy proportion of its national airlines. Rivals of this business have higher occupancy
ratios to beat this airline. In overcoming this threat, the business operates 350 daily flights on
the domestic routes to overcome the effect of its competitors. The market share of the
business gets decreases from 19.8%to 11.8%.
Good thing about this airline is the built image of this airline which is working in eradicating
the worst performance of the airline. This airline covers majority of the destinations in all
across the world to generate revenues in overcoming its past losses. This entity covered 201
destinations in the world to maintain its position in the external market. These strategic
actions of the airlines will further help an entity in maintaining its current position in the
market. The capacity of an entity will get increases with the passage of time as this gibes
enough fight to India which is depriving in seeking the trust of its customers.
Human resource and corporate benefit for the airlines
Important factor affecting the present and the future performance are proper management of
the human resource department of the airlines. Air India and Air china’s HR department
reflect its strengths or weaknesses as this department handles the recruitment of an entity
which, in turn, makes the future of the business. Losses and the wound up witness by Aitr
India due to inefficient employees appointed by the HR department of the airline as HR
manager do not understand the need of the market and just appoints the employees just tyo
fill the vacancy. On another hand, Air china’s HR sector is quite better than the HR
department of this Airlie as they hire personnel according to the roles which hold a reason of
the flourishing of their business.
According to, (Halpern and Graham, 2018), corporate benefit is offered to the customers
according to their needs and the expectations. A traveller gets all kinds of services according
to the prices paid by them for the flights. Loyalty programs introduce by an entity in the form
of discounts and the rewards schemes to lure the attention of its travellers. Corporate benefit
says that a passenger traveller for a business purpose gets more benefit as compare to the
benefits getting as a regular or seasonal traveller. From the past ten years, Air India is
suffering from losses due to which the corporate benefit provides by an entity to its users are
not good.

11 Cost Factors
Cost is considering as an important element for every airline so as prominent for both these
companies to raft its strategies by considering these. Air India and Air china considers
indirect costs majorly in its costing when they imports any pats of the aircrafts from other
country that increases the budget of the airlines whose results reflects in the final prices of the
tickets. The cost of staffing gets increases when the airlines decide to introduce fresh talent in
its business to handle the operations and boost its performance. All these factors will help the
airline owner of these two companies in determining the price of their flight ticket to beat its
competitor by gaining a higher share over its competitors. Aim and motto of both the
companies are to minimise the costs and maximise the final output generated by selling its
services.
Economic value addition will help in assessing the worth or the efficiency of the
airlines in this study. Current approach will aid in identifying the economic profit earns by an
entity and also to assess the return earned by an entity in comparison to the shares held in the
business. As per EVA concept, the performance of Air India is not favourable as the
company is struggling to meet its primary goals as there is no return the firm is producing as
many money pumps in this business to give financial support. On the contrary to this, Air
China's earnings are high as the company is effort is seamless. The economic profit and the
return earned by an entity in comparison to the shares held by the shareholders are higher to
show its performance. The current concept assesses an entity’s performance using various
parameters such as checking the market value-added. The current position of an entity is to
compare with the reactions of the external market to see to what extent the external
environment will affect an entity’s performance.
The Air India’s situation of losses is due to the debt of the company as to pay off to the
industry as it is very high which needs to be paid off by the company to stabilise its position
in the market. The debt which an airline has to be pay to the aviation industry is 9000 cr INR
for the financial the year 2020 as till this year the airline has to repay this amount otherwise,
its survival in the industry is of no use. However, the company is not generating revenues to
meet up this cost as continuously the airline is suffering from losses which are not a good
thing as this need to improve (O’Connell, 2018). The researcher analyses the recent study
about industry performances and compares the overall performance. The airlines covering in
then identify that after the shutting up of jet airways. Air India is considered a second airline

11 to get shut who are able to meet the debts of the industry and regain its market position as
currently, the airline is struggling to meet its underlying revenues as all of their aircraft is not
operating correctly due to which no return or less return is generating in comparison to other
airlines. While in comparison to Air China. The performance of this airline is better as
globally Air India performs well as their performance rate is 16.55%, which is very high as
compared to the domestic flights. As well as the importance of Union loggerhead is very high
in running the business functions smoothly as any labour strike will directly affect the
business functions, which will further result in business losses. With the decreasing financial
condition of Air India, new wage policies introduce by the airline, so all their pilots come on
protests when they do not get the deserving salary as this protest affects the performance of
the airline.
Notwithstanding, the performance of Air China is excellent as the debt of the
company on the industry is not very high as the revenue generation model of an entity is very
high which need not requires an entity in taking debt from the industry. The market
positioning of an entity is high due to its assets as the assets of this airline that is all of their
aircraft generate enough revenue to cover up all the costs and debt imposed on the business
(Parise, 2018). The debt to equity and asset turnover ratio of Air India is less as compared to
Air China as the performance of the company that how an entity utilises its strengths in
meeting the burden of debt imposed on it. Furthermore, the pressures of the loggerhead, the
company’s operating expenses increased by 12.5% every year, which is not fruitful for their
better performance (Wings, 2017).
Additionally, unpredicted crowded air traffic can pose a significant threat for both the airline
as their business gets affected when due to increasing air traffic; the flights of the airline
companies get cancelled which leads to dissatisfaction among its customers who will shift to
other airlines (Aremu and Duyile, 2018). In meeting their needs and desires, it is essential for
them to watch the actions of the aviation industries in the present period to avoid any future
loss
Revenue and Expenditure
The airline emphasises on some of the centre of attraction areas in improving its performance
are reducing the tax legally to show improved earnings statements. In result of this, the
efficiency of an entity get also improves to showcase its skills in front of the people. In an
area, it can state in the working of Air China, there was an increase in revenue, which was