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China Southern Airline (Beijing branch) China Southern Beijing branch, which was built on July 1st, 2005, is located in Yuhua Road, Shunyi district, Beijing, it is one of subsidiaries of China Southern Company, which is the third largest airline company around the world. China Southern Beijing branch was basically responsible for cargo transporting, these years, however, amount of passengers has also been increasing. Terminal 2 of Beijing airport has a close relationship with Beijing branch, most of airplanes belongs to China Southern are taking off or landing inside the limits of jurisdiction of terminal 2.



Basic situation
As one of 16 branches of China Southern Airlines, Beijing branch, which was built up in 2005 that is located in Shunyi district of this city, plays its role on transportation of both cargo and passengers that carried by Airbus and Boeing aircrafts, includes serious of Boeing 737,747, 777 and 787, and Airbus 320, 330 and 380. For Beijing is the capital of China, airlines of Beijing Branch cover most of domestic provinces with their major cities, and its international airlines also contain destinations in all of five continents. As other 19 members of air companies, China Southern Airline is also part of Skyteam, which is an international alliance that provides its member companies with large amounts of airlines across the world. For its amount of passengers, China Southern company has been predicted that by year 2029, passenger volume will reach 14 billion, which contains almost half of Asians (47%) interiorly. Truth of increasing passengers domestically indicates the increasing profits of company, which is the reason why China Southern Beijing Branch will keep financial surplus during next decade.

Relations with Beijing airport and terminals
There is a close relationship between China Southern Beijing Branch and Beijing airport, which can be regulated by Beijing branch directly, especially the terminal 2 that has been established since 1999 and belongs to China Southern’s airplanes to take off and landing. Each day the records of airplane movements and volume of passengers belong to China Southern Beijing branch can be checked from statistics of terminals in Beijing airport. During the last decade in 20th century, the average growth rate of passengers, who boarded China southern airplanes and had been recorded by China southern Beijing branch, had reached 11.8%. Moreover, its growth rate of movements of airplanes have also reached 12.6% during this period.

History of developments
China Southern Beijing branch is a subsidiary of China Southern company, operating situations between them are similar to a certain extent. Process of founding and development of Beijing branch, however, cannot be explored without knowing deregulation and consolidation of China’s airlines last century. Before 1978, airplanes were not used for companies to make profits, civil aviation of China was totally controlled by Chinese government and militaries, passengers then were only public officials and government employees. At that time, the Civil Aviation Administration of China (CAAC), which is the predecessor of China Southern Beijing branch and other airline companies, was the monopolist of air transportation and being regulated by state directly. However, no profits but only costs mean absolutely loss. Since late 1970s, the opening-up reform policy has been executed in China, an objective was pointed out to transfer civil aviation to enterprises which can make profit. For this reason, from 1987 to 1991, six formal airline companies, includes China Southern airline company with its operations in Beijing, were built up. At almost the same time, the nature of airline companies has been changed from macro-control by government to self-sufficiency to their profits and losses. Without intervening of CAAC, much more routes have been set up by China Southern Beijing branch for the convenience of passengers from different cities. The records of China Southern Beijing branch in 2012 shows its amount of flights to different cities reached 54, which is two times more than 22 flights in 2004 when Beijing branch was just being set up. Nevertheless, though airline companies have gone through reform policy, they do not totally break away from control of government. Until the nearest decade, government of the People’s Republic of China still owns 49.7% of equity of China Southern Beijing branch, which is 1.96% lower than the figure of Air China.

Development of China Southern Beijing branch cannot be separated from politics. To establish China’s formal status in WTO, large amount of access has been permitted to enter markets which includes departments of agriculture, industry and services. In 2005, an industrial agreement which was signed with the U.S. has declined import tariff of America from 17% to almost 9.4%, and the limitation of imports had vanished before 2010. For airline companies which concentrate on services of both domestic and international markets, Beijing branch accessed an agreement with the U.S. in 1999, which was to stimulate the growth of airlines between China and America. Agreements of expanding domestic markets by strengthening cooperation with enterprises from overseas indicates the trend of liberalization in various industries in China. Since 1997, Hong Kong’s sovereignty has changed which has belonged to components of China again. The return of Hong Kong to China has resulted in appearance of much more efficient traffic routes between Hong Kong and Mainland China. For China Southern Beijing branch, many new routes depart from or arrive at Hong Kong have been opened since 1997. Moreover, as a transfer station between Mainland’s cities and destinations around the world, airport’s efficiency of transporting in Hong Kong has been largely increased, because its sovereignty has come back to China, transporting have not been at the mercy of tariff policies in U.K., and tedious process has been simplified because of that. During the last decade of 20th century, the vast majority of increasing profits of China Southern Beijing branch were earned from routes that relevant to American cities and Hong Kong, which is also benefit to government, not only because of larger amount of taxation, but also for the reason that nearly half of company’s share still belongs to government of China.

Costs and benefits
As many other airline companies, profit of China Southern Beijing branch is closely related to fuel prices. Oil has become the major expenditure of airline companies since 1980s, which occupied 30% to 33% of total cost at first, and its percentage has increased even larger during next several decades because other costs of operation has been decreased. In 2008, because of the financial crisis, the average oil price around the world was increased to 100 dollars per barrel (bbl), which is nearly four times of price in 2002. Meanwhile, China Southern Beijing branch got a negative marginal operating profit with its headquarter in 2008, which is the only negative result since the 21st century started. Sudden increase in oil price influenced the net profit of China Southern Beijing branch, which can be shown from statistics of pure technical efficiency, which decreased from 1.000 in 2008 to 0.816 in 2009, and also the scale efficiency, which declined from 1.000 in 2008 to 0.975 one year later. Figures between China Southern Beijing branch and its headquarter are identical, they have the same operating situation. In respect of gross total factor productivity index (TFP), however, there is a general increasing tendency in China Southern Beijing branch, especially during last decade, the TFP had increased from 0.51 in 2001 to 0.72 in 2010, though the index of real yield shows the opposite tendency during same period, which declined from 100 in 2000 to nearly 80 in 2008.

Status
Status of China Southern Beijing branch can be seen from how it has occupied with its headquarter in domestic and international market. With its competitors Air China and China Eastern, percentage of them had increased from 45% in 2000, to 66% in 2006 in domestic market. In international market, percentage of them had increased from 92% to 96%. Moreover, the world ranking of China Southern Beijing branch had increased from 38th in 2002 to 18th in 2008, which is also the same as its headquarter. Furthermore, from 2000 to 2008, average percentage of seats that was booked by passengers of China Southern Beijing branch had increased from 60% to almost 70%.

Services
Since the 21st century, competition between airline companies in China has become more intense, passengers can be attracted not only by cheaper tickets, but also by more considerate and comprehensive services. It is worth mentioning that satisfaction degree of services is proportional to passenger loyalty, which influences profits of airline companies directly. For China Southern Beijing branch, service performance is represented during process of both flying and baggage check-in. As the enterprise which joined the alliance of Skyteam firstly, China Southern has been assessed as “four stars” enterprise with its Beijing branch in Skyteam. Furthermore, service performance is relative to reputation of company, for this reason, managers of China Southern Beijing Branch need to check performances of flights and communicate with ground crew and flight attendants frequently. According to records which was resulted from California Association of Professors of Special Education (CAPSE) that focus on overall reputation of airline companies, China Southern was ranked at No. 6 with its Beijing branch.

Safety degree & risk tolerance
There is an inverse relationship between safety degree and tolerance of risk, higher risk tolerance indicates lower safety guarantee of performance during flights. According to statistics of risk tolerance which was gathered from 118 pilots, who work in China Southern Beijing branch and headquarter, items’ number which concentrates on system risks of aircraft was 3.25 on average, risks of operation error was 4.49 on average, in addition, risk that caused by weather had an average items of 4.26.

Problems and complaints
As statistics collected and analysed by CAAC during last decade, a positive relationship has been indicated between complaints of customers and degree of problems such as delays and deviation of flight information. For China Southern Beijing branch, it had an average rate of 37.59% that caused by delaying, which can be recognized as the major problem as almost same as rate of China Eastern Company which is its competitor as well. Furthermore, problems of baggage and ticketing have been considered as another major source of complaint. China Southern Beijing branch has been researched with China Eastern and Air China together, which showed the result that nearly one over five of complaints come from baggage check-in and ticket problems. For passenger services of Beijing branch, however, there was a much lower rate of complaints comparing with problems above, which was 7.36% in 2010.

Competition with low-cost airline company
Competitors of China Southern Beijing Branch are not restricted to major airlines such as China Eastern and Air China, development of cheap airlines facilitates more intense competition. In 2006, the Spring Airline had only less than 13 routes that depart from or arrive at Beijing airport, in 2011, however, amount of its routes had been increased to 60. Furthermore, for China Southern Beijing branch, there is a conspicuous disadvantage of cost comparing with spring airline. According to records in 2011, for Beijing branch, cost of fuel per unit is 0.216, which was 0.05 lower than the Spring Airline. Depreciation per unit, however, was 0.082 for Beijing branch, which was 0.028 higher than spring airline. Lower costs represents cheaper tickets, which is preferred by tour groups that purchase large amounts of tickets for a time. During last decade, amount of tourists in groups had declined a half according to research of China Southern Beijing branch, and the major reason why they did not choose China Southern was its higher price of ticket.

Future trends
For future, China Southern Beijing branch will focus on cargo transporting, which is related to regulation of Beijing international airport with its terminals. Profits or loss of Beijing branch is closely tied to headquarter, which concentrates on transporting passengers. Though the future operating situation of Beijing branch cannot be estimated accurately, one thing that can be ascertained is that there will be adjustments of management methods and price of airline tickets, which will be adjusted in order to adapt international market and own more advantages compare with other airline companies.