E-Commerce at Yunnan Lucky Air

5422 Words Nov 13th, 2010 22 Pages
08-076 August 11, 2008

E-commerce at Yunnan Lucky Air
Inaki Berenguer, Cai Shijun, Li Liang, Liu Jing, Ningya Wang

Preserve the essence of traditional Chinese culture while learning from successful models of the world. - Yunnan Lucky Air, statement of corporate culture Fortune had favored Yunnan Lucky Air. Four years after its founding in 2004, Lucky Air had grown into a US$104.3 million (RMB720 million) low-cost airline, serving domestic routes from its hub in Kunming, the capital of southwestern China’s Yunnan province. Yunnan was one of China’s top tourist destinations, famous for its beautiful landscape and multi-ethnic culture, and Lucky Air had successfully attracted over 1.2 million Yunnan-area travelers in 2007 alone – more
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A wave of new low-cost airlines had emerged, making domestic travel more affordable for everyone. Analysts estimated that about 780 routes were appropriate for low-cost flights, based on route popularity, trip length, and similar factors, and that by 2013 25% of passengers would be carried by low-cost airlines with a projected growth rate of 20% per annum.1 The growth potential attracted many new entrants and intensified competition. Government regulations restricted airlines’ ability to reduce ticket prices, yet the sheer abundance of low-cost airlines pressured each to lower its ticket prices as much as possible. Some airlines opted to expand beyond offering flights alone. Spring Airlines, launched in 2005 and based in Shanghai, flew to 23 destinations within China and had achieved US$72 million in revenue and US$4.3 million in net profit by the end of 2006. The key to Spring’s growth strategy had been the decision to pursue the large Shanghai tourist trade by offering discounted tour packages. By bundling with hotels and other travel services, Spring was able to offer a fare 34% lower than average market price. Company History Lucky Air was founded in 2004 with an initial capitalization of US$2.2 million (RMB15 million). As one of China’s most popular domestic tourist destinations, Yunnan province was seeing significant growth in the number of tourists. Between 2007 and 2008, the number of projected arrivals was predicted to

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