E-COMMERCE AT

YUNNAN LUCKY AIR

GROUP 1
MELINDA WALSH
KRISHA MAE P. PARANGUE
MARY JOY A. DANDAL
 INTRODUCTION
Lucky Air is a chinese low-cost carrier based in Kunming the capital of
Southwestern China’s Yunnan province. Yunnan was one of the China’s
top tourist destination. Founded in 2004. It is owned by Hainan airline’s
group (Parent Company). The Carrier operates domestic service with
narrow body equipment from its main base at Kunming Changshui
International airport. Lucky Air was started with initial capital of U.S $2.2
Million and within 4 years the operating revenue was U.S $104.3 Million.

Lucky Air got a huge lead in year 2007 as

the no. of internet users were increasing
rapidly. This led a boom in IT industry and
e-commerce industry.
 BACKGROUND
Yunnan Lucky Airline’s main concern was low-cost carrier strategy,
but by considering monopoly and its Parent company support they
successfully established themselves as one of the major player in airline
industry in China. Problems of the airline industry in China was heavily
regulated, intensified competition, the cost of fuel,landing fees, aircraft
leasing and taxes, Commision to travel agents (2-5%) and less
transaction security online websites and absence of customers reviews.
 EVALUATION OF THE CASE
Lucky Air using a single type of aircraft, it reduced maintenance and operational
complexity, it offered only one seat class-coach and simple one way pricing, no
seat assignments or inflight entertainment. Most of its routes were short haul and
point to point to increase on-time departure and arrival. It operated mostly in
secondary cities to avoid congestion and reduced landing cost. However unlike
low-cost airline in United States and Europe that could achievea roughly 30%
cost advantage. Lucky Air’s cost structure was only about 5% lower than the
industry average mostly due to government-imposed constraints.
Lucky Air’s four largest cost components:
 Fuel
 Landing fees
 Aircraft leasing
 Taxes
 It comprised about 70% of its operating cost, yet these costs
were heavily influenced by government regulations.
SWOT ANALYSIS
STRENGTH WEAKNESS
Rapid Growth of technological Government Restrictions
industry gives the company a Low access to internet
competitive advantage More Participation in another
Successful Existing Infrastructure countries
and low cost of operations
Communication for customers
enables success
only in some countries
One of the most Profitable
airlines that achieved
profitability three years it was
founded
Has IT operations which leads to
efficient operational matters that
result in low cost hence having
low fare with great values
SWOT ANALYSIS CONT….
OPPORTUNITIES
Chinese Technological boom will
guarantee growth of online
market
Online payment presence makes
it easier for fast and efficient
booking
Entering a new market and
developing a new way to see
this business
Increasing the market share by
doing new promotion
THREATS
External users will expand into
this market
Cyber threats to company and
users will increase
China Government Regulations
Limited inflight services to
customers
PESTLE ANALYSIS
POLITICAL
Legal framework for contract
enforcement
Political stability and
importance of major airlines
sector in the country’s economy
Trade Regulations and Tariffs
related to services
Taxation – tax rates and
incentives
ECONOMIC
Government intervention in the
free market and related services
Infrastructure quality in Major
Airlines Industry
Type of economic system in
countries of operation. What
type of economic system there
is and how stable it is
PESTLE ANALYSIS CONT……
SOCIAL
 Demographics and skill level of
the population
Class Structure, hierarchy, and
power structure in the society
Culture
 LEGAL
 Copyright, patents/Intellectual
property law
Consumer Protection and E-
Commerce
Employment Law
Health and Safety Law
TECHNOLOGICAL
Recent technological
developments by Lucky Airlines
Company Limited competitors
Technology impact on product
offering
ENVIRONMENTAL
Weather
 Climate Change
 Air and Water Pollution
Regulations in Major Airlines
Industry
Business Model
Key Partners Value Propositions
 Internal Stakeholders  High efficiency of use of avia
 External Stakeholders  Low prices, no frills
 Hainan Airlines  Prompt response to customer request
 Yunnan Government  Delivery Directly to the Destination (without
 Airline Ticket Distribution System transit airports) which reduces the cost of
Key Activities the ticket
 Airlines  Flexible Distribution System
 Online Services Customer Relationship
 Ticketing Services  Personnel/ Employee are properly oriented
 Airlines Regular Disinfection how to build Professional customer
Key Resources relationship.
 Employees  Channels
 Stakeholders  Technology Advancement(Online Platforms)
 Capital  Friends and Connections
BUSINESS MODEL CONT….

Customer Segments  Revenue Streams

 U.S and European Airlines  Sales from the business
 Corporate Travellers
 Students

Cost Structure
 Fuel
 Landing Fees
 Aircraft Leasing
 Legal Documents
 Maintenance & Repairation
 Salaries of Personnel
 Income Tax
 PROPOSED SOLUTION/CHANGES
 Since Yunnan Province in China is a
tourist destination, luckyair can
diversify its products and services by
having partnership agreement with
travel agencies and hotels within the
area to achieve stability of profit and
avoid dependence in one product line.
Luckyair may create a partnership or contract
to an insurance company and they can include
travel insurance as an option on their
luckyair.net application. If a customer wants to
avail it, it will be included on the total amount
of their billing statement. Cebu Pacific and
other airline companies has been including
travel insurance since there are number of
things can go wrong while travelling. Recently,
Ted Cordero of GMA news reported that
Budget carrier Cebu Pacific said on Wednesday
that it has upgraded its travel insurance
product to include COVID-19 coverage to boost
travel confidence amid the pandemic.
PROPOSED SOLUTION/CHANGES CONT……
 Maintaining its low airfare price. Due to aggressive airline
competition, luckyair should maintain its low cost airfare without
compromising profits and services to be offered.
 Improve Customer Services Relations. In order to have a quality
relationship with your customer, response promptly on their request
and queries. By doing so, they will feel that they are important and
this will leave a good impression to luckyair. By word of mouth or
through online platforms satisfied customers may lead potential
customers to luckyair.
 Root Cause of the Problem
Heavily Regulated Chinese Airline Industry
1. It leads to aggressive competition and price wars between existing
airline companies.
2. It contributes to a high operating cost of airline companies. 70% of
operating costs includes the following:
Fuel- China prohibits route optimization and to hedge oil price risk through
financial instruments that could be another way to reduce fuel expense.
Landing fees- late development of airline industry in china that most cities have
only one airport or even if there are more than one airport, landing fees are same
regardless of location and capacity.
Aircraft leasing- It was controlled by NDRC of republic of china. Airline expansion
could not exceed 35% per year, airlines were not allowed to lease aircraft directly
to its manufacturers, and small airlines were lower on the priority list. It hinders
lucky air to respond quickly to market demand and cannot temporarily increase in
capacity.
Taxes- chinese government taxes, strict pricing regulations, fees on agents and
china's ticket distribution system. China held a monopoly on the GDS or global
distribution system.
 RECOMMENDATIONS
 Luckyair.net has no option or feature to put feedback and reviews of
travelers on how they have enjoyed their travel. They should add an
additional feature on luckyair.net for customer reviews and feedback on
their experienced lucky air services whether negative or positive. This
additional feature will help lucky air to continuously improve their
services.
 Luckyair.net does not have a call center back end. This is an important
feature that travellers were looking for. In airasia, they have Ava and in
Cebu pacific, they have charlie. These chatbot quickly answer
frequently asked questions that you can communicate as long as you
have a stable internet connection.
RECOMMENDATIONS CONT….
 Luckyair should come up with a strategy to alleviate income loss during world crises like
Covid 19 pandemic we are facing today. In the Philippines, Cebupacific airlines continuously
earn even if air travel has fallen sharply due to shutting down of borders to avoid the spread
of pandemic. According to Alex Reyes, president and chief executive officer of Cebgo on Jan.
6,2021,“We saw this pandemic as an opportunity to recalibrate our business and optimize
operations to address the needs of our customers,There is a growing demand for cargo to and
from the Philippines and our fleet of dedicated cargo aircraft allows us to address this while
doing so in a more efficient manner.” Lucky air could also substitute its services from
transporting individuals to transport cargoes temporarily while individuals are cautious and
restricted to travel during this covid 19 pandemic or any crisis may occur. According to
chinadaily.com last december 15, 2020 at 13:47pm, there is a surge in cross border
ecommerce trade volume in yunnan. To meet the demand of the booming e-commerce in
China, luckyair could provide cargo shipment to an upgraded and efficient logistics.
RECOMMENDATIONS CONT….
 Like those of the airline industry in the Philippines, Luckyair.net could provide
an additional feature for online check-in for those in a hurry to save time on
long airport check in lines.
 Luckyair should also provide customer relationship management on its
application. This is an option where customers can express their feelings and
issues on their trip like delays on flight. This is also important to address the
issue promptly and to make an effective offer such as a future travel discount
on tickets. This feature will make your customer appreciate your airline's
assistance and may book travel again and again. This will strengthen
passengers' loyalty and will help airline services improve services.
RECOMMENDATIONS CONT….
 Due to China's growing and
improving internet population.
Lucky air can market themselves
through social media platforms and
televisions. Advertisement may be a
cost but luckyair can cut this off
once it has been promoted and
public awareness on the services
offered has been disseminated
drastically.
Lucky air should focus on targeting the
market of business enthusiast travelers
and try routes that will make lucky air
profitable since China is continuously
constructing more airports. Last October
28, 2021, Victoria Bryan of Aero time
hub reported that according to plans
released in Feb. 2021, China is aiming to
have 400 Civilian transport airports by
the end of 2035, or an increase of 150
compared with the number at the end of
2022.
 THANK YOU
AND
GOD BLESS EVERYONE