Organizational Learning, Operating Costs and Airline Consolidation Policy in the Chinese Airline Industry

The impact of organizational learning upon an organization’s performance has been an important topic of organizational studies and management practice, as many prior studies have argued that organizational learning can affect and
improve the performance of an organization, such as new product development (creativity and innovation) and the creation of a learning culture within the organization (e.g. Murray and Donegan, 2003; Yeo, 2003). Researchers have defined organizational learning in many different ways. Firstly, organizational learning is defined as “a dynamic process of creation, acquisition, and
integration of knowledge aimed at the development of resources and capabilities that contribute to better organizational performance” (López, Peón and Ordás, 2005, p.228). Secondly, organizational learning occurs as an organization
acquires experience (Argote, 2011; Argote and Miron-Spektor, 2011). For example, an organization’s experience can be obtained from experience of success and failure or the past (Kim, Kim and Miner, 2009). In this respect, organizations like airlines are also seen to learn from prior experience of accidents and incidents in improving flight safety (Haunschild and Sullivan,
2002). Apart from prior experience, there are other factors that may also affect the phenomenon of organizational learning throughout the learning curve, such as pre-production planning activities, time, employee training and selection (Chambers and Johnston, 2000). The conceptual arguments for the impact of organizational learning on an organization’s performance (e.g. airline performance) sound rather convincing; however, the important impact of organizational learning upon an airline’s performance during and after the
completion of mergers and acquisitions has received limited attention in the aviation literature. Therefore, this paper aims to address the abovementioned issue by empirically examining whether airlines can improve their performance in the context of mergers and acquisitions. In this study, our empirical investigation will focus on the Chinese airline industry, which has seen an
exhibited extensive level of horizontal merger and acquisition activities between 2001 and 2010. The recent development of the Chinese airline industry (mergers and acquisitions) is discussed in Sections 2 and 3. The Chinese airline industry is tightly regulated by the Civil Aviation Administration of China (CAAC), which has directed the major structural reforms of the Chinese airline industry. One of the key reforms was the CAAC initiated the airline consolidation policy of airline mergers and acquisitions in 2001/02 and 2010. The landscape of the Chinese airline industry has substantially been changed after the CAAC’s initiatives. With this, this study will also review whether the airline consolidation policy initiated
by the CAAC has improved the organizational learning and the performance of Chinese airlines after airline mergers or acquisitions.