The Strategy of Brand Building

ESTABLISH A BRAND IMAGE THROUGH QUALITY

A SENSE OF MISSION BOOSTS BRAND BUILDING

PASSENGER OPINION CANNOT BE NEGLECTED

FOUR HEARTS SERVICE: FIRST MOVER OF AIR CHINA BRAND

CORPORATE CULTURE IS FUNDAMENTAL FOR A BRAND

PROFIT MAKING UNDERLIES A BRAND

AN INTERNATIONAL BRAND: THE ULTIMATE DREAM OF AIR CHINA

ESTABLISH A BRAND IMAGE THROUGH QUALITY

What is corporate pin pai (a Chinese term that means brand)? Pin pai consists of two elements: quality (pin) and brand name (pai). A brand is the reflection of a company’s internal quality through its external brand name. That is to say, quality is the content while brand name is the form. In order to build a brand, a company must first build its internal quality. Otherwise, it would be like putting the cart before the horse.

The relationship between quality (pin) and brand name (pai) reflects the dialectical relationship between two important philosophical concepts—content and form. Sun Wukong¹ can transform himself into 72 different kinds of objects, which may appear to be a dazzling

¹ Sun Wukong, also known as Qi Tian Da Sheng (Great Sage Equaling Heaven) and Mei Hou Wang (Handsome Monkey King,) a character in Journey to the West written by Wu Cheng’en in the Ming dynasty.

display. Yet, no matter how much he transforms himself, his content and the essence are still the same. Thus, glossy and sophisticated as such exterior representations of a company as brand name, advertisement, and CI designs are, they all reflect the quality of a product and even the company itself in a fundamental way.

Corporate competition in the 21st century revolves principally around brands, talented people, and culture. The importance of branding can be proven by three major events in the recent development of Air China. At the end of 2004, before the road show of the issuing of our H-share, the “China Aviation Oil (Singapore) Incident” and the “Skyworth Incident” came to light, one after the other. As a result, international capital markets became very cautious about Chinese aviation companies. Faced with the adverse circumstances, Air China still successfully issued its H-share and was listed in both Hong Kong and London, raising as much as RMB 10.2 billion, outstripping any other airline listed over the previous 20 years. Later, Air China successfully joined Star Alliance, implementing an equity swap with Cathay Pacific Airways. Star Alliance is the biggest airline alliance in the world, and Cathay Pacific Airways is one of the world’s most famous airlines. The fact that Air China could successfully reach an agreement with them was rooted in a host of factors, including the development prospects of the Chinese economy and the improvement of Air China’s strength and brand. Currently, more than 70 percent of Air China’s passengers are business passengers. Air China has become the first choice for many government and business passengers. Branding has increasingly become Air China’s competitive edge, paving the way for its further development.

A SENSE OF MISSION BOOSTS BRAND BUILDING

It has been years since Air China began to implement its brand strategy in the real sense. In practice, Air China’s understanding of branding gradually improved and deepened, and shifted its focus from external form toward a careful building of its internal quality. The present corporate identity of Air China consists of a red Phoenix, the Chinese name of Air China written by Deng Xiaoping, and the English words, “AIR CHINA.” According to the Chinese classic Shan Hai Jing (Classic of the Mountains and Seas), the phoenix was born in an oriental country of gentlemen, flew over the great Kunlun Mountains, and soared above the oceans, bringing good fortune and peace wherever she went. We hope that every time passengers of Air China see a phoenix, they will immediately think of the “safe, prestigious, warm, and auspicious” service provided by Air China, and recognize Air China’s corporate culture, which is aptly summed up by the phrase, “Be the most perfect and the kindest, be the best of the best”

Just an artistic logo is not enough for brand building. The vitality of a brand comes from the long-term practices of a company. A large major enterprise like Air China should have the sense of mission and responsibility required of an international organization. Apart from its daily business of passenger and cargo transportation, Air China also shoulders the task of transporting, with special airplanes, party and state leaders visiting foreign countries, as well as those foreign leaders who visit China. This has helped boost its brand.

For some time now, we have been working hard to strengthen the sense of mission and responsibility among Air China’s employees, so that they can motivate us to aspire toward higher standards in our work. In regard to the building and maintenance of a national image, Air China has been like a window. In security guarantees and the promotion of industry development, it has been like a backbone. In serving the reform and opening-up of the nation and the development of the national economy, Air China has been like a spur, with its rapid development. Over the past few years, Air China has maintained an annual average complex index increase of 16–18 percent, with its profit growing annually by multiples, turning it into a globally recognized airline.

Throughout these years, Air China has gained a better understanding of brand building and implemented corresponding measures. In the coming ten years, Air China will stand a chance of becoming a world-famous brand. That is why emphasis has always been placed on brand building, and these efforts have already paid off since Air China’s reorganization in 2002. Right now, Air China has established its competitive edge in branding in the domestic civil aviation industry, and has enhanced its position as an industry leader.

Based on the evaluation of some world professional institutions, Air China ranks 14th among the 265 IATA airlines in terms of overall strength, and has made its way into the World’s 500 Most Influential Brands, which includes only 12 Chinese enterprises. By 2010, Air China will have developed into a major airline that is able to compete with the world’s major carriers and that is well respected by mainstream passengers. Its total air transportation turnover volume will be close to 12 billion tonkilometers, making it one of the top ten world airlines. With such a strategic development goal in place, brand building and brand strategy will continue to remain high on Air China’s strategic agenda.

PASSENGER OPINION CANNOT BE NEGLECTED

If a brand is an iceberg, then what people see in the brand—that which reveals itself after positioning, integration, and publication— is just the tip. The core of the brand is hidden under water. As a corporate manager and captain of your ship, if you only focus your vision and thinking on the tip, you will be in danger of crashing into the part of the iceberg hidden beneath the water.

Air China is a service-type corporation, and passengers and cargo owners usually get to know its brand through the services it provides. Therefore, service quality is fundamental to the brand’s survival and development.

However, as airline service has the character of being direct and face-to-face, this can be hard to handle. This is why the managers constantly remind themselves that they should guide all employees to better understand the meaning and significance of service.

To build a corporate service brand, you have to be good at listening to what passengers are saying. A letter from a journalist triggered Air China’s intense focus on service quality and the implementation of “The Year of Good Service.” The letter is copied below:

Dear Chairman Li:

I am a loyal, long-time Air China Silver Card member, and hold high expectations for Air China. Also, as the official airline representing the nation, especially as a partner of the 2008 Beijing Olympic Games, Air China boasts an image widely respected and admired. However, on the day of January 7, 2007, the service quality of Air China made me feel very disappointed. The wonderful image that has been built up in my heart for years was largely discounted, making me deeply worried.

It came about like this. Two days ago, I dialed 400810199 and booked a return air ticket from Beijing to Chongqing, departing at 17:50pm of January 7 (CA4142), and returning from Chongqing to Beijing on January 9 (CA4141). At 16:30 on January 7, I arrived at the Air China ticket selling window to print out the ticket. To my surprise, I found that my surname 徐 (Xú) was falsely printed as 许 (Xŭ). It should be noted that this was the third time I had booked tickets with Air China. There had been nothing wrong the previous times, so why should there be a mistake this time?

It wouldn’t have mattered if the falsely printed tickets could have been rectified. I pointed this out to the booking clerk. To my surprise, he answered coldly, “I cannot change it. You should have got it changed when you booked the ticket.” “But I booked the ticket at an Air China’s booking office! I can give you the telephone number of that office. After all, it is Air China’s booking office, and you all work for the same airline. Can’t you just check this with them?” What I meant was that Air China should resolve the problems through internal communication and that it should not involve the passengers. But what I heard was still a cold “no.”

Helplessly, I called the booking office and was told that they would get back to me in five minutes. Five minutes passed. Fifteen minutes passed, but no reply came. I had to go to Air China’s duty counter to ask the duty manager to dial 400810199. Operator No. 67 said that my case was being dealt with, and I would be informed of the result soon. I waited another ten minutes for the result that was supposed to come to me soon. The check-in counter was about to be closed. The duty manager contacted the booking office from time to time while consoling me. At 17:20, the reply from the booking office finally came, saying, “the discount tickets cannot be reprinted.”

What the hell is this policy? Who caused this mistake? Words suddenly failed me as I looked at the worried duty manager.

To err is human. One mistake is not everything. But as a partner of the 2008 Beijing Olympic Games, Air China should not have made an irritating mistake such as this. It revealed at least three big problems. First, employees do not have any sense of respect for their company. They risked the reputation and brand image that Air China has been building up over many years. This is how a single incident and a single person can ruin a whole enterprise and its brand. Second is the lack of a team spirit. Employees only focus on their own work instead of supporting and cooperating with one another. Third, the employees were not professional and service standards were very low. I am a frequent customer who has booked tickets three times, but my name was still falsely typed. Where is the employees’ sense of professionalism? What happened to those who were supposed to be in charge of service quality control?

As the year 2008 is approaching, how can you, Air China, serve the Olympic Games and win glory for our country? Service quality, brand building, winning glory for our country … these cannot be achieved through mere lip service. Nor can these be achieved through money or short-term enthusiasm.

Air China, I feel ashamed and worried about your work style and attitude!

The passenger’s complaint was about a specific service problem, but it was more about problems to do with management in a fundamental sense. The important thing was to strengthen the service awareness of all employees and improve their professional competence. Therefore, I requested the corporate magazine China Air to publish the letter in full. At the same time, I wrote an open letter to all Air China employees:

Dear Editor of China Air,

I have enclosed here a letter from a passenger for you. I hope this letter will be published in full.

We always say that in order to improve the executive power of front-line employees, we should first improve their problem-solving ability.

Our front-line employees are the true face of Air China. The face they present to our passengers represents Air China’s image. The brand of Air China is built through their faces. We Chinese attach great importance to “face,” so how can we make the face of Air China more beautiful and attractive?

I hope China Air will publish this complaint, in order to initiate a discussion and improve our work, so as to ensure that Air China appears in front of our customers with a better-looking face. I’d also like to suggest that China Air start a dedicated column for publishing letters of criticism as well as of praise. (In the past, we only published letters of praise, which is of little use.)

The way to improve the executive power of front-line employees is through leadership. This improvement should be made through various comprehensive measures, such as education, training, encouragement, and regulations. Among these, a key issue would be for all employees to build a strong sense of ownership and feel a sense of being primarily responsible. Whoever is faced with a customer problem should take full responsibility for solving the problem. What can be solved must be solved immediately. What requires coordination must be actively coordinated. We must not leave our passengers running here and there to solve their own problems.

This year, the State-owned Assets Supervision and Administration Commission launched the “service quality year” campaign among central enterprises. As the only airline that carries a national flag during flights as well as being a window enterprise in the service industry, Air China should take the lead in this campaign.

I wish you all a happy new year, and through you, I wish every one in Air China a happy new year!

The two letters caused a storm among Air China employees. Later, special activities were held to reflect on service weaknesses and ways to eliminate them. Half a year later, Air China experienced an impressive improvement in service with the passenger complaint rate dropping dramatically. The customer satisfaction rate improved by 4.2 percent and the flight punctuality rate rose by 8.5 percent.

FOUR HEARTS SERVICE: FIRST MOVER OF AIR CHINA BRAND

In the past, service quality was always understood as simply being a manner of serving, which usually came in the form of a smile, especially in civil aviation. This understanding was shallow and incomplete. Serving with a smile is only a form, not the essence of service, and definitely not the whole of service. Service is a systematic undertaking that requires us to be fully prepared in many aspects.

In 2002, on the basis of a study of the needs of passengers and cargo owners for air transportation services, Air China launched a service project known as the Four Hearts project, focusing on four areas: trust, comfort, convenience, and satisfaction.²

Trust refers to the fact that Air China must make passengers and cargo owners feel safe and secure when they choose Air China. Based on the concept of “safety as the top priority, customer as the point of reference,” Air China sees security as something of primary importance in service.

² In Chinese, all these four terms end with the Chinese character of xin (heart).

Comfort means that we should guarantee the punctuality of flights and the smoothness of the whole service flow. Specifically, this is shown in the guaranteed smooth interconnection of every link of the service chain, so as to give passengers and cargo owners a sense of ease.

Convenience refers to making Air China passengers and cargo owners feel that the service provided is comfortable and enjoyable. In terms of facilities, convenience is reflected in a cozy environment, including comfortable seats, entertaining audio, video, and reading matter, as well as in delicious food. In terms of software, Air China should make our passengers and cargo owners feel comfortable, happy, and at ease.

Satisfaction refers to Air China’s satisfying the reasonable, individual demands of passengers and cargo owners, with a view to making them feel satisfied and impressed by the service provided. This is the highest level of service.

The Four Hearts service project concerns the service content and goals of Air China. It is not only the starting point of service, but also covers the whole process. The project requires Air China to pay greater attention to the potential needs of its customers, satisfy their practical demands, and become an airline that knows its customers better than the customers know themselves.

The service concept of an aviation company should not only reflect the demands of passengers, but should also cover all functions of the company, meaning that everyone should participate in it. For example, security covers functioning positions such as flight, airplane maintenance, dispatch, airplane operation control, and security. Comfort covers functioning departments such as selection of plane models, purchasing, catering, media, and comprehensive support. Convenience covers various links such as sales, terminals, capacity control, repair and maintenance, ground service, and flight scheduling. Satisfaction requires joint effort from all departments. In this way, the Four Hearts service links together all positions in Air China, and requires all employees in every position to faithfully play a part.

Analysis shows that, among all passenger complaints, those concerning flight delays outnumber all others. But what are the causes of flight delays? The CAAC lists 21 factors. Of the total number of delayed flights, 15.8 percent are caused by weather problems, 24.1 percent by flight flux control, 8 percent by airplane maintenance, and 32 percent by problems at the airport, joint inspection, and flight support. Clearly most flight delays are related to airlines. Air China inspected these factors one by one, so as to minimize the possibility and impact of flight delays.

Flight CA123 from Beijing to Seoul used to be a flight with frequent delays. Nearly every flight was delayed for at least 30 minutes. Air China’s airplane operation control department found that the flights of Asiana Airlines, which took off shortly after CA123, were seldom delayed. Further research by the same department unveiled a series of oversights on the part of Air China’s operations support department.

It turned out that the take-off time was not printed on the boarding pass. We all know that once passengers go through security inspection in the isolation area, they only need a boarding pass to board the plane. Without a clear indication of the take-off time on the pass, it is likely that passengers will forget about the time and so delay their boarding time.

Another finding revealed that check-in counters were closed too late. According to regulations, check-in counters should be closed 30 minutes before takeoff. However, the check-in counters for that particular flight used to close 15 minutes before departure. If passengers were to board the plane at that time, it would be impossible for the flight to take off on time.

The inspection process was complicated, resulting in overcrowded security inspection and border control passages. A passenger had to present his ticket or boarding pass as many as seven times, from arriving at the airport to boarding the plane. In the three time periods, respectively before breakfast, before lunch, and before supper, passengers for several flights crowded together. It took 30–60 minutes to go through the security inspection.

A lack of communication between cabin crew and ground staff could also result in flight delays in times of emergency. For instance, if the cabin crew did not check the number of boarding passengers with airport staff, incidents such as passenger numbers exceeding previous expectations or the inadequacy of food supplies might occur. If the cabin crew noticed low food supplies at this point, flight delay was inevitable.

Although flight delays have become a common scene in the domestic aviation industry, Air China has never relaxed its rules and regulations on this. Targeting the delay problem on Beijing to Seoul flights, Air China adopted a measure to resolve problems at every link of the production chain, which required the joint participation of all departments. Our goal was to reduce the cases of flight delay caused by us to 10 percent, or even less. To achieve this, Air China did not skimp on any investments in auxiliary facilities and service quality.

Air China established a base reserve airplane system that would reduce the possibility of flight delays due to airplane failure. After a man in the international aviation industry learned about this during his visit to Air China, he could not help but compliment us, “Air China has made such a huge investment to ensure the punctuality of flights! It is quite rare in the international aviation industry. It is really an admirable move.” The flight monitoring system, in which Air China invested a huge amount of capital, realized instant communication with flights within 3,000 kilometers, which effectively reduced aviation repair and maintenance time, and lowered the incidence of delayed flights.

At the same time, the Air China ground service department revised The Detailed Working Rules for Irregular Flights, requiring all supporting staff, vehicles, and equipment for arriving and departing flights to be ready at the appointed gate position for further orders five minutes before the landing of such flights. The operation control department self-designed a flight production data analysis software to measure and analyze the punctuality of flights, and worked out a Long-time Flight Delay Control Program to support a flight’s quick recovery to normal operation after a delay. The cabin service department put in place a system of rewards and punishments to ensure the punctuality of flights, and faithfully implemented the timely communication of information on joint and irregular flights. Every chief attendant, every flight, and every cabin service crewmember was required to follow security and punctuality rules and regulations. The repair and maintenance department formulated Analysis and Improvement Measures on Engineering Aviation Maintenance Causing Flight Irregularity. To ensure that passengers appreciated its caring and genuine service, Air China laid out Guiding Principles on Passenger Compensation for Flight Delays, requiring the service staff to explain in time points about the flight to passengers, provide them with food and drink, as well as information in cases of temporary delay, and to appropriately arrange boarding, traffic, compensation, and flight changes in cases of long-term delay.

Air China’s Trust project was based on substantial investment and persistent implementation. Over these years, Air China’s profit-making ability has continually increased, year after year. Air China’s investment in security was larger than in any other area. It has adopted a series of measures to upgrade and invest in its security systems, and employees training and security facilities.

To better understand something, we have to endeavor to explore its development rules. For an aviation company, flight security will be basically guaranteed if the pilot team, airplane repair and maintenance crew, and operation and dispatching crew are appropriately organized. In earlier years, as Air China mapped out its Outline of the Comprehensive Building of a Pilot Team, all departments endeavored to systematically solve the problems that would affect the development of this team. For example, a reward and punishment system for pilot training was established to pick out the good pilots and get rid of the bad ones. Income distribution was adjusted to favor captains, backbone pilots, and instructors. After reorganization in 2002, Air China revised its safety operations brochure to unify security management standards and data. These measures have been the basis of Air China’s efforts to strengthen security management.

Establishing a security guarantee system is essential to safe operations. Although aviation is the safest of all modes of transportation in terms of the traffic safety index, the economic losses and social impact caused by an aviation accident are the greatest. To ensure safety and build a brand, dependence on luck or oversight is not allowed. Over several years, Air China has invested more than RMB 10 billion to establish a world-class joint venture—AMECO—to provide repair and maintenance for Air China’s fleet. It also boasts the ability to serve international aviation companies, and repairs and maintains almost all models of Boeing and Airbus planes. Air China also invested more than RMB 1 billion to build an advanced pilot and cabin crew training center. The center is equipped with the most up-to-date training facilities and the strongest training capability. Through lease and resale, Air China eliminated 12 old planes in a row. Right now, the average plane age of Air China’s fleet is 7.5 years, which is considered “young,” compared to the fleets of other international airlines. The airplanes are all in good condition.

Just as it is easy to fall over while you are getting on and off a bike, so the security problems of airplanes mostly occur during take-off and landing. To improve the captains’ take-off and landing techniques, Air China established a pilot retraining base in Tianjin, and allocated two Boeing airplanes solely for training, even though the fleet was already stretched to its limit with a high demand. Two passenger airplanes could have brought in an annual income of almost RMB 400 million, and two airplanes would cost Air China more than RMB 100 million per year on fuel consumption and depreciation. This is a measure rarely adopted around the world. However, this measure had observable effects. In 2006, Air China’s accident and error rate was only 0.0012 percent, against 0.0049 percent for the Chinese civil aviation industry. What’s more, the establishment of the retraining center had enabled Air China to double its speed in pilot training. Air China also introduced a piloting quality monitoring system, at the cost of RMB 240 million, to record flight data on take-off, landing, and piloting. The data recorded was used to assess and grade pilots. The first thing a captain would do after he got back home from a flight was to turn on his computer to see his grade. The adoption of these new techniques and management measures has helped Air China achieve a transformation in security management, from relying on experience to taking scientific data as the basis.

Propelled by its robust profit, Air China was able to make a continuous investment in service facilities, and ensure the continuous achievement of its branding strategy. In May 2005, in order to improve competitiveness in international and domestic trunk air routes, and to further satisfy the demands of high-end passengers, Air China invested as much as RMB 688 million in an overall rebuilding of passenger cabin facilities. Models with rebuilt first class and business class sections first made their appearance on the Beijing to New York flight.

It is fair to say that this was the biggest move in the Convenience Project. After the comprehensive upgrading, Air China’s 15 wide-bodied, long-range aircrafts such as the Boeing 747–400 and the Airbus A340–300, would be equipped with the most advanced facilities in the world, enhancing Air China’s competitiveness against foreign airlines. In the refurbished models, an exclusive passenger seat in business class alone costs RMB 600,000, equaling the price of a BMW. At the press of a button, the first-class seat can be flattened into a bed. The desk beside the seat has enough space to place a laptop. A 10.4-inch LCD offers video and audio programs selected from 60 DVDs, 90 music CDs, and eight games that can be played with other passengers. Eighteen modes of lighting enable the passenger to simulate different scenes such as sunrise, sunset, night, and dawn. The Convenience Project has added to Air China’s brand image as being high-end and exclusive. At the same time, it has also effectively promoted the implementation of Air China’s internationalization strategy.

To make passengers feel satisfied is the highest level of service. The Satisfaction Project provides passengers with a sense of satisfaction beyond their expectations. Only an airline that touches the hearts of passengers can have bright market prospects. Let me relate to you a story about two phoenixes that perfectly reflects the concept of Air China’s Satisfaction service.

In 2003, Ms. Liu Hairuo, a presenter on Phoenix TV, was seriously injured in a train accident in Britain, and urgently needed to be flown to China for medical treatment. Phoenix TV contacted several major airlines, but they refused to take Liu Hairuo on board their planes because of her general paralysis. All of a sudden, another phoenix came into the mind of Mr. Liu Changle, chairman of Phoenix TV—Air China.

Although both companies are represented by phoenix logos, there had been, before this incident, little contact between them. As soon as I received the facsimile, I immediately ordered the relevant departments in Air China to ensure that Liu Hairuo’s security and medical treatment would be guaranteed during the 11-hour flight. To this end, we removed some seats to convert part of the passenger cabin into a hospital. In the end, Liu returned to Beijing successfully, and received the necessary medical treatment.

One year later, I met Liu Hairuo on the first chartered flight from Beijing to Taipei. After I boarded the plane, a lady sitting in the first row stood up and bowed to me. She was none other than Liu Hairuo, with tears running down her face. The service of Air China had deeply impressed her. Air China had an accidental gain after this event—Phoenix TV became a group client of Air China.

Service is a concept instead of a form. In the process of providing service, love comes first, and then there comes the motivation to make continuous progress, and the base point to evaluate service quality. A year after Air China had launched its Four Hearts service, a leader of Air China’s passenger cabin service department told me that another airline had exceeded Air China’s Four Hearts by raising a Six Hearts service slogan: the six being Passion, Flexibility, Patience, Sincerity, Devotion, and Love. I answered her, smiling, “None of these hearts actually take into account passengers’ demands, nor do they cover the operational aspects of that airline, either. We don’t have to worry about them.”

Of all the management cases I have read, the story of Virgin Atlantic Airways particularly impressed me. In the summer of 1978, Richard Branson, the founder of Virgin Airways, was on a vacation in the Virgin Islands. Waiting rooms at the airport were crowded with passengers, because all the flights to Puerto Rico had been canceled. Seeing this, Branson called a leasing company and rented an airplane to Puerto Rico at US$2,000. Then, he borrowed a blackboard and wrote “Virgin Airways: US$39 for a Single Trip to Puerto Rico.” Branson only had to walk around the waiting room a few times before his rented plane was fully loaded with passengers. Based on the ideal of continuous innovation and meticulous caring for passenger needs, Virgin Atlantic Airways, which completed its “virgin” flight this way, has become the second largest long-range international airline in Britain. This story reminds us that a company is never too old to learn to be creative. Only when a company continues to pay due attentionto customer needs, even the slightest needs, can it set up a most solid base for future development.

In some respects, the Four Hearts service is based on Air China’s understanding of the rules of service. During the promotion of the Four Hearts service, instead of only talking about rules and concepts, we worked hard to stimulate our employees’ enthusiasm, action, and innovation. Innovative measures flooded in during the process, which not only touched the passengers but also Air China’s managers.

Below is something written by a family of ordinary Air China employees on how to improve their daily communication with passengers. Here I quote it to illustrate the tireless efforts made by Air China’s employees in their service:

We are one of the average families made up of two crew members of Air China. As summer is approaching, I hope you can understand our work.

Distinguished passengers, it is our great honor to serve you. Thank you for choosing air travel, the safest way to go on your trip. According to the current security conditions of the aviation industry, we can guarantee your security for 10,000 years in a row, even if you take a flight from Beijing to Shanghai once a day. To this end, apart from excellent piloting performance, we must have a systematic and exacting approach.

Summer is approaching. In the busiest season of the year, misunderstandings may happen between us. I guess we all understand that delays due to thunderstorms are inevitable. What might confuse you is why the plane can’t take off, even though the rain has stopped. Let us explain this to you.

Suppose you are on a flight from Beijing to Shanghai when a storm cloud is approaching Beijing. Because it is right in the regular path of some flights, the capital airport has to enlarge the time intervals for take-off and landing to ensure flight safety. This is like closing one lane on an already busy highway. In an airport as busy as Beijing Capital International Airport, more than 1,000 flights take off and land every day. In busy times, take-offs and landings take place every 50 seconds. Enlarging the time intervals means that airplanes on the ground will immediately become crowded with the takeoff time of every flight delayed. Therefore, it is highly likely that the flight will be delayed for more than half an hour.

If it is just not your day and your flight has not taken off before the thunder storm arrives, I’m afraid that you will have to wait a little longer. During thunderstorms, the airport has to be closed and airplanes are not allowed to take off while airplanes in the air are not allowed to land, forcing them to return or land at alternate airports. An hour later when the weather becomes better, a huge number of airplanes will be flying toward the airport from all directions. At that time, the airport will be overcrowded with inadequate airplane gates. That’s why the bad weather only lasts for one hour, but it could delay you for four to five hours. If the destination airport’s weather is not good and your flight has to land at another airport, it may take even longer. This is like a traffic jam during rush hour, and anxiety is not able to solve the problem.

Aviation is an industry that relies on the most advanced technologies. Every Boeing or Airbus aircraft you see costs more than RMB 300 million, and some of them are even worth more than RMB 1 billion. But none of them ever compares with any one of you. Distinguished passengers, you are our most treasured asset. We appreciate your trust and we are fully aware of our responsibility for you and your family. We must not take any chances even if there is only a slight possibility of danger. We hope you can understand this.

All frequent passengers know that our job is very demanding. After transporting you safely to your destination, there are still other flights waiting for us to take care of. But the most painful thing for us is that we are unable to win your understanding due to the flight delay.

Well, I hope my introduction above has helped you gain a better understanding of our work. If you encounter such situations in your future journey, I am sure that you can relax yourself by reading a newspaper, listening to some music, taking a cup of delicious coffee from our smiling attendants, or starting a pleasant chat with your neighbor. If you need anything, just ask the attendants, and we will do our best to help you. Once you board the plane, please relax and leave everything else to us. When you deplane and meet your family members, please send our best regards.

A company’s techniques, facilities, and specific management measures are reproducible, but its culture is something that is difficult to replicate. Corporate culture reflects the core competitiveness of a company. When our competitors raised their Six Hearts service, people asked me more than once if I wasn’t worried that others would copy Air China’s experience and policies. I answered honestly, “Are you afraid of someone who copied your homework? It’s easy to copy the homework, but it’s hard to master the knowledge. Why? Because the formation and perfection of a culture is a long-term and systematic project. It’s far from just being a simple slogan.”

One day in December 2005, I took an Air China flight from Shanghai to Beijing, which was delayed for about 20 minutes, due to air traffic control. The attendants had already announced the cause of the delay. However, a first class passenger who sat beside me began to curse the attendant, “Your leaders in Air China behave like real dogs in front of their superiors! Only when the leaders in Air China have all died out can you make your flights punctual!” The attendant looked at me with tears in her eyes and I motioned to her not to reveal my identity. Then, I patted the passenger on his hand and said: “Sir, maybe you’re not aware of this, but in actual fact, Air China’s leaders are more like dogs in front of their passengers! They don’t dare to retort even if they’ve been insulted!” The passenger stopped cursing directly. Throughout the flight, he didn’t know who I was. When I got off the plane, the attendant apologized to me in tears that I was wrongly accused because they had not performed well enough. I comforted her, saying, “You’ve done a good job. To work in the aviation industry, you have to bear grievances. If I can bear grievances, so can you.”

Today, Air China’s Four Hearts service has taken root in the minds of everyone, including me. I remember that I saw a passenger with three bags when I was on a business trip. I went up to help him, only to be identified. “Mr. Li, how can I let you help me with my bags!” he said. I answered, partially joking that since I was in the aviation transportation service industry, to take every bag I see had become a professional habit. It was like waiters in restaurants who had the instinct to take away all the trays in sight!

CORPORATE CULTURE IS FUNDAMENTAL FOR A BRAND

Corporate culture is the fundamental quality of a corporate brand, but it takes a long time and continuous efforts to cultivate a culture. Service quality is fundamental for the survival and development of an aviation company in the context of fierce market competition. But it is hard for the attendants and pilots, commonly known as “the unusually lucky people,” to lower their pride to become a loyal waiter. For a long time, “base everything on the satisfaction of customer needs” was just a slogan for some Air China employees, while the service was also in the position of attending to one thing while losing another. Events that ran counter to Air China’s service concept and passenger complaints still occurred from time to time.

To completely solve this problem in order to build and maintain a long-term, shining brand image for Air China, the employees’ mindsets had to be changed. Air China must continue to build a new Air China culture.

What is corporate culture? It is something that resides in the heart and that cannot be built, but only fostered by a company. It happens often these days that some people work out a few slogans and declare these to be the corporate culture. Others hire a consultant to design the corporate culture. The same kind of thing had also occurred previously in Air China. Four years ago, when Air China was designing its corporate culture, a famous corporate culture expert came and told me that he had already worked out Air China’s corporate culture. I read his proposal, only to find flowery but empty words. I asked him, “I’ve been in Air China for three years, first as secretary of CPC committee, then as president. Until now, I still dare not talk about Air China’s corporate culture. How come you’ve worked it out overnight? This isn’t the corporate culture of Air China. It’s yours.”

Corporate culture develops in the process of solving problems that emerge during corporate development and problems that attract the attention of employees. In a word, corporate culture should be able to solve problems. Otherwise it is not a real culture.

Once I met an entrepreneur whose enterprise was still small in size. He asked me about the major difference between managing a big enterprise and managing a small one. I asked him about what he did when in office. He answered that he signed invoices all day. I said, “I’ve got it. The difference between a big enterprise and a small one lies in their general managers. Those in small enterprises sign invoices while those in big enterprises build platforms. What kind of platform? The platform that can give free play to the role of all employees, and that can tap every employee’s potential.” I told him that I had been in Air China for six years and was appointed secretary as well as president, but had not signed a single invoice. I never signed invoices! Then what was my focus in work? I focused on solving major problems in corporate development as well as problems that the employees cared about. I focused on the management of banzi, on the guiding of teams, and on the improvement of employee quality. To summarize, I focused on the cultivation of a corporate culture.

In corporate reform and development, every company is more or less bound by the outdated mindsets of its employees. These socalled mindsets refer to the thinking method, thinking mode, and perceptions of an individual or a collective. It is a deep-rooted psychological and thinking activity. If a reform and development plan cannot be implemented in time, the reason has usually to do with the impact and restriction of such mindsets. The function of mindsets can be exemplified in the following allegory.

Once there were two people, a sick rich man and a healthy poor man. These two envied each other. One medical expert discovered how to conduct a brain transplant operation, and the rich man suggested that he and the poor man exchange brains at the cost of all his wealth.

The operation was successful. The poor man became rich, the rich man became poor. Later, the now poor rich man gradually accumulated wealth because of his healthy body and his goal to become successful. However, he was always bothered by his health condition and worried about the tiniest symptom. Day after day, he returned to the previously state of being rich but sick.

At the same time, the newly rich man could not forget that he used to be poor. As he lacked the expertise to invest his money, he kept wasting his money on useless things. It was not long before he used up all of his money. However, since he didn’t worry about anything, the sickness that came with his brain transplant had gone. In the end, both of them returned to their previous state.

In brand building and service providing, Air China had to break through the previous mental obstacles and avoid the situation of “only change the soup but not the drug”³ due to differences in perception. Therefore, the Air China management team took advantage of such opportunities as research projects and conferences to repeatedly stress the essence and meaning of service within Air China, so as to change the mindsets of all Air China employees.

Economic and service globalization means that human society has entered a stage of reciprocal service. Every one of us is both a producer and a consumer, both a service provider and a receiver. It is fair to say that the essence of service is the exchange of service between people. Everyone is serving others in exchange for service provided by others. In terms of aviation companies, aviation transportation service is not free of charge. When a passenger buys the ticket, he buys the service of the company. Therefore, for the sake of survival and development, every employee in every aviation company has to provide excellent service to the passengers. Only when employees see aviation transportation service this way can they understand service quality as vital to their survival and develop a stronger sense of social responsibility.

At the same time, the service character of aviation transportation requires that every employee from every enterprise is able to provide a high level of service.

The service provided by an aviation company is instant. Aviation companies are capital-intensive enterprises. The service product they provide is not storable. The process of aviation service is in essence the process of product manufacturing, and also the

³ A Chinese idiom, which means a change only in form but not in content.

process of acquiring instant profit rewards. If the service provided by the aviation company is not good enough, it means that the product it manufactures disappears instantly, resulting in the failure to receive positive returns for the previous intensive capital investment.

The service provided by an aviation company is face-to-face. Although aviation companies are also technology-intensive enterprises, the products they manufacture are realized through direct interaction with consumers. This mode of product manufacturing means special requirements for every employee of the airline, in terms of service awareness, service capability, and service standards. Service problems occur during face-to-face interaction.

Another distinctive feature of the service provided by airlines is that it is a one-off service, making problems that occur during the service hard to fix. This is even more so in terms of flight security.

Therefore, providing passengers with Four Hearts service is not only the fundamental mission of Air China, but also the foundation on which the survival and development of every employee depends. With this concept in mind, it would be much easier to solve numerous problems.

There are a lot of similar cases about breaking away from the old mindsets in Air China. The dialectical relationship between profit making and security, which has been mentioned before, used to cause disputes within Air China.

In Air China, for a long time people dared not stress the importance of focusing on economic profits, to avoid being accused of pursuing economic profit at the cost of security. This had resulted in extensive operations and management. In point of fact, security and profit are not contradictory. Rather, they complement each other. Security is the primary principle in the production process and is the basis of profit making. Profit is the purpose of corporate operation. Without safe production, profit making cannot be realized, whilst once profit making is realized, larger investments can be made to improve safety.

The cask effect demonstrates that the service level of a company is determined by its worst aspects, not its best ones. The weak links in the service are usually decided by the least satisfactory individuals. However, in terms of image communication, the effect of good and bad news is not proportional. Corporate culture building aims to turn the weak into the strong and improve the quality of all employees. This is of vital significance to the building of a good brand image for Air China.

For employees to appreciate quality, they need guidance toward cultivating a systematic mode and method of thinking. Hegel said that the human world is a world of methods. Methods are similar to bridges and boats that are modes of transport across a river. However, methods are varied in level and nature. There are different ways to deal with different things. The server and the served are essentially a pair of contradictory positions. Different times, locations, and situations require different methods for solving contradictions. This is a comprehensive test on the judgment and reaction of an attendant.

I once settled a dispute between a passenger and an attendant. It happened on a flight from Beijing to Paris. A passenger was accusing the attendant because the plane had taken off 25 minutes behind schedule, while the attendant explained to him repeatedly that the delay had been caused by the late arrival of the plane. The more she explained, the angrier the passenger got. Seeing this, I told the attendant, “No more explanations. What you should do is to tell the captain to take off as soon as possible and try to make up for the delayed time.” The attendant directly spoke to the captain on the phone, repeating what I had said, and the attitude of the passenger immediately improved. What the attendant did not get was that, instead of explanations from her, what the passenger needed was for action to be taken by the air crew to make up the lost time.

From the perspective of service, the case above demonstrates that we should not only know that all roads lead to Rome, but also know that there are shortcuts and longer ways to get to Rome. We should endeavor to combine contradiction solving and the ultimate result. A Chinese idiom goes like this, “once the number of people reaches 100, you can see all kinds of human beings.” The actual situation faced by attendants is far richer and more complicated than any service rules and regulations can cover. Therefore, to improve attendants’ ability to implement the Four Hearts service, the key is to make sure that they can smartly understand the needs, including the psychological needs, of the passengers under any circumstances.

PROFIT MAKING UNDERLIES A BRAND

To a company, there is no such thing as brand value when it is suffering long-term losses. Although profit earning is not the only index for evaluating the success of a brand, a lasting profit-making capacity is the most valued aspect of a corporate brand.

In early 2005, Air China set the goal to become an airline that is recognized by mainstream passengers, China’s most valuable brand and largest profit earner, and a globally competitive company. The key here is to become China’s most profitable airline, which poses a serious challenge for Air China’s operational ability. What is this ability? I summarize it in four sentences: to master the market conditions, to have well thought through strategies, to minimize costs, and to maximize profits. Centering on these four sentences, Air China has done much in recent years. For example, Air China promoted its hub strategy in Beijing and several other airports, strengthened the air route network, emphasized the transfer passenger market, sorted out the sources of major costs, stressed the design of operational strategy, and laid the foundation for long-term cost reduction and profit improvement. We started with locating the profit-making points before connecting the points into lines, grouping lines into surfaces, and ultimately realizing a profit-making body. Of course, in corporate operations, we pursued profit volume in the short term. But in the long run, the crux is not the specific profit numbers, but the profit-making capability and quality. Such capability and quality are composed of several elements, the key of which is appropriate operational ideas. Over the years, we have implemented a systematic outlook on development, adopted intensive development methods based on security and economic profit, emphasized the improvement of employee quality, and worked toward comprehensive corporate development. These seemingly abstract principles became concrete actions in Air China. For example, in the past few years, Air China no longer stressed corporate expansion. Instead, it started to prioritize corporate optimization and enhancement, highlighting the goal of profit in aircraft purchasing and air route opening. Here we adhered to the principle of taking stock first, and then follow it with decision making and implementation.

In terms of earnings, Air China ranked ninth in the world in 2005. If measured on the same standards in terms of tax, oil prices, and so on, Air China would have ranked even further ahead.⁴ However, Air China employees have never relaxed their guard against overconfidence because they are committed to a realistic

⁴ Take Cathay Pacific Airways for example. Air China paid four times as much as Cathay Pacific in taxes in the same year.

attitude in their unremitting effort to improve Air China’s profitearning capability. In corporate management, it is easy to propose a concept or shout some slogans. But it is definitely not an easy task to advance a correct concept, implement it as the soul of corporate operations, inculcate it in the minds of all employees, and make it an important part of the corporate culture. It requires strenuous effort.

AN INTERNATIONAL BRAND: THE ULTIMATE DREAM OF AIR CHINA

Air China’s branding effort has already seen results. In recent years, the airline has won a series of major prizes related to corporate branding. In 2004, Air China was honored as one of the Ten Most Influential Chinese Enterprises with Self-Owned Brands, and one of the Ten Best Received National Brands of China. In 2005, Air China was chosen by Britain’s Finance magazine as one of the Top Ten Chinese National Brand Enterprises, and was also awarded the Chinese Public Aviation Service Communication Annual Index Brand Prize. Air China was also nominated as one of the Top Ten Chinese International Brands conducted by the Financial Times together with McKinsey & Company. In 2006, Air China was listed as one of the 500 Most Valuable Brands in China by the World Brand Lab, ranking above all other domestic airlines with a brand value of RMB 23.5 billion. The seemingly intangible brand is bringing in tangible value for Air China every day. In recent years, Air China witnessed its annual complex increase index growing at a rate of more than 16 percent, its average annual profit growth multiplying, and a rate of seat occupation 3–5 percent higher than the industry average, which alone rakes in a profit of more than RMB 1 billion.

Air China did not stop there. Riding the opportunity afforded by the 2008 Beijing Olympic Games (BOG), Air China will fly higher and further. During the Spring Festival of 2007, an Air China aircraft painted with Fuwa, the BOG mascot, took off from Beijing Capital International Airport with Taiwanese passengers on a direct flight to Taipei.

Becoming the partner of the 2008 BOG is another milestone in Air China’s building of an international brand. Air China has been very lucky to witness several glorious moments in the history of Chinese participation in the Olympics.

In July 1984, the first Olympic delegation organized by the PRC headed for Los Angeles on an Air China flight. For more than 20 years, Air China has on countless occasions transported Chinese Olympic contestants to their destinations.

On July 13, 2001, Beijing successfully won the right to host the 2008 Olympic Games. On the evening of July 14, the Beijing Olympic Games Bidding Delegation took a private plane provided by Air China to return from Moscow in triumph. As the plane landed, the airport was filled with cheers. All Air China employees were very proud to have had the opportunity to serve the heroes who brought the Olympic Games to Beijing.

In April 2003, Air China officially presented its application to the Beijing Organizing Committee of the Olympic Games (BOCOG), hoping to become the aviation passenger transportation partner of the 2008 BOG. On August 4, 2004, based on its comprehensive advantages in such areas as security and service, Air China stood out from all competing aviation companies, and became the sole and official aviation passenger transportation partner of the BOG. Air China will provide a full range of passenger transportation services to the BOG, Beijing 2008 Paralympics Games, BOCOG, and the Chinese Olympic Committee.

As the 2008 Olympic Games approach, Air China is getting ready to embrace the event. Since October 2004, the logo of BOCOG has emerged side by side with Air China’s phoenix logo everywhere, ranging from in-flight magazines, duty counters, and ferry buses, to name tags and business cards of employees.

On November 13, 2006, a B737–800 aircraft printed with Fuwa appeared at Beijing Capital International Airport. The Fuwa airplane was designed in a simple but lively style, with five colorful Fuwa printed on each side of the airplane. Together with the characters of “Beijing 2008” and Air China’s phoenix logo which represents happiness and luck, the design fully captured the perfect integration of the Air China brand and the Olympic mascots. Then, designed to publicize the Olympic ideals and spirit, the Olympic Mascot Aircraft (OMA) launched a series of round-trip flights between ten cities such as Beijing and Shanghai. The OMA’s rate of seat occupation reached 84 percent, which is nine percent higher than the average rate of all flights in the same period.

To better serve the BOG, Air China launched the Olympic English Training program and other activities, including the speech contest entitled, “I Love the Olympic Games.” In the National Passengers Talking about Civil Aviation activity, Air China was awarded the golden prize of “Customer Satisfaction and Service,” becoming the airline best recognized by mainstream passengers.

In terms of facility improvements, Air China invested on an unprecedented scale. It has witnessed an annual increase of 20 aircraft and more than 100 captains. By the end of 2007, the newly built third terminal at Beijing Capital International Airport will go into operation. At that time, all Air China’s domestic and international flights in Beijing will be operated from the terminal. Boasting a total area of 900,000 square meters and 6,000-lot parking space, the terminal will definitely be able to satisfy the needs of the Olympics.

As part of its Olympic marketing strategy, Air China has also rolled out the Olympic suite tickets. It is predicted that the Games will attract 2.6–2.7 million passengers to Beijing, of which 550,000 will be international passengers. With an opportunity to distribute the tickets of some games as authorized by BOCOG, Air China will issue suite tickets consisting of tickets to the Games and hotel accommodation.

In May 2005, Air China became an associate member of Star Alliance, one of the three biggest international aviation alliances. In 2007, Air China will become an official member. After that, more than 20 fellow members of Star Alliance will provide aviation services to the passengers of Air China in 912 cities around the world. This represents another major step in Air China’s internationalization endeavor. With the opportunity granted by the 2008 BOG, Air China will be able to fly higher and further, just like a beautiful phoenix.