Qunar’s Internal and External Problems due to the Joint Sanction of Airlines

Since October last year, news of Qunar.com, except for CEO Zhuang Chenchao’s personnel change, has barely been exposed in the public eyes after the combination of Qunar.com and Ctrip. At the beginning of this year, Qunar.com was in a dilemma, facing a difficult situation arising from problems of internal organizations and external partners. 8 airline companies were rejecting to continue cooperating with Qunar; meanwhile, CEO Zhuang Chenchao, CFO Zhao Jinlu, COO Peng Xiaomei and other senior executives submitted their resignation simultaneously; share price saw a slump of 17% and market value was shrinking.

External problem: Qunar’s air ticket business will see a decline due to the joint sanction of domestic airline companies.

This sanction first started from 2015, when China Southern Airlines, Hainan Airline and Capital Airlines took the lead to announce the cease of cooperation with Qunar.

After the New Year’s holiday, ChongQing Airlines, Subsidiary of China Southern Airlines, suspended its partnership with Qunar and later on the same day, Air China and China Eastern Airlines also released a similar notification, stating that they would shut down their official shop on Qunar.

Yesterday, after the announcement released by China Southern Airlines, Hainan Airline, Capital Airlines, ChongQing Airlines, Air China and China Eastern Airlines, Tianjin Airlines and Lucky Air joined the sanction team as well by closing their online shop on Qunar.

So far, due to too many complaints from users, 8 airline companies in total have stopped their partnership with Qunar.

Right at that time, Chen Shihong, GM of Transportation Department of Tuniu Travel Website, stated that Tuniu was still working closely with Hainan Airlines and China Southern Airlines to further expand their air ticket business. In the meanwhile, Tuniu has kept a partnership with many airline companies.

Data from EnfoDesk showed, in the 3rd quarter of 2015, Qunar’s airline booking has reached 30.94 billion, ranking first with a market share of 38.2%. Yet the joint sanction by the 8 airlines will probably affect its dominant position in the airline booking field, on the other hand, which gave its rivals a golden chance to occupy the market.

Qunar responded that consumers could continue to buy tickets of China Southern Airlines and Hainan Airlines on the Qunar website during the cooperation suspending period, which meant  that Qunar was still able to get tickets from agencies even though the official channels were disconnected. Besides, Qunar has launched a corresponding project to tackle this tricky situation, and this project includes recruiting 2000 air ticket agents whose work was to integrate all the resources from agencies.

However, as an agency integration platform, Qunar cannot avoid some common problems, such as identified ticket source, refund issue, overcharge of refunding fees, no prior notice of irregular flight, etc. If such kind of problems frequently bother the consumers, Qunar will be more likely to lose certain users.

Under such circumstance, air ticket and relevant business which are the second biggest revenue source of Qunar were greatly affected. According to the financial statement of 3rd quarter of year 2015, Qunar’s revenue from air tickets was 596.6 million, about 45.02% of the total revenue, only next to revenue from wireless.

This sanction is still going on. It is said that domestic airline companies plan to cease the current cooperation mode with OTAs. Apart from Qunar, some other OTA giants including Alitrip, Ctrip, LY.com, etc., will also be involved. Yet this message is still to be confirmed.

Internal problem： Resignation of Qunar’s senior executives

Just as the case of 58.com and Ganji.com’s combination, Yang Haoyong resigned his position as 58.com’s CEO; after the combination of Meituan and Dianping, CEO Zhang Tao resigned from Dianping; after the combination of Ctrip and Qunar, CEO Zhuang Chenchao resigned from Qunar. However, compared with previous cases, the changes of senior executives in Qunar are more influential, because except Zhuang Chenchao, CFO Zhao Yilu, COO Peng Xiaomei, and CTO Wu Yongqiang also left the company.

Meanwhile, Zhuang Chenchao gave an announcement in the company: Chen Zhenyu, previous Executive Vice-president and Head of Wireless Business, will be the new CEO; Zhang Qiang, previous Executive Vice-president and Head of Destination Business, will be the new COO; Zhu Xiaolu, previous Executive Director of Strategy and Investor Relations, will be the new CFO; Yang Miao, Gan Quan, He Weiping and Li Jifeng will take the place of CTO.

The changes of Qunar’s senior executives in a short term will absolutely have some bad influences on the junior staff and lead to some instability to the company’s operation.

Meanwhile, so many senior executives resigned at one time will cause a talent loss for Qunar, and the company has to find more HR resources to fill these vacant positions.

For the outside world, the resigning problem will surely attract the media’s attention and damage the reputation of Qunar, which may even weaken investors’ confidence in the outlook of Qunar. This doubt towards Qunar’s business conditions will be reflected on the fluctuation of stock price. According to US Stock, Qunar’s stock price on Monday dropped 16.65% to $43.96 and the market value fell to $5,750,000,000.

 From a long run perspective, different executives usually have different ideas and plans, this time since Qunar has changed a number of executives, we can expect some significant changes of Qunar in terms of future’s planning, core business, operation concept, stategies, etc. Moreover, another thing that need us to note is that whether these new leaders have a coherent company concept and whether they can deliver a perfect teamwork.