Normalization of Airline Companies’ Internal Management System
Rui Sun
Civil Aviation Flight University of China, Guanghan, Sichuan, 618307, China
Keywords: Airline companies, Internal management system, Internal control, Risks, Normalization.
Abstract: With the economic development of China, the environment of global economy is changing fast, which
brings unprecedented challenges and chances for airline companies. Therefore, it is necessary to strengthen
the normalization of airline companies’ internal management. This study focused on relevant concepts of
internal management and the relation between internal management and management system. Problems of
airline companies’ internal management system and corresponding influencing factors were analyzed to
help normalize the internal control of airline companies. These analysis and suggestions could be useful for
the normalization of airline companies’ internal management system.
With the rapid development of Chinese navigation
industry, the internal management of civil airline
companies is faced with great changes. Normalizing
internal management system is the most effective
way to tackle complicated economic environment.
Nowadays, the internal and external environment of
airline companies is complicated and the
management of airline companies has many
uncertainties. Therefore, airline companies need to
strengthen their competitive power and normalize
their internal management system. The lack of
internal management system leads to the fact that
airline companies do not have comprehensive plans
on plane purchasing and flight management (Liu
Weigang, 2012). For example, the internal
management of airline companies is scattered and
contradictory, leading to loss of state assets,
uncontrolled cost and ineffective budget system. All
these problems provide chances for accounting fraud
and corruption, so airline companies cannot
effectively control their risks. Therefore, in
complicated economic environment and fierce
competition, airline companies should establish a set
of internal management system, enabling them to be
successful in competition.
2.1 Relevant concepts about internal
management system
The normalization of internal management system
mainly relies on the establishment of companies’
internal control system, which is based on the
effectiveness of companies’ risk management.
Internal control refers to the system that high level
of companies, including board of directors, board of
supervisors and senior managers, guarantee the legal
management, safe assets of companies and real
financial information, effectively enhancing business
efficiency and realizing sustainable development
(Song Guixiang, 2011). The normalization of airline
companies’ internal management system depends on
the legality and rationality of internal control
system, which can bring unprecedented effects to
business of airline companies. The goal of internal
control is risk control. Risk management means that
companies can reasonably identify, evaluate and
assess various risks in advance. For those predicted
risks, companies should take economic and
reasonable measures to control and guarantee the
safety of companies’ assets to the large extent. Risk
Sun R.
Normalization of Airline Companiesâ
Z Internal Management System.
DOI: 10.5220/0006446201660169
In ISME 2016 - Information Science and Management Engineering IV (ISME 2016), pages 166-169
ISBN: 978-989-758-208-0
2016 by SCITEPRESS – Science and Technology Publications, Lda. All rights reserved
management mainly includes three aspects, namely,
risk identification, risk evaluation and risk solution.
Companies are supposed to avoid risks in time and
reduce uncertainties in their business. Risks in this
study refer to the negative influence on companies’
business and the goal of risk management is to
reduce uncertainties, enhancing companies’ risk
control abilities and their business performance.
2.2 Relation between internal control
and management system
Internal control of companies is closely related to
internal management. Companies will always face
various uncertainties and undergo risks from both
internal and external environment. In this process,
companies need to transform uncertainties into
certainties within their control. The normalization of
internal management refers to applying risk
management to internal control system and closely
relating risk management to internal control (Xie
Yunshuang, 2004). Thus, the normative internal
management system can be formed. Internal control
system consists of authorization and liability, a
working standard with high logic. Internal control
mainly includes accounting, management, business
and law enforcement. The more normative of
internal control system, the less risk companies will
face and the internal management of companies can
be more normative.
3.1 Problems of airline companies’
internal management system
Firstly, the internal management consciousness is
weak since the internal control is negative. People’s
consciousness determines their behaviors. Currently,
the consciousness of airline companies’ staff is weak
and most of them lack the consciousness of internal
control, resulting in the deficiency of airline
companies’ internal management and a series of
problems. The senior managers of airline companies
do not deeply recognize the important role of
internal management for the long-term development
of companies. Some of them regard internal
management system as accounting system or
effective measures to prevent embezzlement, so they
do not correctly understand the true meaning of
internal control and fail to educate their staff on
internal control. Therefore, companies should take
initiative to implement internal control management.
Passive implementation of internal control is one of
the important reasons that lead to serious
management problems. Lack of internal control
initiative largely influences the risk control abilities
of airline companies.
Secondly, internal management system can not
adapt to the changes of environment. The fast
development of economy brings more uncertainties
to companies. If airline companies want to be
successful in changing environment, they should
constantly normalize their internal management
system and strengthen internal control, adapting to
current economic environment. However, the
internal management of most airline companies can
not adapt to the changing economic development
and identify potential risks, greatly lowering the
management level of companies.
Lastly, internal management has big leak. The
normalization of internal management mainly relies
on internal control, which is a way l to achieve
business goals. Internal control is a comprehensive
control process and it needs the cooperation of
companies’ different levels. For airline companies,
safety in production and management is the priority
among priorities. The core goal of business is entire
process control of service management. Currently,
airline companies mainly emphasize pre-control and
neglect process control, exposing them to great risks.
Therefore, the internal control system and internal
management are not perfect, which can not
effectively normalize internal management.
3.2 Risk factors of airline companies
Firstly, interest rate volatility has great influence on
airline companies. The main assets of airline
companies are fixed assets. No matter how these
assets are acquired (purchase or lease), they are all
debts for airline companies. High asset-liability ratio
will expose airline companies to greater interest risk.
Secondly, Exchange-rate flexibility exposes
airline companies to some risks. Since 2005,
Chinese government has been adopting floating
exchange rate system based on market supply and
demand. The flexibility of RMB rate is influenced
by domestic economy, international situation as well
as supply and demand. In future years, the RMB rate
is likely to have big changes. The business of airline
Normalization of Airline Companies’ Internal Management System
Normalization of Airline Companiesâ
Z Internal Management System
companies basically covers many countries and
regions and the transaction money can be foreign
currency apart from RMB. Most airline companies
have their assets purchase or lease fixed settled in
US dollars. Therefore, the flexibility of RMB rate
will influence the costs of fixed assets and expose
airline companies to greater rate risks.
Finally, the flexibility of aviation oil price brings
some risks for airline companies. In recent years, the
price of oil has been changing frequently and the oil
price in China has been soaring. The influencing
factors of oil price include the regulations of
National Development and Reform Commission and
Civil Aviation Authority as well as the global oil
supply and demand. Aviation oil is the main
component of airline companies’ operational cost.
Therefore, airline companies are greatly influenced
by the oil price. The continuous changing oil price
brings more risks to airline companies and the rising
oil price will add to operational cost of airline
4.1 Strengthening aviation safety
education and enhancing staff’s
consciousness of internal control
The establishment of internal control relies on the
formation of internal control environment. The
formation of internal management system of airline
companies should begin with management ideas of
internal control. Any business decision ought to be
made within normative internal management.
Contrary to other companies, airline companies are
related to aviation safety, which mainly depends on
perfect internal management. Airline companies
should strictly follow their internal management and
have a correct recognition of their internal
management system, which can reduce risks of
airline companies and help airline companies
achieve their goals.
4.2 Analyzing key points of internal
management and strengthening
regulations on weak points
The normalization of airline companies’ internal
management needs effective internal control system,
thus enhancing risk response abilities of staff and
their working efficiency. In order to follow the pace
of economic changes, airline companies should
timely analyze key points of internal management.
Risk points need to be solved in time, strictly
following accounting standards and financial
management system to strengthen risk regulations.
Airline companies also should timely identify risks
and take effective measures to control them, further
improving internal management and enhancing risk
response abilities. In addition, when airline
companies manage their special businesses, they
should have targeted internal management on these
businesses, emphasizing relevant internal control
and risk supervision. Airline companies need to
timely check their internal management and
strengthen regulations on weak points. Problems
should be solved in time and responsibility person
should be punished, thus enhancing risk response
abilities of airline companies and normalizing their
internal management.
4.3 Establishing perfect governance
and organization of airline
The normalization of internal management first
needs to confirm the normalization of organization
structure, the management goals and reasonable
internal control system. The establishment of
governance structure and organization structure of
airline companies should include following aspects.
First aspect is about scientifically and reasonably
definition of duties and powers of decision-making
level, management level and executive level. Airline
companies should strictly follow the separation
principle of management and supervision as well as
decision-making and implementation, ensuring clear
powers and duties among different levels. Then, in
the implementation of airline companies’ affairs, the
balance of powers can be realized to avoid autarchy.
Second aspect refers to the three centers of airline
companies, namely, profit, cost and investment.
Airline companies should entitle investment center,
profit center and cost center with different powers
according to their working liabilities. Internal
incentive should be unified with constraint
mechanism to arouse the initiative of different
ISME 2016 - Information Science and Management Engineering IV
ISME 2016 - International Conference on Information System and Management Engineering
departments of airline companies, thus encouraging
staff from different departments to do their work
with high efficiency and realizing the goal of
internal control. The normalization of airline
companies’ internal management should ensure clear
powers and duties relation, avoiding unnecessary
4.4 Normative management of business
Airline companies should follow the principle of
concision and high efficiency and integrate their
management mechanisms, finally forming an
effective management structure. The systems of
airline companies mainly include financial control
system, human resource system, safety production
system, marketing system and assets management
system. On the basis of these systems, airline
companies can establishment internal management
system and realize procedural business process.
Financial control system should regard financial
management as a core. Fixed assets purchasing and
sales department performance should form effective
communication with financial department, allowing
financial staff to participate in daily affairs of airline
companies. Then, airline companies can effectively
reduce their cost and enhance their economic
benefits. The safety control and production system
should be established to confirm all pilots of airline
companies follow safety rules and regulations,
guaranteeing flight safety based on flight standard
and procedure.
The normalization of airline companies’ internal
management is an important part of management
affairs of airline companies. Airline companies
should highly emphasize the effectiveness of
internal management system. Normative internal
management can offer effective guarantee to basic
management of airline companies. Nowadays,
market environment and economic environment is
constantly changing. If airline companies want to
protect their economic benefits, normative internal
management is indispensable because it is an
important guarantee for airline companies to have
safe production and sustainable development. The
normalization of internal management is also the
most effective way for airline companies to face
competition and changes, wining a place in fierce
Liu Weigang. Strengtheninf Airline Internal Control
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Song Guixiang. Airlines (Air China) under the Internal
Control and Audit Operations. China Chief Financial
Officer, 2011(5) 124-135.
Xie Yunshuang. Construction and Operation of Airlines
Interior Control Management System. China Civil
Aviation, 2004 (9):64-65.
Normalization of Airline Companies’ Internal Management System
Normalization of Airline Companiesâ
Z Internal Management System