Increasing the Competitiveness of Cathay Pacific Airways Ltd Increasing the Competitiveness of Cathay Pacific Airways Ltd. in the FCC Air Travel Industry

Objective, Scope and Limitations Project Objective To Increase the Competitiveness of Cathay Pacific Airways Ltd. in the FCC Air Travel Industry Project scope Cathay Pacific’s passenger transportation service Limitations Covers only passengers sector of CX’s various businesses Initiated out of personal interest and is not authorised by CX Based only on publicly available information

Methodology Gathering of primary and secondary data Performing macro-environment and micro-environment analyses Identifying the key findings and suggesting strategic options Evaluation of the selected strategic options Recommendation on the strategies Recommended strategies’ benefits that are leading to increased Competitiveness

Introduction: The Airline Industry FCC and LCC Capital Intensive Extremely Vulnerable to External Environment CX is FCC and targer customer group is premium travelers (1st and business classes) Main capital expenditure 1) fleet (CX 54% of Total Asset is fleet and related equipment) Boeing and Airbus 2) Fuel major operating expense – 27% (ExxonMobil, Shell, BP)

Introduction: Cathay Pacific’s History 24 September 1946 Roy C. Farrell & Sydney H. de Kantzow Douglas DC-3 – ‘Betsy’ In 1948 partnership was restructured In 1959 Merger with HK Airways

Introduction: Cathay Pacific Today 5-Star Airline In 2009 ranked as ‘Best Airline of the Year’ Headquarters in HKIA

Introduction: Cathay Pacific Today 110 Destinations worldwide

Introduction: FCC Sector Competitors Singapore Airlines A flag carrier of Singapore Established in 1947 HQ in Changi International Airport Asiana Airlines South Korean No.2 Airline Established in 1988 HQ in Incheon International Airport Qatar Airways A flag carrier of Qatar Established in 1993 HQ in Doha International Airport.

Findings: Primary Data To test whether Core Competencies are actually underpinning Competitive Advantages and lead to Competitiveness, Questionnaire has been developed and survey results show: Hypothesis No. 1 Tests the importance of Superior Quality (Supported – 62%) Hypothesis No. 2 Tests the Importance of Superior Innovation (Supported 57%) Hypothesis No. 3 Tests the importance of Superior Customer Responsiveness (Supported 56%) Hypothesis No. 4 Tests the importance of Superior Efficiency (Supported 70%)

Findings: Macro-environment Key Findings Market growth due to economic recovery and fast growth of developing Asian countries Hyper-competition in the industry with strong, government-supported rivals. 5 star airlines competing on service quality and their offers have little differentiation Suggested Strategic Option Growth Strategies Capitalize on Asian market growth Market Penetration Widen customers’ database to increase market share Product Development Create unique offers and services to differentiate itself

Findings: Macro-environment Key Findings Low Cost Carriers is a growing substitute on short and medium haul air traffic Suggested Strategic Option Branding Create relational value to strengthen ties with existing and attracting new customers

Findings: Micro-environment Key Findings Strong financial position Sophisticated and innovative products and processes (e.g. virtual tour, self-check-in kiosk) Suggested Strategic Option Growth Strategies Invest in growing market visibility to enjoy more profits and gain bigger market share Market Penetration Strengthening ties with existing customers and attract new

Findings: Micro-environment Key Findings CX is a recognized airline which receives numerous awards yearly Suggested Strategic Option Branding ‘Best Airline of the Year’ in the industry should work for the firm and grow customers’ database

Evaluation: Strategic Options Growth Strategies Branding Market Penetration Product Development Forward Integration Horizontal Integration

Evaluation: Strategic Options Suitability Feasibility Consistency Acceptability Branding Yes Market Penetration Product Development Forward Integration No Horizontal Integration

Recommendations: Corporate +Business Level Strategies Branding + Differentiation Market Development + Differentiation Product Development + Differentiation

Recommendations: Resources required Financial Technological Innovation Marketing Human Resource

Recommendations: Resources Need to be Developed Marketing Target Marketing Iconic Brand Image Market research Leveraging on Social responsibility Human Resource Select and develop ‘Best People” Develop training Programs Regular training for all employees Promote unique service in adds

Conclusion: Benefits of Branding + Differentiation Building brand equity benefits customers and CX Enhances customers’ confidence in their purchase decision Increases travelers’ satisfaction Reduces cognitive dissonance Provides a basis for differentiation Attracts new customers and helps retain existing Protects market share Distances CX from competitors Allows for charging a higher premium Increases or at least secures margins Secures bigger market share All of the above benefits are leading to Increased Competitiveness

Conclusion: Benefits of Market Penetration + Differentiation ‘Selling more’ of the same products/services to the present market Increases market share and pushes out competitors Widens customer base and increase the market share Lowers costs per passenger Improves capacity utilization Increases margins All of the above benefits are leading to Increased Competitiveness

Conclusion: Benefits of Product Development + Differentiation Targets existing market with new or re-designed products (services) Attracts more travelers by unique and creative products/services Creates customer loyalty Increases revenue Sustains profits Widens the gap with rivals These benefits are increasing overall CX’s Competitiveness

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