MGMT 447 Cathay Pacific Airways

1. MGMT 447 Cathay Pacific Airways Sin Man Wong Ying Wong Christopher Fok

2. Background • Roy C Farrell and H de Kantzow founded Cathay Pacific Airways in Hong Kong on 24 September, 1946 • Initially based in Shanghai, they eventually moved to Hong Kong and founded Cathay Pacific Airways • The new company began to operate passenger flights to Manila, Bangkok, Singapore and Shanghai

3. Cont. • In 1948, their expansion was fast, one of Hong Kong's leading trading companies, Butterfield & Swire took a 45% share in the company • Between 1962 and 1967, business grew at an average rate of 20 percent a year. they also initiated international services to Osaka, Fukuoka and Nagoya in Japan

4. Cont. • The 1980s they expanded their international network. For example to London, Frankfurt, Vancouver, Amsterdam, Rome, San Francisco and Paris • Now, their global network with oneworld partners with connections to 135 countries and over 570 destinations • Connections to 18 destinations in China through their associated airline, Dragonair

5. The Issue • Cathay Pacific is applying for an unlimited licenses to fly to the three Chinese Mainland cities of Shanghai, Beijing and Xiamen • Its only competitor – Dragonair opposes the license applications

7. Flying to China? Cathay Pacific must address this issue because operating three new routes to China is beneficial to both Hong Kong and the company.

8. Reasons • Building Hong Kong as a leading aviation and logistics hub • Hub in Asia • Accessing to China • Enhance connectivity • A strong home carrier-attracting more traffic through its hub

9. Growing market • Mainland China is the fastest growing market in the world Shanghai1997 18 weekly flights2002 56 weekly flightsBeijing1997 16 weekly flights2002 42 weekly flightsXiamen1997 7 weekly flights2002 11 weekly flights

10. Reason • Profitable many visitors including business and leisure travelers going to these three cities from all over the world • Beneficial to Hong Kong Job opportunity Travel industry

11. To address this issue Cathay Pacific should: • Allocate budget • Preparing new flights • Hiring and Training • Develop and implement new plan • Promotion

12. Action Plan • The expected result is Cathay’s ability to attract its target 420,000 incremental passengers • In 2003, an estimated 7.1 million travelers will take connecting flight to Shanghai

13. Organization Structures • Hire specialists • Hire flight attendants and pilots • Training

14. Resources Needed • Hongqiao Airport, Shanghai • Pudong International Airport • Beijing Capital International Airport • Xiamen International Airport • Gates, allocate time, budget

15. Culture Leadership • Focus on the mainland China culture • Intercultural communication between HK and Mainland China

16. Dealing with the PRC Government • Everything is negotiable • Be wary of the "special deal just for you“ • Contract and documents will often be pre-drafted and appear final • Seek concessions

17. Challenges • China lacks predictability in its business environment • Government that has made a partial transition to a market economy • There are still remnants of a planned economy

18. Arguments made by Dragonair • Dragonair uses money made from profitable routes, principally Beijing, Shanghai and Xiamen, to cross-subsidize other loss making ones • ATLA cannot grant an airline a license to fly on a route before it is designated by the Hong Kong Government to operate such a service before it is designated by the Hong Kong Government to operate such a service.

19. The End Any Question?