Cathay Pacific Airways Limited
Table of Contents
1.1 Background Information of the Study. 2
Chapter II: Literature Review.. 4
2.1 Increased Low-Cost Carrier Market Segment and Niche Value. 4
2.2 Cathay Pacific acquisition process of Hong Kong Express. 5
3.1 Information to be Collected. 6
3.2 How information will be Collected. 6
Chapter I: Introduction
1.1 Background Information of the Study
Cathay Pacific Airways Limited (CPA), also known as Cathay Pacific or even Cathay, is among the remarkable flag carriers of Hong Kong, with its head office and central hub located at Hong Kong International Airport. The company is operating and scheduling for its passengers in more than 60 countries across the globe, including codeshare and joint ventures with more than 190 destinations (Minatovicz, Sun, Foran, Chaudhuri, Tang, & Shameem, 2020). According to the company profile information, it has remained noted that some of the fleet that the Cathay is operating include Boeing 777 wide-body aircraft, Airbus A330, and Airbus A350. It has remained noted that Cathay operates two models when it comes to the Cargo operation of the Boeing 747 (Li, Ling, Shao, Xu, Li, Ng, & Liu, 2016). According to a variety of research that has been done on the subject matter, it has stayed asserted that the company was established on 24 September 1946 by Australian Sydney H.de Kantzow along with American Roy C. Ferrell. In 2016, the company was celebrating its 70th anniversary, and based on the available information as per March 2018. It was opined that Swire Pacific was its best subsidiary, which accounted for a 45% stake and Air China with a 29% stake. Again, it has been evaluated that Cathay is ranked as the 10th organization in terms of sales and the 14th most significant when it was measured in terms of market capitalization (Minatovicz et al., 2020).
On 27 March 2019, Cathay announced that it had completed the acquisition of Hong Kong Express Airways (HK Express). Therefore, Hong Kong Express is now wholly owned subsidiary of Cathay Pacific, where it is expected to remain a standalone low-cost carrier. Importantly, after the acquisition of the Hong Kong express, it was reassured that by the Rupert Hogg, who is the CEO of the Cathay Pacific and a chairman of the Hong Kong express, that there will be no change that will be encountered (Jia, Geng, Wang, Tian, Xu, Shi, & Kong, 2018). Again, the CEO promised the Hong Kong express customers that there would be more value fares, and more destinations will be created for their esteemed clients. According to the available information on the subject matter, it has remained asserted that Hong Kong Express is the only Hong Kong’s low-cost carrier and the only founding member of the U-fly Alliance. Again, it is clear that the Hong Kong express is the just world’s first cheap carrier alliance.
1.2 Research Aim
This study aims to determine after Cathay Pacific acquisition of Hong Kong express and impact of the purchase on Cathay Pacific operating performance.
1.3 Research Objectives
The aims of this study will further be divided into the following objectives.
- To review the literature on Cathay Pacific acquisition of Hong Kong Express.
- To establish the impact of Cathay Pacific and Hong Kong Express merging on operating performance.
- To make conclusions and recommendations based on the findings.
1.4 Rationale of the Study
I believe that this is an interesting topic since it will play a focal point in enlightening airline organizations on the importance of merging and presentation of critical knowledge that will help them in the future if they want to join (Somlo et al., 2017). Again, the findings that will be gained from this study will be used by relevant bodies such as airline, government, and airline human resources on the impact of airline industry acquisition on operational performance. This study has not be focused for the past few years.
1.5 Outline of the Project
This study will have five-chapter, where chapter one will present an introduction on the subject matter by giving background information on the topic under investigation, aims and objective of the study, and presentation of the study topic rationale. The second chapter is the literature review on the subject; the acquisition and history of the two companies after acquiring impacts on operational performance will be addressed in this section. The third chapter is the methodology, where an introduction to the method, design, and data collection used in the study will be addressed. The fourth chapter will discuss the result and data analysis by addressing the key objectives of the study. The final section is the conclusion and recommendation based on the findings gained in this study.
Chapter II: Literature Review
2.1 Increased Low-Cost Carrier Market Segment and Niche Value
According to the previous research that has been done on the topic, it has remained opined that the acquisition of the Hong Kong Express has played a focal point in increasing the market segment for the low-cost carrier (Hiller, Hübner, Fajnorova, Schwartz, & Drewes, 2019). Based on the information presented by CEO of Cathay Pacific, he said that the acquisition of the Hong Kong Express would be one of the iconic development that will help the company to serve more market thus improving profitability and growth in terms of expansion (Arouri, Gomes, & Pukthuanthong, 2019). Again, the CEO asserted that the acquisition of Hong Kong Express would be a good ideology for creating a right traveling ideology on the public, which is suitable for Cathay in line with the development of Hong Kong as a global aviation hub. In that regard, it has remained noted that the acquisition of the Hong Kong Express will play a critical role in the expansion, thus improving the economic generation, which offered more great economic development in Hong Kong in general. Reasoning along the information presented on the company profile, they demonstrated that Hong Kong Express would continue operating as a standalone airline using the low-cost carrier business model (Minatovicz, Sun, Foran, Chaudhuri, Tang, & Shameem, 2020). With the increase of the service on the low-cost carrier will help the company to expand via an increased client attraction in the airline market sectors. The logical; explanation that can be deduced from this line of thinking is that the acquisition of Hong Kong Express has been viewed as a breakthrough for Cathay Pacific to grow and develop in their various operations in long-term dimensions. Again, the previous research has asserted that this process has also played a central role in enhancing the competitive advantage of Hong Kong as a home base, given that it has been ranked as a hub for aviation.
2.2 Cathay Pacific acquisition process of Hong Kong Express
Based on the information offered on the subject matter, it has remained noted that Cathay pacific entered the share of the purchase agreement for 100% of Hong Kong Express shared for 4.93 billion HKD (630 million USD (Fu, Sun, & Ghauri, 2018). According to the company profile, it has remained asserted that it has offered its financial information about the deal; however, they narrowed down to submit to state the reason for the transaction (Mehra, Kumar, & Raju, 2018). As illustrated above, Hong Kong Express is a low-cost carrier operating fleet of the 24 Airbus A320 family aircraft on the regional flights. In that regard, it has remained noted that the Hong Kong Express tend to produce to nearly a dozen destinations in Japan, and then also it happens to work in various part of South Korea, Thailand and more (Chen, Liang, Yang, Li, Zhang, & Ren, 2019). Therefore, Cathay’s acquisition of the Hong Kong Express tends to make a significant management shift in Hong Kong, where in late 2017, the company has bunched executives from Hainan Airlines and parent Company HNA, which resulted in the clearing of the previous management.
Cathay Pacific, the seller and the seller’s Guarantor entered on the share purchase agreement on 27 March 2019 to purchase the Cathay Pacific purchase for the consideration of HK$4.93 billion. In the process, it was revealed that the payment has two terms: cash consideration of HK$2.25 billion that are payable and non-cash consideration of HK $2.68 billion settled via the issue and motivation of promissory loan notes (Chen et al., 2019). According to the research done by Du, Ke, He, Chu, & Wagner, (2019), they asserted that the completion is conditional upon particular condition that needs to be fulfilled (Yuan, Xu, Geng, Ji, Wang, He, & Li, 2020). The company profiles documented that the some of the critical condition that was given to Cathay Pacific is a clearance that is needed from relevant competition authorities, consent that is acquired from the Hong Kong Express contract and the termination for particular arrangement between Hong Kong Express and its related parties in the business market (Jia, Geng, Wang, Tian, Xu, Shi, & Kong, 2018).
Chapter III: Methodology
3.1 Information to be Collected
The information that will be collected in this study is secondary and primary data. The secondary data will be gained from the literature review on the previous research that has been done on the topic. For the primary information, I will interview employees in Cathay Pacific to gain critical information on the after acquisition impact on the operational performance.
3.2 How information will be Collected
In the context of data collection, I will interview employees in Cathay Pacific to gain critical information on the after acquisition impact on the operational performance. I will use a questionnaire to collect the primary information from the participants that will be used in this investigation. For the secondary data, I will review articles and journals to understand the after acquisition impact of Hong Kong Express. I will use a stratified sampling method in the selection of the participants. The main reason why I will deploy stratified sampling is because I want to interview specific people. They are having a particular characteristic such as regional and operating managers since they have a good experience on the study topic. Therefore, interviewing them will help me gain substantial information that is worth making a robust conclusion and recommendations.
3.3 Analysis technique
For the data analysis technique, I will deploy SPSS version 21 to analyses the information that is gained from the interview. After that, I will present the result based on correlation, ANOVA, and T-test on the subject matter.
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