Cathay Pacific Airlines Portfolio - Assignment Example

? Cathy Pacific Airlines Cathy Pacific Airlines Task Historical Background Cathy Pacific is an international airline that was registered in 1946 and is based in United Kingdom. It was formed to carry both passengers and cargo in 15 destinations across the world. It is perceived to be the leading airline because of how its staffs are committed to provide high quality services, its standardized fleets and product enhancement. Lately, the airline was known to operate with 80 wide body aircrafts for the past seven years. During a research carried out by global Skytrax Research poll carried in population of 4.4 million travelers, it lead to an award to Cathy Pacific for being considered the best airline (Exter & Tamara, 2012). In the following year, it was also awarded with another award for being the best airline Europe and best airline Transpacific for two consecutive years. Cathy Pacific Airlines of UK was founded in 1946 by Roy Farewell a businessperson as well as a pilot and Sydney de Kantzow an adventurous pilot operating Calcutta, Burma and Chungking (Lasok, 1998). Earlier, during the Second World War, the duo was flying to shanghai with a DC-3. Later, the British colonial government demanded that they officially register their company in order to operate Hong Kong. It was on the 24th of September that the two entrepreneurs registered their company by the name Cathy Pacific Airways Corporation. It was though the registration of Cathy Pacific that Roy Farrell import and export Company was formed. The purpose of forming Roy Farrell Import-Export Company was to undertake tax issues; they would also lease aircrafts from the Cathy Pacific Airlines. By the end of one year after its formation, Roy Farrell had possessed a second DC-3 and had ferried over 3000 passengers and an estimated cargo of 15000 kilograms from Australia and Asia. Cathy Pacific’s growth was rapid because in 1947, the airline had acquired an additional five DC-3 and another two smaller aircrafts (Catalina Fling boat), this enabled them to extend their operations to Macao towards the southern China. In 1948, Cathy Pacific had acquired a 45% market share in the airline industry. In 1962 to 1967, the airline’s growth was rapid; this made them enjoy its spectacular growth. The huge profits that they realized brought in the first international services in Osaka, Nagoya and Fukuoka in Japan. In late 1970s, the airline had expanded its services to other parts of Europe and North America. In mid 1980, the airline was moving to London, Frankfurt, Amsterdam, Brisbane, san Francisco, Vancouver, Zurich, and Manchester. In 1990s, Cathy Pacific assembled the youngest fleets in the world. For the last five years, Cathy pacific has improved drastically in terms of carriage per annum. In 2008, it carried 13, 066, 011 passengers and 4046 tons of cargo. In 2009, it carried 37, 683, 812 passengers and 32, 128 tons of cargo. In 2010, it increased to 122, 544, 546 passengers and 111, 234 tons of cargo. This is a clear indication that Cathy Pacific is growing rapidly (Malcolm et al., 2013). This is because it was established long time ago thus making them to secure a larger market share. In addition, its long service has demonstrated its capabilities to carry even more passengers and cargo as time goes by. The future of Cathy Pacific seems exciting. The airline’s expectations are that they should have bought 100 aircraft by the year 2020. They will also introduce a third runway in Hong Kong, which is an international airport. Cathy Pacific substantial investment is to build their cargo terminal at the airport. They also plan to nurture catering, ground handling companies, aircraft maintenance and corporate headquarters at UK. Vision The vision of Cathy Pacific airlines is “To be the leading airline in the world”. this means that they should strive to excel in all they do. Objectives The main objectives of Cathy Pacific as set by the company management include: To ensure that customers are well served and satisfied To increase our revenues annually at a constant rate To ensure that we emerge the leading airline in the world Income Statement Annual Data All numbers in thousands Period Ending Dec 31, 2012 Dec 31, 2011 Dec 31, 2010 Dec 31, 2009 Total Revenue 98,406,000   89,524,000   66,978,000   86,563,000   Cost of Revenue 81,481,000   66,150,000   52,614,000   83,983,000   Gross Profit 16,925,000   23,374,000   14,364,000   2,580,000   Operational Expenses Development Research -   -   -   -   General Selling and Administration -   -   -   -   Non-recurring -   -   -   -   Others -   -   -   -   Total Operating Expenses 92,906,000   78,471,000   62,499,000   94,124,000   Operating Income or Loss 5,500,000   11,053,000   4,479,000   (7,561,000) Income from Continuing Operations Total Other Income/Expenses Net -   -   -   -   Earnings Before tax &interest 5,500,000   11,053,000   4,479,000   (7,561,000) Interest Expense (909,000) (992,000) (1,311,000) (1,810,000) Income Before Tax -   -   -   -   Income Tax Expense 803,000   1,462,000   283,000   (1,333,000) Minority Interest (169,000) (185,000) (170,000) (224,000) Net Income From Continuing Ops 5,670,000   14,233,000   4,864,000   (8,472,000) Non-recurring Events Discontinued Operations -   -   -   -   Extraordinary Items -   -   -   -   Effect Of Accounting Changes -   -   -   -   Other Items -   -   -   -   Net Income 5,501,000   14,048,000   4,694,000   (8,696,000) Preferred Stock And Other Adjustments -   -   -   -   Net Income Applicable To Common Shares -   -   -   -   Source: (Marie,Vaillancourt &, Mary, 2013) Balance Sheet Annual Data ‘000 Period Ending Dec 31, 2012 Dec 31, 2011 Dec 31, 2010 Dec 31, 2009 Assets Current Assets Cash & Cash Equivalents 12,798,000   9,612,000   8,276,000   16,522,000   Short Term Investments 9,563,000   8,112,000   12,434,000   -   Net Receivables 8,828,000   8,815,000   8,716,000   7,415,000   Inventory 1,194,000   1,155,000   1,021,000   947,000   Other Current Assets 3,826,000   3,663,000   6,205,000   746,000   Total Current Assets 36,209,000   31,357,000   36,652,000   25,630,000   Long Term Investments 19,772,000   19,092,000   14,341,000   10,590,000   Property Plant and Equipment -   -   -   -   Goodwill 7,666,000   7,666,000   7,666,000   7,666,000   Intangible Assets -   -   -   -   Accumulated Amortization -   -   -   -   Other Assets -   -   -   -   Deferred Long Term Asset Charges -   -   -   -   Total Assets 155,010,000   137,133,000   128,053,000   113,324,000   Liabilities Current Liabilities Accounts Payable 7,357,000   7,663,000   6,211,000   4,832,000   Short/Current Long Term Debt 59,546,000   43,335,000   39,633,000   42,653,000   Other Current Liabilities 20,381,000   20,782,000   20,265,000   17,140,000   Total Current Liabilities 35,895,000   37,007,000   35,184,000   29,811,000   Long Term Debt 20,209,000   12,858,000   11,193,000   15,159,000   Other Liabilities -   -   -   -   Deferred Long Term Liability Charges -   -   -   -   Minority Interest -   -   -   -   Negative Goodwill -   -   -   -   Total Liabilities 97,704,000   81,189,000   73,624,000   71,086,000   Stockholders' Equity Misc Stocks Options Warrants -   -   -   -   Redeemable Preferred Stock -   -   -   -   Preferred Stock -   -   -   -   Common Stock 17,082,000   17,082,000   17,082,000   17,082,000   Retained Earnings 38,363,000   38,785,000   37,061,000   24,704,000   Treasury Stock 1,741,000   (58,000) 131,000   452,000   Capital Surplus 31,180,000   21,915,000   19,732,000   19,655,000   Other Stockholder Equity -   -   -   -   Total Stockholder Equity -   -   -   -   Net Tangible Assets Source: (Jeffrey & Risius, 2007) Cash Flow Annual Data ‘000 Period Ending Dec 31, 2012 Dec 31, 2011 Dec 31, 2010 Dec 31, 2009 Net Income 916,000   5,501,000   14,048,000   4,694,000   Operating Activities, Cash Flows Provided By or Used In Depreciation 6,617,000   6,127,000   6,316,000   5,652,000   Adjustments To Net Income -   -   -   -   Changes In Accounts Receivables (1,075,000) 1,148,000   (2,091,000) 2,422,000   Changes In Liabilities -   -   -   -   Changes In Inventories (39,000) (134,000) (74,000) 13,000   Changes In Other Operating Activities 2,224,000   503,000   (1,383,000) 212,000   Total Cash Flow From Operating Activities 7,440,000   13,563,000   17,599,000   2,035,000   Investing Activities, Cash Flows Provided By or Used In Capital Expenditures (20,975,000) (17,610,000) (8,299,000) (6,776,000) Investments -   -   -   -   Other Cash flows from Investing Activities -   -   -   -   Total Cash Flows From Investing Activities (20,286,000) (13,061,000) (14,663,000) (1,223,000) Financing Activities, Cash Flows Provided By or Used In Dividends Paid -   -   -   -   Sale Purchase of Stock -   -   -   -   Net Borrowings -   -   -   -   Other Cash Flows from Financing Activities (1,056,000) 1,900,000   (7,233,000) 4,249,000   Total Cash Flows From Financing Activities 16,052,000   758,000   (4,914,000) 2,140,000   Effect Of Exchange Rate Changes (20,000) 80,000   156,000   97,000   Change In Cash and Cash Equivalents 3,186,000   1,340,000   (1,822,000) 3,049,000   Source: (Pizzey, 2001) Company size and Structure Cathy Pacific has a total of 4500 permanent staffs and 6000 cabin and cockpit crew. The company so far has invested US$ 1 billion at Hong Kong making it the largest of the other outlets. It lies in a 4, 500 acre piece of land. Cathy Pacific is listed as among the Oneworld Global Alliance. The Cathy pacific is a private owned company owned through partnership. It is owned by Roy Farewell a business man as well as a pilot and Sydney de Kantzow. They founded it in 1946. Products and services Cathy Pacific is tasked with offering flights to passengers and carrying cargos. In their company, they have segmented its services into classes basing on ones’ ability. The classes include business, economy first class and pier lounge. Catering, maintenance and education are products being offered by Cathy Pacific (Richard & Wilson, 2012). Promotional strategy Cathy Pacific has employed the use of YouTube channel as a promotional strategy in order to market their products and engaging their customers. They have developed interesting movies to be watched such as ‘A day in the life of a Pilot’. The reason for this is that customers are perceived to rarely know what is happening behind the airline scenes and what a pilot before and after a takeoff (Barry, 2007). So far, 50,000 people have watched the video, which is impressive to the growth of the company. Cathy pacific is able to command up to 35% of the total share in the market. Although there are other upcoming airlines, their share is impressive. Task 2 SWOT analysis Strengths Online growth They have Loyal customers Its management team is strong Pricing is amazing Many aircraft fleet Weaknesses Low research and development Little innovation Poor communication Not yet diversified Opportunities There are popular destinations globally Online Financial markets through debts Threats Travel trends Competition Season issues Political factors Weather conditions Price wars Source: (Barber, 2013) Task 3.1 Economic factors Currency inflation Customers will not travel if their currency if affected due to inflation (Armendariz et al., 2007). High cost of servicing High cost of servicing will force Cathy Pacific will be left with no other choice but to go for new ones which is expensive High cost of living This will reduce the number of people travelling because few people will be travelling Task 3.2 Oil prices fluctuation The rise of oil will negatively affect Cathy Pacific because its profits will definitely drop in respect to amount increased but a decrease will affect the company positively. Fluctuation of company stocks Rampant fluctuations will make it difficult to make forecast for the company. Task 4 Flight routes approval FAU strikes Employee strikes Operation Data privacy Security policy Carriage laws Retention laws Marketing laws Employee laws flight laws international laws Members of EU Belgium 1952 Australia 1995 Bulgaria 2007 Croatia 2013 Denmark 1973 Cyprus 2004 Finland 1995 Estonia 2004 Czech Republic 2004 Germany 1952 Ireland 1973 Greece 1981 France 1952 Hungary 2004 Italy 1952 Luxembourg 1952 Latvia 2004 Lithuania 2004 Romania 2007 Malta 2004 Netherlands 1952 Slovakia 2004 Lithuania 2004 Spain 1986 Portugal 1986 Poland 2004 Sweden 1995 UK 1973 Merits and demerits of euro Cathy Pacific will transact its business without any difficulty due to a common currency Demerits 1. Fluctuation suffered due to local currency fluctuation (Luiz, 2000). 2. Country’s freedom is given out 3. Collective problem is shared Task 5 Digital marketing People celebrate aging –this helps marketers develop brands to those models that are more in-depth and textual from each generation (Oldroyd, 2012). Screened interaction – this attract customers attention Re-engineering randomly – introducing the unexpected will make customers inspired (Dalic, 2003) Optional marriage- helps identify what singles need Food emerging as a new economic issue- introducing food as a product Shared value- improving on company’s competitiveness (Adjibolosoo, 2000). Generation go- helps improve communication systems Live a little improves enjoyment of pleasures that come with life. Economy navigation – brings in new opportunities Task 6 1. New fleet that attract customers to board plane 2. Apple applications- help convince customers gain brand loyalty 3. E-bills for Airways which makes it easy to distribute cargo Cathy will benefit from this in that if they have new fleet, passengers will enjoy new ones that the outdated ones. Electronic airways bill increase accuracy and saves time. The use of internet by customers will increase communication system by customers to the company. Customers will also learn of events, flights timetable among other things without necessarily going to the customer service’s desk. Bibliography Seaton, A. V, & Bennett M., M., 1996, The Marketing of Tourism Products: Concepts, Issues and Cases, Cengage Learning EMEA. Adjibolosoo,B, 2000, The Significance of the Human Factor in African Economic Development, Greenwood Publishing Group. Armendariz, B de A., Armendariz B., & Morduch J., 2007, The Economics of Microfinance, MIT Press. 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