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Cathay Pacific SWOT & PESTLE Analysis

ID : 52160953| Oct 2019| 15 pages

COMPANY PROFILE -Cathay Pacific

Business Sector :Aviation

Operating Geography :Asia, Hong Kong, Global

About Cathay Pacific :

Cathay Pacific, established in 1946 is an international airline registered and based in Hong Kong. From the past 7 decades, the airline is deeply dedicated to its home base and is extensively contributing to developing. Hong Kong as one of the world’s leading international aviation centers. The company offers scheduled passenger and cargo services to over 212 destinations in 53 countries and territories. The company provides scheduled air passenger, cargo services, airline catering, ramp and passenger handling, ground-handling, cargo and aircraft maintenance services. Dragonair which has been rebranded as Cathay Dragon is a regional airline and is a registered and a wholly owned subsidiary of Cathay Pacific. The company is also member of the oneworld global airline alliance and Cathay Dragon, Cathay Pacific’s sister airline, is an affiliate oneworld member. As of March 2018, Cathay Pacific and Cathay Dragon employ 32,400 people worldwide of which 25,800 people are employed in Hong Kong, making the company one of Hong Kong's biggest employers. In 2019 Cathay Pacific announced the acquisition of Hong Kong Express Airways Limited.
While 2018 proved out to be a year of great achievements and honors for the company, 2019 also brought great achievements for Cathay Pacific, the company has become the world’s first airline to be awarded CEIV Fresh, the International Air Transport Association’s (IATA) globally-recognized accreditation for perishable product handling. Cathay Pacific Airways achieved a twofold triumph at the ‘VFS Global Times Travel Awards 2019’. The company received two awards in the Travel Enablers category, for ‘Airline – International Business Class’ and ‘Airline – International Economy Class’
Cathay Pacific’s Vision and Mission statement reads “Our vision is to be the world’s best airline. Being the best means that we always strive to excel in everything we do. Our dynamic team provides the highest quality service so that our customers are happy they chose Cathay Pacific.”
The USP or Unique selling proposition of Cathay Pacific signifies in being the flag carrier of Hong Kong and the world's largest cargo carrier. It has made sturdy investments to develop Hong Kong as the world’s leading international aviation centers and biggest international cargo terminal in the world.

Cathay Pacific Revenue :


HK$ 111,060 million – FY ending 31st Dec 2018 (y-o-y growth of +14.2%)
HK$ 97,284 million – FY ending 31st Dec 2017

Ownership / Major shareholders :


As of April 2018, the major shareholders of the company are as follows –
1) Swire Pacific Ltd. (45.0%)
2) Air China Ltd. (30.0%)
3) Government of Qatar (Qatar Airways) (9.94%)
4) Norges Bank Investment Management (0.43%)
5) Dimensional Fund Advisors LP (0.38%)

Competitive Analysis of Cathay Pacific

SWOT
PESTLE
The word 'Cathay' means China in English, which shows that along with name, the Cathay Pacific Group is solely and deeply committed to its home base. Cathay Pacific is the official carrier of Hong Kong and is making huge investments in improvising Hong Kong's airports, cargo terminals, aircraft etc., with a clear vision to make its home base the world's largest aviation center. The company provides passenger services and scheduled cargo services in more than 200 destinations across the world. The company is the world's largest cargo carrier and ranks 4th amongst the world's best airlines of 2019. Cathay Pacific along with its sister airline- Cathay Dragon, operates 206 aircraft till date. Cathay Pacific owns 18.13% of Air China Limited (“Air China”) and is also a major shareholder in AHK Air Hong Kong Limited (“Air Hong Kong”). Thereby utilizing the SWOT tool to understand further about factors that continue to strengthen the company and to foresee the opportunities that Cathay Pacific has in its external environment that can be incorporated to achieve sustainable growth and progress. The SWOT reports bestow intelligence on the internal weaknesses and threats from the macro environment that can hurt Cathay Pacific's business model and growth trajectory.
Cathay Pacific is in the aviation market for the past 7 decades and all this while the company's major strengths have been its impeccable dedication towards the following aspects: providing quality services to consumer, focused on the patron's demand and leveraging the same, high-quality training and facilities to employees, technology-based improvisations, no compromise in safety etc.
One of the major weakness of Cathay Pacific is the fluctuating fuel prices which have caused huge losses to the company. Another noted weakness of Cathay Pacific is the fleets are costlier and is mostly targeted to a confined niche of audiences belonging to middle and upper middle classes.
The external analysis highlights certain opportunities like expanding international routes and destinations, increasing demand for international travel, improving lifestyles demands quality facilities and luxury travel etc. These opportunities can be incorporated by Cathay Pacific to further strengthen the company.
The aviation industry is one of the most competitive industry and Cathay Pacific is prone to stiff competition and threat from luxury brands offering better services and local competitors offering flights at cheaper rates.
The SWOT analysis for Cathay Pacific is presented below in the SWOT Matrix followed by detailed analysis:
Strengths
Weaknesses
1. Strong brand equity and customer experience
2. Presence across regions leading to increased synergies of operations
3. Huge fleet and mix of aircrafts leading to optimum utilization of fleet based on demand conditions
4. Code sharing agreements along with membership in OneWorld alliance
1. Weak financials due to high leverage
2. Future finance leases liabilities leading to limited scope for future expansion
3. Cost reduction initiatives leading to unpleasant measures
Opportunities
Threats
1. Emerging market growth potential which would be the future growth driver for the company
2. Technology backed services leading to improved operations and reduced costs
3. Expansion in air freight sector in cargo hubs like Dubai
1. Intense competition in both domestic and international segments
2. Volatility in jet fuel prices which is significant operating expense for the company
3. Regulatory issues pertaining to continuing operations in both domestic and international segments
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Detailed SWOT Analysis of Cathay Pacific

 

Strength

This section is available only in the 'Complete Report' on purchase.

Weakness

1. Weak financials due to high leverage leading to difficulty in raising future finance: We can see from the financial reports that the company has low liquidity ratios. The weak ratio implies that the firm may face issues in fulfilling its short-term obligations. Also, the D/E ratio for Cathay Pacific is 1.04 compared to .76 for ANA proving that the company has raised more debt and it’s a highly-leveraged company. If we see the Cash Conversion cycle of Cathay airlines it shows that the firm is financing working capital requirement through supplier financing which would result in higher cost of borrowing for the firm based on the cost of capital of the suppliers. The company’s tight liquidity position puts it in a disadvantage when funding any new capital from the market due to increased risk perceived by the creditors.

2. Future finance leases liabilities leading to limited scope for future expansion: Cathay Pacific has commitments under finance lease agreements in respect of aircraft and related equipment expiring during the years 2016 to 2025. As of December 2015, the carrying value of the company's future payment was HK$ 30,898 million and present value of future payments of HK$ 28,047 million (taken from annual report). Such amount of future liabilities may impact the firm’s ability to obtain additional financing for future expansion. It may also result in impact on ROIC for the firm due to higher obligation in long term debt.

Opportunity

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Threat

This section is available only in the 'Complete Report' on purchase.

Major Competitors :

Major Brands :

  • Cathay Pacific
  • Cathay Dragon
  • Cathay Pacific Catering Services (HK) Limited
  • Cathay Pacific Services Limited
  • Cathay Holidays Limited

Key Business Segments / Diversification :

Cathay Pacific
Passenger transport (Airline) Cargo transport (Airline) Aircraft ramp handling services(Non-airline)
Ground handling(Non-airline) Catering (Non-airline)

Recent Acquisition / Mergers / Alliance / Joint Ventures / Divestitures :

Open Table Preview
Name
Business Segment
Year
Type
Objective/Synergy Achieved
DragonairAirlines2006AcquisitionDragonAir was acquired for $1.05 million and with this deal Cathay Pacific would increase its flight network on the Chinese Mainland. From the two routes that it was previously operating on, Cathay Pacific would now be able to operate on all of the 23 routes under Dragonair.
Source: Company website and other reliable sources. The detailed table is available in the Complete Report.
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Check Out Analysis of Other Relevant Companies

WHY BUY THIS REPORT?
TABLE OF CONTENTS
DELIVERY AND FORMAT
WHY CHOOSE US?
1) Strategic tools like SWOT and PESTLE help analyze major internal and external factors influencing the airline industry at large, specifically Cathay Pacific.
2) The SWOT and PESTLE report constitutes of SWOT Matrix and PESTLE Matrix to obtain a quick glimpse of the internal and external strategic factors accompanied by detailed analysis.
3) The SWOT Analysis of Cathay Pacific reveals the company's major strengths and opportunities from its external environment that can be consolidated to further strengthen the company. The report also bestows intelligence on Cathay Pacific's internal weaknesses and external threats.
4) Review of strategic initiatives that were taken by Cathay Pacific, to attain a competitive advantage over its rivals and achieve a sustainable position in such a highly competitive environment.
5) Cognizance of current technological trends in the aviation industry and its influences on the Cathay Pacific.
6) The PESTLE analysis of the airline industry helps to understand the constituents that impact the aviation market.
7) The PESTLE/ PESTEL/ STEEPL Analysis covers a comprehensive analysis of all external factors, specifically of influencers like political, economic, social, technological, legal and environmental and highlights their outcome on the operation of Cathay Pacific.
8) Intelligence on Cathay Pacific's business model and business diversification. It further expands into the key business segments and gives an elaborate view of the business case study.
9) A concise case of Cathay Pacific’s founders, headquarters, turnover, revenue, subsidiaries, and employee strength. This is accompanied by a comprehensive company analysis to obtain insights into company information, company profile, business model, business strategy, and marketing strategy.
10) Holistic information on Cathay Pacific's share price, mergers and acquisitions, strategic partnerships and alliances that the company subscribed to accomplish its business aims or synergies.
11) Study of Cathay Pacific’s USP or unique selling proposition, mission statement, and vision statement that the company has envisioned to excel in the aviation industry.
12) A peek into the Cathay Pacific's chief performance indicators, core values, success factors, value proposition, and core competencies.
References used in Cathay Pacific Analysis Report

1 . Cathay Pacific Airways Limited Annual Report 2018 - https://www.cathaypacific.com/content/dam/cx/about-us/investor-relations/interim-annual-reports/en/2018_annual_report_en.pdf

2. Financial Briefings - https://www.cathaypacific.com/cx/en_IN/about-us/investor-relations/financial-briefings.html

3. Announcements - https://www.cathaypacific.com/cx/en_IN/about-us/investor-relations/announcements.html

4. Cathay Pacific Airways Investor Presentation – slideshow- Cathay Pacific Airways Limited - https://seekingalpha.com/article/4183374-cathay-pacific-airways-cpcay-investor-presentation-slideshow

The detailed complete set of references are available on request in the 'Complete report' on purchase.

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Cathay Pacific SWOT & PESTLE Analysis - SWOT & PESTLE.COM

SWOT & PESTLE.com (2020). Cathay Pacific SWOT & PESTLE Analysis - SWOT & PESTLE.com. [online] Available at: https://www.swotandpestle.com/cathay-pacific/ [Accessed 02 Apr, 2020].

In-text: (SWOT & PESTLE.com, 2020)

Copyrights and Disclaimer

Cathay Pacific SWOT and PESTLE analysis has been conducted by Vipul Varkar and senior analysts from Barakaat Consulting.

Copyright of Cathay Pacific SWOT and PESTLE Analysis is the property of Barakaat Consulting. Please refer to the Terms and Conditions for usage guidelines.

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Cathay Pacific SWOT & PESTLE Analysis
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