Research Proposal: what the future will look like for Cathay Pacific after the pandemic and China taking control of Hong Kong and Hong Kongs role as a hub in aviation.

Introduction

The wake of the COVID-19 pandemic has negatively impacted global economies, with aviation being among the affected industries. As of 2020, Cathay Pacific Airways of Hong Kong had recorded a total loss of HK $ 21.6B (about 2.8 billion US dollars) amidst the pandemic. According to Cathays chairman, 2020 was the most challenging year in their history. To this date, the airline is still in survival mode following the losses recorded in 2020. To recover from these losses, the group is making vaccination for its staff and cost-saving its top priorities. With the pandemic still rampaging through the economy, the recovery pace for Cathay Pacific Airways remains indeterminate. The company, however, is optimistic about recording positive improvements in the second half of this year, 2021 (Tsui et al., 2021).

As of May 2021, Cathay Pacific planned on cutting 5900 jobs and close its regional Cathay Dragon brand. This is an effort meant to cut costs, just like its peers are doing, as the airline continues to suffer from the economic downturn brought about by the coronavirus pandemic. The airline will also change contracts with its pilots and cabin crew as an additional way of reformation. This is expected to cost about HK$2.2 billion. Generally, Cathay Pacific is to slash 8500 positions, including 2600 roles currently unfilled due to the companys initiatives to cut costs. According to Cathay, chief executive officer, restructuring is fundamental for the groups survival as the pandemic continues to devastate aviation (Lo &Kwan, 2019). According to a report done earlier this year, the initiatives could cost the airline about a quarter of its consignment capacity.

Cathay Dragon was in charge of operating the majority of the companys flights to and from China. However, before the pandemic hit, Dragon air had been hit by reduced demand due to protests against the government in Hong Kong that discouraged mainland travelers. There had been plans to close the brand earlier in 2021. However, these plans faced obstructions from Chinas aviation regulator in the protests held in 2020. The question, therefore, becomes what Cathay Pacific Airways will look like after the pandemic. This research seeks to answer this question and also look at what the airline will look like after china taking control of Hong Kong in addition to the impacts of the pandemic. The study also empirically investigates the citys role as a hub in aviation in the pacific region (Tsui et al., 2021).

Literature Review

To begin the research, a literature review was done to help understand the literature on the research topic. This literature review will look at what Cathay Pacific will look like after COVID-19 and China taking control of Hong Kong and Hong Kongs role as a hub in aviation. For this literature review, a total of 7 papers were analyzed, with the majority originating from Hong Kong and China.

Malkani et al. (2020) write that the passenger revenues declined drastically in 2020 due to low demand. In addition, the airlines operating capacity stayed below 10 percent for most of 2020. Despite this struggle, the airline occasionally pocketed a slightly higher percentage of demand, especially during the summer period, with students traveling from Hong Kong and Chinas mainland to the United Kingdom and other areas in Europe. Nevertheless, the summer period, which usually is the peak period of operations of every year, remained extremely difficult in 2020. Man, Xu & Ahmed (2021) agree with Malkani et al. (2020). According to them, passenger revenue recorded an 83 percent decrease in 2020 compared to 2019, while revenue passenger kilometer traffic recorded an 85.1 percent decrease. As a result, the load factor reduced...

Czernet et al. (2021) agree with Malkani et al. (2020) and Man, Xu, and Ahmed (2021) that the pandemic has negatively affected Cathay Pacific Airways and led to the company recording billions of losses. He writes that other subsidiaries and associates also reported massive losses. For instance, HK express recorded a HK$1723 million loss in 2020. The pandemic led to travel contractions. The governments around Asia were forced to impose travel restrictions resulting in the airlines suspension from 23rd March to 1st August. Generally, the airlines subsidiaries recorded a worse performance than in 2019 due to decreased cargo traffic and passenger capacity.

As much as the airlines cargo business was also affected, it recorded a better performance than 2019. Czerny et al. (2021) write that the cargo business has by far been a better performer despite the negative impact of the significant reduction in capacity that is typically provided by large numbers of passengers every year before the pandemic. This performance was attributed to a movie made by the airline to contract services from Air Hong Kong, an all-cargo subsidiary of the airline, to carry selected cargo in the passenger compartments of some aircraft. Some seats were also moved in the economy class compartments of four Boeing 777-300ERs to avail more space for cargo.

In a bid to lower the cash expenditure, the airline had to reduce capacity, freeze hiring, defer capital expenditure, and suspend costs that are not critical for the operations (Man, Xu & Ahmed, 2021). Executive pay was also cut, and employees were asked to take part in voluntary unique leave systems. The fuel cost also recorded a 72.8 percent decline compared to 2019. The steep reduction in fuel price led to hedging losses (Malkani et al., 2020).

Regarding Hong Kongs role in aviation, several writers agree that it plays an important role as the major air transport hub in the Pacific region. Malkani et al. (2020), Czerny et al. (2021), and Man, Xu & Ahmed (2021) all agree that Hong Kog has kept its edge as a transport hub in Asia for DHL and other firms despite competition in Greater Bay Area. The city has always been the preferred option for companies such as DHL Express since it operates the highest number of scheduled flights to global destinations. Moreover, the higher frequencies f flights and faster clearance of customs have always helped the city to retain its role as the regions aviation hub. Hong Kong has also done great in the past as a tourism industry, which goes hand in hand with the aviation industry.

Moreover, the airline serves as one of the major contributors to Hong Kongs GDP, thereby impacting the citys economic growth. However, all this is likely to change after the aviation industry takes a major economic hit due to the pandemic. Hong Kongs future regarding its role in the aviation industry remains unclear, with China taking control of the city and the impact of the pandemic on the airline (Czerny et al., 2021). several writers agree that the hub is facing grave danger of losing its position in the international outlook.

The Proposed Methodology, Methods, and Sources

The methodology that will be used for this research project is quantitative. Additional information will also be obtained as secondary data. The selected method, quantitative, has characteristics that will concentrate on quantifiable data collection. Statistical methods will be applied to allow for the generation of and representation of the data collected in numerical…