Airline Marketing Module

London 11-13 April 2012

Coursework B
Darwansjah (Dani) Toligi
About Cathay Pacific Airways and Hong Kong

Cathay Pacific Airways was founded in 1946 by an American Roy Farrel and an
Australian Sydney de Kantzow. The company was initially operated out of Shanghai
with one Douglas DC3 named “betsy”. Cathay’s home base was later moved to Hong
Kong and began passenger flights to various cities.

Today Cathay Pacific operates 134 wide-bodied aircraft with 92 more on order. It
operates to 164 destinations in 42 countries. The major shareholders of Cathay are
Swire Pacific Limited and Air China Limited.

Cathay Pacific is currently ranks as the second most profitable airline (Source: Air
Transport world 2011). In 2011, Cathay recorded revenue of HK$98,406million and its net
profit was HK$5,501million with profit margin of 5.6%.

There is a number of advantages of Cathay Pacific being based in Hong Kong.

As one of the world’s major financial centres, Hong Kong benefits from its low taxation
and free trade status. Hong Kong is maintaining capitalist economy and therefore has
become one of the greatest concentrations of corporate headquarters in the Asia-Pacific
region. In 2011, Hong Kong was ranked second in the Ease of Doing Business Index,
behind Singapore.

The government of Hong Kong plays little role in determining how business is
conducted in Hong Kong. Market and private sector are allowed to determine its own
development.

Being located in Hong Kong, Cathay Pacific has several advantages to play its
strategic plans as an important global carrier.

Cathay Pacific’s Marketing Policies

Product

Cathay Pacific is a well-known airline for delivering quality product to its

customers. The aircraft being used for their operations are various types such as B747-
400, B777 and the A330/340 family. Except for the B747-400, the aircraft operated by
Cathay are quite new with the average fleet age of 10.7 years. In the coming years,
Cathay will see the arrival of some 90 new aircraft such as the A350. As a result, it will
bring the average age of the aircraft fleet.

The schedules that Cathay offers are suitable to most. Hong Kong is
located in the middle of two economic powers of the North America and Europe and
now China. From its strategic location, Cathay links the major cities in the

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abovementioned regions with flights with effective timing. For example New York/JFK is
served with four flights a day. Taipei in Taiwan is served up to 15 flights daily. Within its
network, Cathay offers many flights to choose from with easy connections to major
cities worldwide.

There are three classes of service currently offered to customers being

First, Business and Economy. The Premium Economy Class is being progressively
introduced to the Cathay’s fleet.

The First Class offers an excellent product from the separate check-in counter,
use of exclusive lounge, flatbed seat with the latest inflight entertainment and superb
inflight dining where the passenger choose the time they want to eat.

The Business Class is similarly of the excellent value for money product. It offers
flatbed sitting for the long haul flights. Inflight entertainment consists of a large 15.4 inch
TV with a lot channels to choose from for its audio and video on demand.

Although Cathay is a little bit behind, the Premium Economy Class is certainly a
useful addition for long haul customers who demand it. The class introduced wider
seats and more leg room. The seat can recline at an increased angle compare to the
standard economy.

Price

As far the pricing is concerned, it is not one of the most economical one
especially on Business and First Class. However, the fares are competitive to the most
legacy airlines which are on the upper level.

The capacity management as such that at the year 2011 Cathay achieved the
average load factor of 80.4%.

There are 5 types of fares for the Economy Class that determines the
applicability for mileage reward, validity of the ticket, rebooking and cancelation fees,
mileage upgrade and pre-booked seat.

The Business Class is offered with fewer restrictions. The lower fare is charged
with higher cancelation fee, no- show and one month ticket validity. The higher fare
entitles for standard 12-month ticket validity, lower cancelation fee and no charge for
no- shows.

First Class is probably has the least restrictions. The only penalty is the
cancelation. Other than that the First Class fare offers the standard 12-month validity,

Airline Marketing April 2012: Coursework B 3

no charge for no-show, pre-booked seat, and mileage accrual. There is only one fare
available for First Class.

There are other types of fares that only eligible for selected group of customers.
The Domestic Helpers Fare is offered to migrant workers from Sri Lanka, Philippines,
and Indonesia who are working in Hong Kong.

Cathay Pacific also offers special fare to students who are studying at selected
countries overseas. The fare can be bundled for student and parent.

Promotion

Cathay Pacific runs the Marco Polo Club program that offers privileges to its
frequent flyers. The club program is affiliated with oneworld alliance partners. There are
a range of benefits are available to member of the Marco Polo Club depending on the
club tiers.

The other mileage based program at Cathay Pacific is Asia Miles. Asia Miles
earned towards flights, daily spending, and hotels at over 400 partners worldwide. The
miles are redeemable for free tickets or other lifestyle awards.

American Express and Cathay Pacific launched co-brand credit card and Asia
Miles. Similar to the abovementioned programs, mileage accrued on this program is
also eligible for free tickets.

Another loyalty program from Cathay Pacific is the Corporate Travel Solutions
(COTS). The unique program offers business travel benefits to corporates. The
companies must meet certain criteria such as annual travel spending before eligible to
join the program. Once in the program, the selected persons in a company can enjoy
privileges which would normally be available to the Marco Polo higher tiers members.

Cathay Pacific has a long supporter for the world famous rugby team Hong Kong
Sevens. Recently Cathay Pacific together with HSBC is into the new 4-year sponsorship
agreement to support Hong Kong Sevens.

Green Explorer program is sponsored by Cathay Pacific to give students from

various countries understanding of environmental issues and the importance of
conversation.

Cathay Pacific uses the new social media such as Facebook, Twitter and
YouTube for their marketing adverts.

Airline Marketing April 2012: Coursework B 4

Place

The distribution channels of Cathay Pacific remain traditional. There are ticketing
offices in most cities served by the airline, town and airport offices. The reservation
centres in many cites handle bookings.

Internet bookings through Cathay Pacific’s website are also available and very
effective way for time saving.

Travel agents are still dominant partner for Cathay Pacific as their distribution
channel. Buying tickets for Cathay Pacific can still be done at most travel agents
worldwide.

CONCLUSION

The home base of Cathay Pacific in Hong Kong is unique. Hong Kong being a
major financial centre in Asia provides several benefits to Cathay Pacific. As a legacy
carrier which adopt the concept of differentiation appeared to have implemented most of
the marketing strategies and it succeeds.

Despite of the rising fuel price, Cathay Pacific’s 2011 Annual Result recorded a
profit although it dropped by 60% compare to the previous years. The staff expense
accounted for the second highest after fuel expenses. Staff expense was once the
highest in the company operating cost. Cathay Pacific has to offer many perks in order
to attract the best talents to fill the vacancies which are not available locally.

Cathay Pacific has no domestic network. Anytime a flight departs Hong Kong is
an international arena which is a subject to fierce competition. It ranks as one of the five
5-star airline by Skytrax.

It is remarkable to note that Cathay Pacific achieved the status as the second
most profitable airline despite the limitations it might have by its geographical location.

It is highlighted that Cathay Pacific is focusing on the quality to ensure that the
brand remains strong. The statement is reflected with more new aircraft order to replace
the aging B747-400. The Business seats and Premium Economy are introduced,
lounges are upgraded. It is a smart strategy in order to provide more value to their
customers.

There a lot of options as far as flights availability and frequencies which are an
advantage to the traveling public. Pricing is excellent, different fares for different group
of people at different occasions.

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 The Green Explorer program is also an excellent way of showing to the
customers that Cathay Pacific is a caring company and committed to the issue of the
world.

RECOMMENDATIONS

Although Cathay Pacific is ranked as a 5-star airline, there is room for

improvement. Upon reviewing the Skytrax customer comments, it appeared that works
need to be done in the area of ground service. Language skills, attitude, enthusiasm
and problem solving skills of staff at Business and First Class lounges are identified to
be less satisfactory. Privileged customers such as the high tiers frequent flyers, First
and Business Class passengers are usually demanding. It is quite understandable
knowing the price they pay to get the privileges.

Making an optimum use of the social media probably would help to increase the
sales as more people now spending more time on internet.

Overall it is a well-organized airline which is dedicated to provide the best in the

industry.

END

Airline Marketing April 2012: Coursework B 6

Works Cited

(n.d.). Retrieved May 24, 2012, from Kayak: http://www.kayak.com

(n.d.). Retrieved May 24, 2012, from Planecrashinfo: http://planecrashinfo.com/rates.htm

(n.d.). Retrieved May 25, 2012, from Skytrax: http://www.airlinequality.com/Airlines/CX.htm

Cathay Pacific Airways. (2012, March 14). Annual Result. 31 December 2011.

Hong Kong. (n.d.). Retrieved May 24, 2012, from Wikipedia: http://en.wikipedia.org/wiki/Hong_Kong

Shaw, S. (2007). Airline Marketing and Management. Surrey: Ashgate Publishing Limited.

Shaw, S. (2012). Airline Marketing. London: City University.

Airline Marketing April 2012: Coursework B 7