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MS4226 Project Progress Report

The project analyzes the financial risk management practices of Cathay Pacific Airways during the COVID-19 pandemic, focusing on the years 2020-2021. It evaluates the effectiveness of strategies such as cost reduction and hedging in response to significant risks faced by the airline due to travel restrictions and revenue collapse. The research employs both quantitative and qualitative methods, including financial report analysis and interviews with industry executives, to assess the impact of the pandemic on Cathay Pacific's financial performance.

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41 views3 pages

MS4226 Project Progress Report

The project analyzes the financial risk management practices of Cathay Pacific Airways during the COVID-19 pandemic, focusing on the years 2020-2021. It evaluates the effectiveness of strategies such as cost reduction and hedging in response to significant risks faced by the airline due to travel restrictions and revenue collapse. The research employs both quantitative and qualitative methods, including financial report analysis and interviews with industry executives, to assess the impact of the pandemic on Cathay Pacific's financial performance.

Uploaded by

詠芯謝
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© © All Rights Reserved
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MS4226 Project Proposal Summary- Group P11

Members: YING Wan Ting (5783622) LI Jia Min (57306245) TSE Wing Sum (57258765) Wong
Yeung Chung (58645321) LI Tsz Ka (57889169) Wong Tsz Mei (57159740)

1.Title: Financial Risk Management Practices of Cathay Pacific Airways during the COVID-19
Pandemic in Hong Kong

2. Brief Introduction of project: The COVID-19 pandemic caused border closure in Hong Kong
and restricted travel, which severely impacted the whole airline industry. As Hong Kong's
flagship carrier, Cathay Pacific faced significant risks, including increased fuel price, fuel cost
hedging risk, revenue collapse and cash flow risk.
This project analyzes how Cathay Pacific adapted its financial risk management practices of cost
reduction, hedging, and cash flow management during COVID-19 in Hong Kong. We would
mainly focus on the financial period of 2020-2021 and compare to that before pandemic to
evaluate the effectiveness of its strategies, and the financial impact of these strategies during a
period of significant loss.

3. Research method(s):
Reviewing and analysing Cathay Pacific's financial reports, particularly its annual reports in
2020-2021, as well as additional historical data on fuel consumption and profit before COVID in
2019 for comparison and disclosing the impact of the pandemic on the Cathy Pacific’s fuel cost
hedging and financial performance.
The research relies on both quantitative data (financial figures, fuel consumption statistics) and
qualitative data (management's explanations, audit opinions) extracted from the annual report.
Industry statistics will be used to identify topics and narratives related to financial risk
management. Observing the strategies of competitors(e.g., Hong Kong Airlines, HK Express)
and partners during Covid-19, to review Cathay Pacific's response or approach to the case.

4. Collection of data:
1. Quantitative Data: For company internal data, the primary source of data is Cathay Pacific's
annual reports (Cathay Pacific Airways Limited. (2020) and (2021) ), which provide detailed
financial statements including fuel cost and consumption breakdowns, hedging losses, operating
expenses, and disclosures on derivative financial instruments.
For the external data of the airlines industry in Hong Kong, IATA (International Air Transport
Association) statistics, Industry reports, market analyses, and academic articles on the airline
sector's response to COVID-19 will be collected to provide a broader context for Cathay
Pacific's practices.
2. Qualitative data:
Semi-structured interviews with aviation executives to gain insight into the impact of the
epidemic on the aviation industry. For example, in the 2021 Annual Report, CFO Rebecca -
Sharp (2021) said ‘In 2021, cargo revenue offset 40% of passenger losses.’ (Cathay Pacific
Airways Limited. (2021))
5. Proposed data analysis method:
a) Qualitative Analysis:
1. Use thematic analysis to identify Cathy Pacific’s key risk management strategies(1.Cost
Reduction, 2.Cargo Prioritization).
1.1 Thematic analysis will be conducted on the qualitative data collected from annual reports
and interviews in procedure.
1.2 Initial coding will be performed to identify segments of data that are relevant to the
research questions. For example, sections of the annual report discussing risk management
strategies will be coded under themes such as "Cost Reduction," "Cargo Prioritization," and
"Government Support."
1.3 through iterative review of the coded data, preliminary themes will be developed. These
themes will be refined and redefined as more data is analyzed, ensuring they accurately reflect
the underlying patterns in the data.
1.4 To ensure the reliability and validity of the themes, they will be cross-checked with
quantitative data and industry reports. This triangulation will help confirm that the identified
themes are robust and meaningful.
2. SWOT Analysis: Assess the strengths, weaknesses, opportunities(Partnerships with logistics
firms (e.g., DHL) for cargo charters), and threats(Hong Kong’s strict quarantine rules delayed
recovery) related to Cathay Pacific's financial risk management during the pandemic.

b) Quantitative Analysis:
1. Statistical analysis: Some key financial ratio can be used to assess the financial impact of its
risk management practise(liquidity, solvency, and profitability). For example, percentage of fuel
hedging losses over total operating expenses increased from 0.1% in 2019 to 5.1% in 2020
show reflects the ineffectiveness of its hedging strategy and failure to mitigate risks during the
sudden market downturn in 2020 due to the COVID-19 outbreak.
2. Historical Trend Analysis: By examining Cathay Pacific’s fuel consumption trends before and
during the pandemic allows us to understand how COVID disrupted normal operations and fuel
usage patterns, so as to compare that after some risk management practise taken into action and
disclose the financial changes. Due to the low efficiency of cargo flights, the fuel consumption
of a single flight increases from 10.2 tonnes per flight in 2019 to 14.5 tonnes per flight in 2020.
3. Comparative analysis: Comparing Cathay Pacific's financial performance and risk
management strategies with other airlines(e.g., Hong Kong Airlines, HK Express) in Hong
Kong to have a holistic view on whether Cathy Pacific outperformance or underperformance.

6. References (including website(s)


1. Cathay Pacific Airways Limited. (2019). Annual Report 2019.
https://www.cathaypacific.com/content/dam/cx/about-us/investor-relations/interim-annual-
reports/en/annual_report_2019_eng.pdf
2. Cathay Pacific Airways Limited. (2020). Annual Report 2020.
https://www.cathaypacific.com/content/dam/cx/about-us/investor-relations/interim-annual-
reports/en/2020_cx_annual_report_en.pdf
3. Cathay Pacific Airways Limited. (2021). Annual Report 2021.
https://www.cathaypacific.com/content/dam/cx/about-us/investor-relations/interim-annual-
reports/en/2021_cx_annual_report_en.pdf
4. COVID-19 AVIATION INDUSTRY RECOVERY.HOW COVID-19 IMPACT THE
AVIATION SECTOR? https://www.oag.com/coronavirus-airline-schedules-data
5. Xiaoqian S, Sebastian W, Anming Z. (2022). COVID-19 pandemic and air transportation:
Summary of Recent Research, Policy Consideration and Future Research Directions. doi:
10.1016/j.trip.2022.100718 https://pmc.ncbi.nlm.nih.gov/articles/PMC9640395/
6. IATA. (2022) https://www.iata.org/en/iata-repository/publications/economic-reports/
understanding-the-pandemics-impact-on-the-aviation-value-chain
7. Hansha K, Miwa M. (2024). Above the clouds: Unveiling insights through semi-structured
interviews with airline employees from the African, Asian, and North American regions
surrounding the COVID-19 pandemic era. Journal of the Air Transport Research Society.
https://doi.org/10.1016/j.jatrs.2024.100047.

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