Drivers and effects of merger and acquisitions in the airline industry : a case study of Hong Kong

Abstract

The present study aims to figure out the drivers and motives behind merger and acquisitions (M&As) and their effects in the post-M&As scenarios, considering the case study of the acquisition of HK Express by Cathay Pacific in 2019. First, commercial situational analysis of four Hong Kong-based airlines has been done to understand the current and future scenarios. To identify the drivers behind M&As, several quantitative and qualitative research methods and techniques have been used such as interviews, collection, and analysis of market share data, on-time performance data, etc. These data are analyzed through linear regression, paired T-test, etc. We analyzed the case of Cathay Pacific acquisition in three steps: pre-acquisition stage, peri-acquisition stage, and post-acquisition stage. A total of 8 drivers of airline acquisition have been identified. They include weakening of the acquiree, strengthening of the acquirer, financial situation of the acquiree, compatibility of network, compatibility of business model, concerns of airport slots, branding of acquiree and external business environment. To examine the changes and effects of M&As, an improved Fishcer and Platzer model is used to study dimensions of post-merger effects. We figure out 5 different dimensions of effects brought by the acquisition including operational services, investor confidence, internal confidence, possible structural changes of the Cathay Group, and the possible changes towards the external business environment. This study may serve as a useful reference for relevant stakeholders.