Airline spreads wings, trims costs

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The Background

Cathay Pacific Airways operates passenger and cargo services to 138 destinations in 38 countries worldwide, including code shares and joint ventures. In 2009, the company and its sister airline, Dragonair, carried nearly 25 million passengers and more than 1.5 million tons of cargo.

Based in Hong Kong, Cathay Pacific operates in an environment that provides no bankruptcy protection or other forms of government support. Competition is stiff, which is evidenced by the hundreds of airline companies that have failed in recent decades. Many of the expenses of running an airline are fixed, leaving very few competitive differentiators between airlines. One of Cathay Pacific's competitive advantages, however, is its hallmark level of customer service, which is supported by a strong "service straight from the heart" corporate culture.

The Challenges

Maintaining a high level of customer service can be a challenge in times of economic uncertainty. Moreover, Cathay Pacific has forecasted significant growth in demand in both its passenger and cargo markets. How can a company preserve a customer-service culture while simultaneously expanding operations to new markets and trimming costs?

To address the challenge, Cathay Pacific in North America joined forces with Sauder School of Business Executive Education to co-design a strategic leadership development program. Through themes that included innovation and creativity, entrepreneurism, leadership and integration, the program was designed to help Cathy's managers "make connections" in order to improve organizational performance and enhance individual effectiveness.

A key goal of this custom training was to break down silos by sensitizing managers about the ripple effects of decisions. The overall objective was to integrate Cathy Pacific's many different business functions, its people, and its strategy.

The program brought together a diverse range of managers. As part of the Swire group, Cathay Pacific extended access to the training to other group companies in North America, including their bottling division, Swire Coca-Cola USA and US Cold Storage. Middle and upper managers from different locations, including New York, Los Angeles, Chicago, and Toronto, were flown to Vancouver to participate.

Cathay Pacific had a number of targets they wanted to hit, including:

• bring managers together from across the organization and have them get to know each other on a person-to-person basis
• share best practices and learn how different businesses have dealt with challenges.
• train managers in the latest in business acumen and supply them with knowledge they need to understand how major business disciplines - like strategy, accounting, operations logistics, information technology, marketing, and leadership fit together
• have managers learn the process of developing innovative ideas, and how to bring these ideas to senior company decision makers

The Outcomes

Cathay Pacific's objectives were achieved through exercises that had managers work together on projects and cases in diverse teams. The teams developed business plans for new innovations that were then presented to key company executives.

The most immediate payoff was that managers gained a deeper and broader appreciation of the company's vision, mission, and strategy. They made connections between the different parts of the group and within the individual businesses, which can help any complex company run more smoothly. The managers also made important personal connections with each other, so that they now "know" the human face on the other end of the telephone line or email message.

Company executives were presented with numerous innovative opportunities to add value in terms of generating new revenue, saving resources, building culture, and providing even greater customer service. Many of these innovations have since been further developed and implemented, and many of the program's participants have gone on to assume positions of greater responsibility within the company.

In summary, in the same way passengers need to make connections to get to their destinations, making connections is an operational imperative for any successful organization, particularly with increasing competition and complexity. Leadership training is the critical mechanism to get any organization from where it is now to where it needs to go.

Daniel Skarlicki is a professor at the Sauder School of Business of the University of Briitsh Columbia. This is the latest in a regular series of case studies by a rotating group of business professors from across the country. They appear every Friday on the Your Business website.