Reference no: EM132929096

The advent of the Greater Bay Airlines

Hong Kong startup carrier Greater Bay Airlines is preparing a fallback plan to start with cargo services first in late summer of 2021 if the pandemic conditions make passenger flights infeasible. "If the situation continues to be difficult, we will look at whether we can use our aircraft to fly more cargo operations to carry vaccines," Chief Executive Algernon Mr. Yau Ying-wah said in January 2021 during an interview with Nikkei Asia. "We can use the aircraft for other purposes."

Greater Bay will receive the first of three leased, secondhand Boeing 737-800 jets in mid-February 2021. However, the plane will then undergo several months' refurbishment in Guangzhou before coming to Hong Kong.

The new venture is the brainchild of Shenzhen-based property tycoon Bill Wong Cho-bau, whose Donghai Airline's home-base is in the mainland city near Hong Kong. Mr. Wong, known in the mainland as Huang Chubiao has launched Donghai with cargo flights in 2006 before adding passenger services eight years later.

Cargo has been a relative bright spot amid the Hong Kong aviation sector's dire straits. Hong Kong International Airport, previously the busiest in Asia for passenger traffic, saw its traveller count plunge 87.7% to 8.84 million in the year 2020, with many passengers put off by pandemic worries and the city's tight quarantine controls on arriving fliers. Cargo flights, however, grew 18.3% for the year, though the overall freight volumes slipped 7%.

Cathay Pacific Airways, Hong Kong dominant airline group, has been hit hard by the traffic swings. The company warned its investors in January 2021 the new quarantine regulations that require locally based returning aircrew to undergo 14 days' quarantine and seven days' medical surveillance would force the company to cut back cargo operations by a quarter and reduce its current bare-bone passenger schedule by 60%. That would increase monthly negative cash flows by between 300 million Hong Kong dollars ($38.7 million) and HK$400 million.

Cathay's shares sank 9.7% to HK$5.95 following the announcement, and the company would issue HK$6.74 billion in convertible bonds to replenish its fast-depleting cash reserves. Cathay is a formidable competitor for both the regulators and companies in the marketplace that have sought to challenge its dominance in Hong Kong. In late 2019, the company absorbed Hong Kong Express Airways, which had struggled to carve out its place as a low-cost challenger. Four years earlier, Qantas Airways retreated from plans to set up a local unit of its Jetstar brand, after Cathay convinced regulators that the ultimate control over the venture's operations would rest in Australia rather than in Hong Kong as legally required.

Mr. Yau, though, expressed confidence that Greater Bay will win regulatory backing for its plans despite its heavy connections with mainland China. "We are independent" from Donghai, he said. "We are incorporated in Hong Kong. We are independent with our resources, with our finance and with aircraft acquisition. So, it is separated."

He said that the airline is making "good progress" with its regulatory applications and that "the job is almost completed" to get an air operator's certificate. A recent government notice in late January 2021 showed that the Greater Bay had applied for rights to serve up to 104 routes from Hong Kong, mostly into mainland China but also destinations in Japan, South Korea, Southeast Asia and U.S. Pacific islands.

"If we have all the licenses and approval given by the authority, we plan to start operations by the end of August 2021," Mr. Yau said.

The carrier is to receive its additional aircraft in August and October 2021. "When we have about 30 aircraft by year five or six into our operations, then we will hire more than a few thousand people from the market," Mr. Yau said.

In the meantime, Mr. Yau said the company received more than 2,000 applications for around 500 initial positions. More than 90% of the applicants' listed job experience with Cathay, many of whom were the cut 5,300 workers late last year.

Mr. Yau served as chief executive of the group's Cathay Dragon unit until it closed down as part of Cathay's restructuring in October 2020. Greater Bay will start interviewing cabin crew in March and begin training pilots in May 2021.

While declining to give details of the new company's business plans other than to say that it "will not be a budget airline" but be "different," Mr. Yau expressed confidence that vaccination efforts will bring COVID-19 under control and clear the way for a travelling revival. "

There will be new demand for travelling," he said. "The timing now may not be right for the aviation industry, but maybe exactly right for our inauguration when the business is coming back."

Q1. Airlines often use management staff to run their foreign operations. Since Greater Bay Airlines will fly to destinations such as Japan and South Korea, the senior management has to decide on the staffing approaches in those places.

a) Assuming that you were IHRM executive of Greater Bay Airlines, propose foreign operations' staffing approach to senior management. Illustrate your answers with examples.

b) Before making your recommended option, you may need to evaluate senior management's preferences to ensure that there is easy buy-in to your proposed approach. Briefly explain the FOUR staff attitude that they may possess.

c) Select one of the proposed staffing approaches which you see appropriate, discuss the advantages and disadvantages of your proposed approach to convince the senior management.