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Horizontal Analysis 2015-2016 2014-2015 2013-2014 Average Sales growth rate Cathay Pacific -3.40% 5.50% 1.10% 1.07% Singapore Airlines -2.17% 2.11% 1.00% 0.31% Profit growth rate Cathay Pacific 2.90% 0.40% 1.70% 1.67% Singapore Airlines 109.44% -4.17% -21.70% 27.86% Dividend growth rate Cathay Pacific 47.20% 63.60% 175% 95.27% Singapore Airlines 104.5% -52.17% 100% 50.78% Data Source: Annual Report of Cathay Pacific and Singapore Airlines The sales of both companies have little growth over the past three years. For Cathay Pacific, the average growth of sales overall the past three years is 1.07% while the growth for Singapore Airlines is 0.31%. However, the average profit growth rate for Cathay Pacific is 1.67%, which is way lower than that of Singapore Airlines’ 27.86%. Besides, the average dividend growth rate for Cathay Pacific (95.27%) is higher than that of Singapore Airlines (50.78%). The almost no growth in sales and profit may due to the downside of Southeast Asia’s economy, and the development of airline industry trends mature and saturation. In addition, Cathay Pacific and Singapore Airlines provide both domestic and international service, but they are only local monopoly. Although most Asians are willing to choose Cathay Pacific and Singapore Airlines for southeastern Asia or long-distance travelling, those customers who are from other continents may prefer their local airlines. However, the brand of Cathay Pacific and Singapore Airlines are
CATHAY PACIFIC 14 well-known by local people, plus the future positively economic environment, the increasing demand of long-distance travelling, the improvement of customers’ income and the promotion of this industry, it is more likely that the revenue as well as the profit will turn to grow in the coming years. It is expected that the Cathay Pacific’s sales and divided growth rate will be lower than that of Singapore Airlines. Singapore Airlines flies to 62 destinations in 32 countries on five continents from its primary hub in Singapore, while Cathay Pacific’s operations include scheduled passenger and cargo services to 200 destinations in 52 countries worldwide. Singapore Airlines still have potential to expand its operation around the world, but the potential of expansion for Cathay Pacific seems not that easy. There is only one year that Cathay Pacific perform worse than Singapore Airlines, but it’s the most recent one, which means that Cathay Pacific should take some measures to keep a positive sales and profit growth, we expect the dividend for Cathay Pacific will continue to fall down, compared with Singapore Airlines in the near future, which may not attract potential investors any longer. 5.2 Ratio Analysis Note: 1 Singapore Airlines uses 31 March of each year as year end while Cathy Pacific uses 31 December as year end. Therefore, in the following tables and passages the year 2015 means the year ended 31 March 2015 to Singapore Airlines and the year ended 31 December 2014 to Cathy Pacific, and similar meaning applied for 2013 and 2014.