Paul Lewis/SINGAPORE
A MAJOR CHINESE shareholder in Cathay Pacific Airways has issued a blunt warning to the Hong Kong-based carrier that it faces competition after the colony is handed over to China in 1997.
In an interview with Hong Kong's main English language newspaper, the South China Morning Post, Citic managing director Henry Fan Hung-ling told Cathay's parent company Swire Pacific to "...wake up to reality and face competition".
Citic is China's main investment and trading company in Hong Kong and owns 10.5% of Cathay stock and 46% of Dragonair. Fan was responding to earlier comments made by Cathay managing director Rod Eddington about global consolidation of airlines.
Eddington reportedly said: "No one seriously suggests it will be good for Singapore if there was another airline there to compete with Singapore Airlines. I don't think that Hong Kong will support more than one major player."
Cathay is the territory's only international airline operating inter-continental routes and, together with Swire, controls 43% of regional operator Dragonair, as well as 75% of cargo carrier Air Hong Kong.
"We take exception to that," replies Fan. "Today, Hong Kong has three airlines, and whether it can accommodate more than one airline not only depends on the economic development in Hong Kong, but also in China."
Cathay is facing, possible future competition from China National Aviation (CNAC), a subsidiary of China's civil aviation administration. CNAC is in the process of applying for a local air operator's certificate for its proposed start-up carrier China Hongkong Airlines.
It has been suggested that Citic interpreted Eddington's remarks as an attack on Dragonair, rather than just CNAC. Dragonair has begun to distance itself from Cathay in preparation for an expected public listing in 1996.
Swire has since been attempting to play down the row, describing it as a "typhoon in a teacup". It claims that Eddington's comments were not meant to suggest that there was room only for "one airline in Hong Kong", but rather that a city of 6 million inhabitants could only really support "one substantial international carrier".
Citic has revealed that together with the Chao family, they had withdrawn an offer to sell 4% of Dragonair to CNAC, leaving only Cathay's offer of 6% still on the table. CNAC had been offered a 10% stake in Dragonair, in a move designed to stop it establishing a competing carrier.
Negotiations have stalled over the price of the shares. The issue has held up an expected public listing of 25% of Dragonair's stock.
Source: Flight International
