Cathay Pacific Airways has won its battle for licences to operate flights to mainland China, prompting Hong Kong rival Dragonair to threaten legal action in a bid to block the larger group from launching competing services.
Hong Kong's Air Transport Licensing Authority (ATLA) eventually awarded route licences to Cathay for services to Beijing, Shanghai and Xiamen, following public hearings. Services are not expected to be launched in the near future, given that the Chinese government must still grant operating rights after consulting with the Hong Kong legislature, but the ATLA licence award is a major initial victory for Cathay in its bid to return to China after a 13-year absence.
Dragonair, which last year appealed against Cathay's application for China licences, says it is disappointed with the decision. It has failed in its attempts to argue that only the Chinese government, not the ATLA, has the authority to issue licences. Since mid-1997, Hong Kong has been a Special Administrative Region of China.
"We feel the decision is unfair to Dragonair," says chief executive Stanley Hui. "We will now review with our legal representatives the options open to us with regard to [the] ruling."
The awards followed 11 days of contentious hearings between January and March at Hong Kong's high court - the first licence hearings in Hong Kong for more than a decade. There were heated exchanges between senior executives from Cathay and Dragonair, which have traditionally co-operated, keeping disputes behind closed doors.
Dragonair, although part-owned by Cathay, has become more independent since Chinese interests won control in 1996, making most of its money from services to the three Chinese cities. It argued that its survival would be threatened if Cathay started flying to the cities, as most of its other China services are unprofitable.
During the hearings, Cathay repeatedly rejected Dragonair's arguments that the market is not big enough to support another competitor on routes between Hong Kong and China, saying the Chinese market is growing faster than any other.
Source: Airline Business
