Hong Kong's Dragonair is taking legal action in a bid to have the China route licences recently awarded to Cathay Pacific Airways declared "null and void".
Dragonair, fearing new competition on China routes from Cathay, sought Hong Kong High Court approval in May to proceed with a legal challenge against a decision by the Air Transport Licensing Authority (ATLA) to award Cathay licences for services to three Chinese cities.
Late in May, High Court judge Michael Hartmann gave Dragonair leave for a judicial review, enabling the airline to move forward with a legal challenge against the decision by ATLA, which is an independent statutory body.
Among several arguments, Dragonair claims ATLA had no right to award licences for China services as only mainland Chinese authorities can do so. It unsuccessfully made the same argument to ATLA while the authority was considering Cathay's application.
Dragonair's legal challenge was filed just over a month after ATLA awarded Cathay licences for services to Beijing, Shanghai and Xiamen following hearings that were spread over 11 days in January and March.
The award of the licences is the first step towards the launch of competing services by Cathay, which must still be approved by authorities in China.
Dragonair makes most of its money from passenger services to China and has argued that its survival will be in jeopardy if Cathay is able to mount direct competition. It claimed during the public hearings that the market is not big enough to sustain another competitor on routes between Hong Kong and China. Cathay disagreed, saying the China market is growing faster than any other.
Cathay and its parent Swire Pacific own nearly 25% of Dragonair, but the smaller airline has become more independent in recent years. Beijing-backed China National Aviation won control of Dragonair in 1996 after a bitter public fight with Cathay, its parent Swire group and fellow China-backed group CITIC Pacific for control of Hong Kong's aviation industry in the run up to the 1997 handover of the former UK colony to China.
NICHOLAS IONIDES SINGAPORE
Source: Airline Business
