NICHOLAS IONIDES / SINGAPORE
Hong Kong's Dragonair is considering legal action to prevent Cathay Pacific Airways operating competing services to mainland China.
On 17 April Cathay took a step towards launching services to Beijing, Shanghai and Xiamen after a 13-year absence when it was awarded route licences from Hong Kong's Air Transport Licensing Authority (ATLA). Services are not expected to be launched soon as the Chinese government must still grant rights after consulting the Hong Kong government, but the ATLA licence award is a major initial victory for Cathay.
Its application was hotly contested by Dragonair, which makes most of its money from China operations. Dragonair is nearly one-quarter owned by Cathay and its parent, Swire Pacific, but it has become more independent from the larger carrier since Chinese interests won control in 1996.
Dragonair formally objected to Cathay's application, forcing ATLA to hold 11 days of hearings at Hong Kong's High Court in January and March. Dragonair argued that the market is not big enough to sustain another competitor between Hong Kong and China.
Cathay disagreed, saying the China market is growing faster than any other. Dragonair also attempted - unsuccessfully -- to argue that ATLA had no authority to issue licences as only mainland Chinese authorities could do so under the terms of Hong Kong's Basic Law, which is often dubbed its "mini constitution". Hong Kong has since mid-1997 been a Special Administrative Region of China.
Dragonair chief executive Stanley Hui says the carrier is disappointed with the decision, adding that the airline still believes it contravenes the Basic Law "in respect of China's domestic routes".
Since the hearings, Cathay and Dragonair have suffered a sharp drop in business as the Severe Acute Respiratory Syndrome virus spreads.
Source: Flight International
