THE confrontation between the Hong Kong and Australian governments over Qantas Airways' 'fifth freedom' rights to pick up passengers here and fly them to Bangkok and Singapore is fast getting out of hand. However angry Australia may feel at Hong Kong's threatened restrictions, its threat not to renew Cathay's operating permit after June 30 is disproportionately severe. The threat by the Economic Services Branch to retaliate against Ansett Australia - an innocent party in the dispute - is an equally unjustified step. Both sides urgently need to cool off.
The row is generally thought to be more likely to end in a peaceful settlement than a dogfight - and so it should. At this stage, the governments and the airlines are still negotiating and, despite the fighting words, all understand a showdown is in no one's long-term interests. The routes are too commercially important for either side to risk a serious disruption of traffic.
Nevertheless, the war of words is a dramatic illustration of the lengths to which airlines (of whatever nationality) will go to protect their markets - and to which governments will go to help them do so. Passenger miles are big money. With a few honourable exceptions, even the most committed free trading nations turn protectionist when it comes to their national carriers.
Whatever the rights and wrongs of the present dispute, however, is important for the Hong Kong Government and Cathay Pacific to take a long, hard look at their general attitude on the question of fifth freedom rights in the coming months. The saturation of Kai Tak airport, which ought, theoretically, to encourage the Government to promote these freedoms as a way to bring more travellers through Hong Kong without increasing the number of flights, also takes the pressure off Cathay. If there are no more slots available, the threat of increased competition is limited.
In the not too distant future, however, the opening of Chek Lap Kok will permit new traffic growth. It may suit the local carrier to ensure the new airport is unavailable as a regional hub for other airlines, but for the future airport authority and the economy as a whole it would be an opportunity lost. The more traffic the new airport can attract, the better.
In the even shorter term, neither the Government nor Cathay can afford to ignore the opening of Macau as an international airport later this year. A number of international carriers has been eyeing the enclave as a cheaper and more welcoming hub and cargo base. Protectionism in Hong Kong would make Macau an even more attractive proposition for them.
