YESTERDAY'S slump in Cathay Pacific shares because of fears that a mainland airline may apply to operate from Hong Kong was welcomed by a minority of investors as a bargain opportunity. It seems the threat of a new airline being allowed to operate from Hong kong has a lot to do with instigating a change in market psychology or perception towards the airline. For years Cathay has been running in-house think-tanks of senior executives, and more general employee awareness exercises, in relation to the 1997 handover to clarify what it will mean to the airline. Chek Lap Kok probably will be the most advanced and best equipped airport in the region, and it should come as no surprise to anyone that the China National Aviation Corp (CNAC) wants a piece of the action. Those fearing for the prospects of Cathay post-1997 ought to remember CNAC owns five per cent of Cathay, as does China Travel Services (Holdings) Hong Kong. Citic Pacific holds 12.5 per cent. These strategic holdings and the alliances they represent are not going to go away overnight. Nor is a mainland airline going to find it easy to comprehensively compete with Cathay on Cathay's doorstep overnight. Cathay is unlikely to hog the pot in the future in the way it has been allowed under British rule. Under the British, the pot was six million people and the 10th largest trading territory in the world. Under the Chinese, the pot will be 100 million people in and around Guangdong province, along with what is the most dynamic regional economy in the world. Economist reports as long as five years ago estimated there was enough business in the region for at least five major airports. For the current investor in Cathay the more immediate problems facing the airline affecting earnings over the next few years include a lack of domestic infrastructure, primarily air slots at the airport, and the lack of hotel rooms in Hong Kong, inflation, and the potential reduction in business when direct flights between China and Taiwan open up. Cathay's immediate, medium and long-term horizons are full of doubt. The news of the CNAC application has changed very little.