FOR 50 years, from Betsy to Boeing, Cathay Pacific has dominated the skies over Hong Kong. But with less than 26 months before the territory's sovereignty reverts to China, the airline has hit turbulence.
It is not the row with Australian carrier Qantas nor the push by Taiwan's China Airlines to gain a foothold in the Hong Kong market that has troubled investors in the company.
What made the analysts really sit up last week, and prompted Cathay chairman Peter Sutch to send a calming message to staff, was news of a potential rival airline setting up in Hong Kong.
The China National Aviation Corp (CNAC), a wholly owned subsidiary of the mainland's aviation authority, has applied for an Air Operator's Certificate (AOC), one of the first steps towards creating a Hong Kong-based airline.
The reaction in the markets was swift. By Thursday Cathay's share price had fallen 6.2 per cent to $10.60 before recovering to $10.85 by the week's end. Parent company Swire Pacific had fallen 7.3 per cent to $50.50 by Wednesday before climbing to $51.75 by the end of trading on Friday.
Cathay's management cleared the front page of their in-house newspaper The Weekly to declare the challenge could be contrary to the Joint Declaration, while CNAC's general manager Hu Yilin was quoted as saying that as Hong Kong was to be a part of China, it was 'only natural' it wanted to set up its own airline here.
