When Cathay Pacific Airways purchased control of Dragonair in 1990 it believed it was securing its place as the dominant Hong Kong carrier.
Yet 10 years on from that deal it is thought that Hong Kong Dragon Airlines, operator of Dragonair, may soon be on the verge of becoming direct competition for Cathay, at least on lucrative routes within the Asia-Pacific region.
This would mean a departure from the unwritten one carrier, one route policy, created in the mid-1980s to protect Cathay when Dragonair was formed.
Steve Miller, a former Dragonair chief executive who helped put the airline together in 1985, said: 'There's no reason why Dragonair and Cathay Pacific can't compete, especially given Cathay's high costs structure.
'I am sure that Cathay and Swire, at the board level, would not like to compete.
'The current situation may be satisfactory for the airlines, carving up the market between Cathay and Dragonair and taking away the need for competition. But if the Government were to want to overturn its policy, I think Dragonair would be interested.' China National Aviation Co (CNAC) has long wanted to start its own Hong Kong-based international carrier. In 1996, to stop it from doing so, Cathay and parent Swire Pacific sold CNAC a 43 per cent Dragonair stake.