A tussle between Hong Kong's two airlines over routes to the mainland is back on course for public scrutiny after their joint application to halt proceedings leading towards an open hearing was rejected yesterday. High Court Justice William Stone, who chairs the Air Transport Licensing Authority (Atla), ruled against the request, which had been submitted by both airlines, to adjourn the hearing into Cathay's application for a licence to operate flights on mainland routes from Hong Kong. Dragonair sparked the issue in September, when it filed a formal objection with Atla - an independent statutory body charged with the licensing of Hong Kong airlines for air services - over Cathay's application to fly between Hong Kong and Beijing, Shanghai and Xiamen. The two airlines said on Tuesday during a public directions hearing that they were privately negotiating a commercial compromise that could alleviate the need for a public hearing. Mr Justice Stone ordered, however, that the hearing must proceed as scheduled, one week from today. At the same time, he chastised the pair for inappropriately using Atla as leverage in their commercial negotiations. 'In my view, the public interest is not served by placing duly constituted procedures on hold in the manner now suggested,' he said. Reports have speculated that such a compromise could involve Cathay receiving the right to code-share to mainland destinations with Dragonair, rather than operating its own planes. Such a deal would result in Dragonair maintaining its grip on mainland routes while Cathay would be allowed to market some of the seats on the flights as its own, effectively limiting outside competition. Cathay holds a 19 per cent stake in Dragonair, but the latter is controlled by mainland operator China National Aviation Co and the two are run as individual airlines. In his written ruling, Mr Justice Stone said the application was 'unexpected given that one of the thrusts of the Cathay Pacific case is that this inquiry is regarded as urgent in light of the necessity to develop Hong Kong as a hub and the need for healthy competition'. '[I do not] perceive it as appropriate for this or any Atla inquiry to become, in effect, an ongoing negotiating tool, the due progress of which is rendered dependent upon whether a successful trade-off of private commercial interests has been achieved. Matters of public interest must be weighed in the balance,' he said. He concluded there was 'nothing in support of this [adjournment] application which in my judgment is relevant to any consideration other than the commercial interests of Cathay Pacific and Dragonair'. 'I decline to accept the premise that . . . it is appropriate for Cathay Pacific and Dragonair simply to place the Atla inquiry on the backburner pending negotiations which may, or may not, serve to resolve the differences between these parties,' he said. In order to avoid a public hearing next week, either Cathay will have to drop its Atla application or Dragonair drop its objection, he said in the ruling. If it goes ahead, the hearing could generate some controversy. Mr Justice Stone agreed to allow Dragonair Senior Counsel Alan Hoo to argue that Atla's authority to license Cathay on the Shanghai and Xiamen routes was unconstitutional under the Basic Law. Mr Hoo has contended that only Beijing had the right to licence airlines on services to China not provided for within the present Hong Kong-mainland air services arrangement, as was the case on the Shanghai and Xiamen routes. He will file written evidence on this point by tomorrow, with a procedural ruling from Mr Justice Stone on how to deal with the argument expected before the hearing starts. Both Cathay and Dragonair said they accepted the ruling and were prepared for next week's hearing. 'We fully accept' the ruling, said Tony Tyler, Cathay director of corporate development. 'We are ready to make our case.'
