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Tribunal rejects Dragonair's claim that the move will devastate its finances

Cathay Pacific has won its bid to resume flights to the mainland, paving the way for the Hong Kong government to negotiate flights to Shanghai, Beijing and Xiamen with the central government.

The Air Transport Licensing Authority (Atla)  said in a 68-page ruling released on its Web site yesterday it would allow Cathay to fly three times a day to Beijing and Shanghai and three times a week to Xiamen.

The decision comes almost one month after an unprecedented 11-day public hearing in which Dragonair complained the move would devastate its finances, with losses of as much as $1 billion a year.

But Atla ruled that Dragonair had overstated the financial impact of the move.

'Looked at in the round ... we do not consider that the 'financial devastation' scenario has been made out by Dragonair ... we firmly reject it,' it stated.

'As Cathay Pacific accepts, undoubtedly there will be a financial impact  but ...  such an impact manifestly will be of a different order and be considerably less than the impact which Dragonair has endeavoured to establish.'

The authority said Dragonair's profitability - it had an operating profit before interest of $544.5 million last year, a 67.5 per cent increase - 'portrays an airline in rude financial health'.

'Viewed overall ... the  reasonable observer of Hong Kong affairs might be tempted to conclude that Dragonair clearly was prospering on these routes, and that its objection to the present licence application is founded as much upon preservation of a favourable bottom-line as upon broader considerations of public interest,' it said.

Dragonair chief executive Stanley Hui last night indicated the company might take legal action to overturn the ruling.

'We feel that the decision is unfair to Dragonair,' Mr Hui said.

'We will now review with our legal representatives the options open to us with regards to today's ruling.'

The ruling also revealed that Dragonair wrote to the authority on Monday, asking it also to take into account the devastating impact that Sars has had on the airline industry, particularly in Hong Kong.

This was rejected by Atla, which said it did not believe the impact would be permanent.

The authority said issues dealing with the intertwined history of the two airlines, around which Dragonair had based a large part of its case, were not within its scope to consider.

It also dismissed Dragonair's contention that it did not have authority to license Cathay on routes not provided for under the current Hong Kong-Beijing air services arrangement by pointing out that not every Atla licence to mainland points held by Dragonair was provided for in the arrangement.

Cathay chief operating officer Philip Chen said: 'We are very pleased that Atla has approved licences for Cathay Pacific to fly to Beijing, Shanghai and Xiamen. Not only will it be a boost for Hong Kong's status as an aviation hub, it will bring many more passengers through Hong Kong, boost the local economy and also promote tourism on the mainland.'



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Cathay Pacific

Cathay wins battle to resume flights to the mainland