CHINA NATIONAL Aviation (CNAC) has rejected Swire Pacific's offer of a 6% share in Dragonair, and will instead press on with plans to launch its own Hong Kong-based carrier.

Beijing-controlled CNAC is reported to have already leased a Boeing 737 from the USA for delivery in March. The China Civil Aviation Administration subsidiary hopes to receive a Hong Kong air operators' certificate in April to begin charter services.

The company was originally offered a 10% stake by Dragonair shareholders in mid-1995, in an attempt to head off its plans to start its own carrier. This was later cut to 6% when stockholders Citic and the Chao family withdrew from the proposed sale (Flight International, 3-9 January).

The rejection of its share offer is likely to postpone plans to list Dragonair on the Hong Kong exchange, say analysts.

Reconfirmation of CNAC's plans to establish its own airline, provisionally named China Hong Kong, comes as bad news for Swire-controlled Cathay Pacific Airways. A competing airline controlled by Beijing is regarded as a long-term threat to Cathay's position as Hong Kong's principal international carrier.

In a related move, Cathay and China Airlines of Taiwan have been forced to extend an old air-services agreement, the result of Chinese delays in approving a newly negotiated bilateral deal. With China due to take over control of Hong Kong in 1997, the new agreement requires Beijing's blessing.

China's failure to approve the deal means that Eva has had to postpone its plans to launch its Hong Kong service in February.

Industry sources speculate that China's delay in approving the agreement is linked to CNAC's planned April launch of its new airline. CNAC is thought to be keen to enter the highly lucrative Hong Kong-Taiwan market, but the new bilateral agreement only allows for two carriers from either side.

Source: Flight International