A bitter public fight has broken out in Hong Kong over Cathay Pacific Airways' contested bid to serve mainland China in competition with Dragonair. Five days of hearings by the Air Transport Licensing Authority (ATLA) ended on 29 January and another four-day round of testimony has been scheduled for March.

Hearings began at Hong Kong's High Court on 23 January and quickly turned ugly, with senior executives from both sides often engaging in heated exchanges. At one point Cathay's lawyers described as "absolute rubbish" claims by Dragonair that the Chinese market is not big enough to sustain another airline operating from Hong Kong, adding that the smaller carrier was "crying wolf".

The hearings were the first held by ATLA in Hong Kong in more than a decade. They were called after Dragonair opposed Cathay's application in the second half of last year for licences to serve Beijing, Shanghai and Xiamen - points already served by Dragonair. Dragonair makes most of its money from its China services and has claimed that its future is threatened if Cathay is allowed to compete with it.

Hong Kong for years maintained a so-called "one airline, one route" policy, limiting services on any given route to one locally based airline. As a result, Dragonair has been the only Hong Kong-based carrier allowed to operate to China since Cathay stopped flying to the mainland more than 10 years ago.

The policy has been eased in recent years, however, and is now effectively dead. Dragonair, which ironically is around one-quarter owned by Cathay and its parent Swire Pacific but which has become more independent since Chinese interests won control in 1996, now competes directly with the larger airline on some all-cargo services as well as on passenger services to Taipei in Taiwan.

Cathay argues that its "ability to develop the Hong Kong hub is handicapped by the fact it does not fly to the Chinese mainland".

Source: Flight International