The transformation of Dragonair from a short-haul subsidiary of Cathay Pacific Airways back to an aggressive rival of Hong Kong's biggest airline is gathering pace.

Cathay has unveiled plans to compete with Dragonair on the smaller carrier's three top routes from Hong Kong to mainland China. This follows Dragonair's entry in July on to Cathay's busiest passenger route, Hong Kong-Taipei, and its earlier launch of competing long-haul cargo services. Local press reports say Dragonair plans to apply for rights to other Asian capitals served by Cathay.

Dragonair was launched in 1985 to challenge Cathay, but eventually stumbled. It turned to Cathay for financial rescue, which came with Cathay's China routes.

Shifts in Dragonair's ownership and Hong Kong government policy are behind the re-emerging rivalry. Hong Kong is retreating from the one airline, one route policy to stimulate Hong Kong traffic and to boost the logistics industry.

Although Cathay and its parent Swire Pacific still own 25.5% of Dragonair, mainland-controlled China National Aviation (CNAC) became Dragonair's biggest shareholder in 1996.

Cathay's plan for mainland services involves at least three flights a day to Beijing, four to Shanghai and one to Xiamen. Cathay says it needs to operate its own flights to China because it is losing overseas travellers to carriers that fly directly to the mainland. Although flying from the USA to Beijing via Hong Kong would add at least eight hours, Cathay believes its service reputation will attract customers.

Cathay expects to be licensed to serve China by year-end, after which Hong Kong would have to renegotiate its air services agreement with China. Cathay expects mainland carriers to push for more rights to fly onward from Hong Kong and to codeshare with airlines on Hong Kong routes.

Source: Flight International