Cathay Pacific Challenges Dragonair Figures

Cathay Pacific Airways today challenged figures presented by Dragonair to Hong KongÁ?s Air Transport Licensing Authority (ATLA).
Dragonair, in its formal submission to ATLA, said business on its Shanghai, Beijing and Xiamen routes grew 11.1%, 16.2% and 15.6% respectively in 2002. Yet actual figures, which Dragonair supplied to Hong KongÁ?s Civil Aviation Department (CAD), showed that the airlineÁ?s business in fact grew by 16%, 22.4% and 29% respectively for Beijing, Shanghai and Xiamen in 2002.

Dragonair used the incorrect lower figures in models to help justify its claim that competition on these three routes would be greatly damaging to the airline.

Counsel for Cathay Pacific Airways, Mr Charles Haddon-Cave, QC, challenged Dragonair Chief Executive Officer Stanley Hui on these discrepancies.
Mr Haddon-Cave said: Á¤Figures that are put forward to the [ATLA] panel from the model are a radical understatement of the true figures which your company was well aware of at the beginning of January.
He also highlighted recent press reports in which Mr Hui is quoted saying Dragonair would need anywhere between three and nine years to prepare itself for competition. Mr HuiÁ?s comments are not Á¤business based,Á¬ Mr Haddon-Cave said. Á¤It is just telling a story to have more time to make even greater profits.
Mr Hui agreed that Dragonair uses money made from profitable routes, principally Beijing, Shanghai and Xiamen, to cross-subsidise other loss making ones. Mr Hui claimed that competition on these routes would lead to Dragonair ceasing operations on some loss-making services.
However, ATLA Chairman High Court Justice William Stone asked Mr Hui: Á¤How often is cross-subsidisation used as a rationale for precluding competition on thick routes?Á¬

Cathay Pacific last year did not object to DragonairÁ?s application for an ATLA licence to compete directly with Cathay Pacific on services between Hong Kong and Taipei.

The reason you wanted to go on the Taipei route were precisely the reasons why Cathay wants to go on the Shanghai, Beijing and Xiamen routes ÁV they are profitable, will stimulate the market, you can fly your own metal, will have control over inventory and pricing, and that is what customers want,Á¬ said Mr Haddon-Cave.
Dragonair objects to Cathay PacificÁ?s application for licences to fly to Beijing, Shanghai and Xiamen. The ATLA hearing resumed today after it was adjourned on 29 January 2002. The hearing continues tomorrow.
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