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ATLA chairman "declines to accept" Dragonair's explanation

14 Mar 2003

Cathay Pacific Airways once more challenged figures produced by Dragonair in today's Air Transport Licensing Authority (ATLA) hearing into Cathay Pacific's application for licences to fly to Shanghai, Beijing and Xiamen.

Cathay Pacific counsel Mr Charles Haddon-Cave, QC, queried the disparity between figures submitted by Dragonair to ATLA prior to the hearing and those revealed to the panel as proceedings drew towards a close.

Dragonair in its 14 January rebuttal document claimed that it would suffer losses of "over $100 million" on its Shanghai route and losses of "well over $400 million" on its Beijing route if Cathay Pacific were allowed to compete on those routes. Dragonair Chief Financial Officer Francis Wai today told ATLA those losses would be $258 million and $595 million respectively. He claimed that revenue data gathered just for December 2002 accounted for the difference.

ATLA Chairman Justice William Stone said he could not accept this explanation.

"It seems to me odd that you can jump from over $100 million to $258 million simply because you did not have December's figures. I decline to accept that not having the December figures, although you had the estimates, can produce a differential of $158 million."

At the heart of Dragonair's case is its claim that most of its routes on the Chinese Mainland are unprofitable and services would have to be shut down if Cathay Pacific is allowed to compete on three of its most profitable ones.

Mr Haddon-Cave demonstrated from Dragonair's own figures that in fact 13 of Dragonair's 15 Mainland destinations in addition to Shanghai, Beijing and Xiamen have a positive margin and that the future of its network does not depend on its Shanghai and Beijing cash cows as the airline claims.

Dragonair objects to Cathay Pacific's application for licences to fly to Beijing, Shanghai and Xiamen. Final summations by counsel will commence 19 March.