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Cathay Pacific issues summary of ATLA submission

23 Jan 2003

Cathay Pacific Airways today joined a scheduled public hearing before Hong Kong’s Air Transport Licensing Authority (ATLA) into Cathay Pacific’s application for licences to fly to Beijing, Shanghai and Xiamen. The following is a summary of the airline’s ATLA submission.

- Hong Kong’s future relies on being a leading aviation and logistics hub. Hong Kong needs the support of a world-class airline and a comprehensive air transport network if its future is to be secured.

- A strong home carrier can establish network connectivity and thereby attract more traffic through its hub.

- Cathay Pacific’s (CX) ability to develop the Hong Kong hub is handicapped by the fact it does not fly to the Chinese Mainland.

- Hong Kong is currently being bypassed by China-bound traffic from Europe, North America, Australia and Southeast Asia. Our aim is to change these traffic flows and enhance connectivity through Hong Kong.

- Other airlines, such as Singapore Airlines, Thai Airways, Japan Airlines and Korean Airlines, and hubs in the region have recognised the potential of the China market and are developing connecting services of their own.

- Hong Kong will find it hard to recover ground lost to competitor hubs if it falls any further behind.

- Dragonair (KA) has made no secret of its wish to enter into competition and - compete more aggressively with CX in more markets ?KA freighters compete with CX to Taipei, Manchester and Dubai. KA now operates passenger flights to Taipei and has licences to operate to Manila, Bangkok, Seoul, Sydney and Tokyo.

- KA’s objection to the CX application is out of touch with the current market and regulatory realities of the aviation world.

- KA is a mature airline with 18 years experience and a fleet of 24 modern Airbus aircraft. KA has ample scope for expanding its network and its dependence on Beijing and Shanghai for maintaining the viability of the airline, as KA claims, should not be exaggerated.

- No airline can afford to rely on regulatory protection from competition on profitable routes.

- KA’s claim that CX returning to the Mainland would result in “uneconomical overlapping is greatly exaggerated.

- The Mainland market is one of the fastest growing in the world. The number of flights from Hong Kong to the Mainland have increased, so has the growth in Mainland flights as a proportion of total throughput at HKIA access to which is currently denied to CX.

- In 1999 there were 260 weekly China flights from Hong Kong (24% of HKIA throughput). In 2002 there were 559 weekly China flights from Hong Kong (30% HKIA throughput)

- KA has itself taken advantage of this market growth to increase its own frequency to Beijing, Shanghai and Xiamen in the past five years.

1997 18 weekly flights
2002 56 weekly flights

1997 16 weekly flights
2002 42 weekly flights

1997 7 weekly flights
2002 11 weekly flights

- KA intends to increase capacity to all three points in 2003 by 25%, 33% and 27% respectively.

- KA’s own actions demonstrate that there is therefore room for another Hong Kong carrier in the Mainland market.

- KA, as an independent company, is entitled to prop up loss making routes with profitable ones, even if that defies business logic. Yet that argument should not be used as an anti-competitive argument to bar CX’s legitimate request for licences to operate to the Mainland.