Better the devil you know? I think not..

[realitycx]

CX really does not need the Swires any more. I hope the other share holders realise just how bad they are for Cathay.

COMPANIES & FINANCE ASIA-PACIFIC: Airline deals stutter on take-off: Obstacles to cross-border partnerships and consolidation in the Asia Pacific region are not being removed fast enough, write Joe Leahy and Douglas Wong:
Financial Times; Jun 8, 2001

EXTRACT

China, meanwhile, has said it would allow foreign ownership of up to 49 per cent of Chinese airlines, and the Sri Lankan government has approved Emirates' purchase of 40 per cent of Sri Lankan.

Huge shake-ups are also under way among some domestic airlines. In April, China's industry regulator, the Civil Aviation Administration of China, announced a three-way merger of the country's myriad domestic airlines. However, in all of these cases, only limited roles are seen for foreign airlines. There is little talk, for instance, of Cathay Pacific Airways, Hong Kong's flag carrier, becoming involved in China's domestic industry even though it is partly held by mailnland interests.

This is due to the British links of Cathay's controlling shareholder, the Swire Group. Swire remains the dominant shareholder despite the politically driven deal ahead of Hong Kong's handover to Chinese sovereignty in 1997 which raised the mainland interests in Cathay and Dragonair, its former regional airline.

"Until either the Chinese government becomes very liberal or the British interests are removed, I don't see a role for Cathay there," said Philip Wickham, regional airlines analyst with ING Barings.

Full text

http://globalarchive.ft.com/globalarchive/articles.html?offset=&query=cathay+pacific&multiViewArticleId010608001724=010608001724

[ackleacklephasechange]

You are probably correct, Realitycx, however before we launch into a Brit bashing session, let's remember that had it not been for the Brits there would not have been a Hong Kong and, by default, a Cathay Pacific. If you have enjoyed any of your career/expat lifestyle/A scale(?) so far, please remember this.

[realitycx]

ackleacklephasechange:

Was I having a go at the Brits - don't think so. Me thinks it was the Scottish managers was the butt.


Given this:
"Cathay to fly to PRC?"
http://www.pprune.org/ubb/NonCGI/Forum7/HTML/001752.html

Anyone got a hat I can eat........ that said, might just wait and see what routes they actually end up with, if any. Better hope they dont p*** off Hong Kong!

[ackleacklephasechange]

Methinks the Scots are also Btitish, just not English!! Sorry if my earlier post felt a little offensive to you, that was not my intention; I was merely trying to head off another xenophobic thread and jumped in a little quickly. I hear CX are looking at Beijing and Shanghai, cheers, AAPC.

[Apollo13]

Swires aren't Scottish anyway. They are from Yorkshire.

[realitycx]

Not so fast.....

Jun 14th 2001
From The Economist print edition

Turbulence on flights between mainland China, Hong Kong and Taiwan

http://www.economist.com/printedition/displayStory.cfm?Story_ID=656231


THE world’s most travelled airline route connects Taipei and Hong Kong. This is a legacy of China’s civil war, since Taiwan still prohibits direct flights to the mainland, forcing its businessmen to transit in Hong Kong on the way to and from their mainland factories. As China considers Taiwan to be a renegade province, moreover, landing rights are negotiated between the airlines themselves, with the governments in the background. Commercially and politically, this can get tense. So it was this week, when the latest landing-rights “arrangement” between Taiwan and Hong Kong expired (only countries can reach “agreements” ;). Instead of being renewed for another five years, it was simply extended by a few months, pending further discussions.

Awkwardly, this coincided with reports in Hong Kong’s local press—which were unfounded, as it turned out —that the territory had struck a deal with Beijing to allow the two Hong Kong carriers involved in the Taiwanese negotiations, Cathay Pacific and Dragonair, to compete on routes to the mainland. In fact, Beijing and Hong Kong have agreed only to increase capacity on certain routes, but not to open them up to new carriers. That, however, may be only a matter of time, given the speed with which China’s aviation market is changing.

Hong Kong plays a big part in these changes. Already a hub not only for Greater China but for much of Asia, it wants to strengthen its role. Several factors work in its favour. Location is one: unlike Singapore, for instance, Hong Kong is within reach of direct flights from America and close to the booming Chinese hinterland. Capacity is another: Hong Kong opened a giant new airport in 1998 and plans to list shares in it in the coming years. To attract ever more airlines, the government intends to liberalise landing rights—though only “gradually”, it says. Last month, for instance, Hong Kong began to allow Air New Zealand to pick up passengers in Hong Kong and fly them to London.

It helps that Hong Kong’s government, unlike most others in the world, has never owned or coddled its domestic airlines, and so confronts fewer interests stacked against liberalisation. Cathay Pacific, the territory’s flag carrier, controls only about 30% of the landing slots at its home airport, far less than most incumbents elsewhere. So Cathay, one of Asia’s best-run airlines, is already used to intense competition. Publicly at least, its managers favour liberalisation, as long as it is based on reciprocity, since a shrinking share of a growing market might still translate into more profit.

Friends or foes?
Ironically, however, Hong Kong’s “motherland”—which officially includes Taiwan as well as mainland China—may prove to be Cathay’s biggest challenge. Hong Kong now follows a policy of “one route, one airline” among its own carriers. This arrangement dates back to the 1980s, when Cathay bought Dragonair, the only other Hong Kong-based passenger carrier, and then divided routes between the two, so that they would complement rather than duplicate each other. Thus only Dragonair now has rights to the Chinese mainland, and only Cathay serves Taipei. In the 1990s, however, mainland Chinese interests took control of Dragonair, as Cathay sold down its stake. The two airlines now seem confused as to whether they are partners or rivals.

Increasingly, they are the second—and this could hurt Cathay. Wendy Wong, an analyst at Merrill Lynch in Hong Kong, estimates that Cathay gets about 12% of its revenues from its “golden route” to Taipei. On it, Cathay already faces competition from two Taiwanese carriers and from Thai Airways. If Dragonair muscles in too, as analysts expect, Cathay will suffer. Its obvious escape is to win Hong Kong-mainland rights in return. It was this sort of horse-trading between Cathay, Dragonair and the authorities that was rumoured to be going on this week.

Without it, Cathay will have to think again. Buying a mainland carrier is one option. The trouble is that the turmoil that exists in Taiwan and Hong Kong is as nothing compared with the upheavals on the mainland. In April, Beijing announced plans to merge ten mainland carriers into three. Of these, Air China will become the national champion for international flights and will be listed in Hong Kong and New York. Its parent, moreover, also controls Dragonair—and the two may team up against Cathay. The two remaining mainland giants, China Eastern and China Southern, will dominate China’s domestic routes. Cathay is already in talks with China Eastern, which is based in Shanghai. But some analysts fear that the Chinese may still regard Cathay, which is part of Hong Kong’s Swire Group, as unacceptably “British”.

There is an even bigger imponderable. Nobody knows when direct transport links between Taiwan and the mainland will become possible, but their desirability (and inevitability) have become totems of Chinese patriotism throughout Greater China. Officials in Hong Kong and managers at Cathay strive bravely to sound as enthusiastic about them as anyone else. Privately, however, they are worried that Hong Kong’s days as a fast-growing hub may be numbered.



[This message has been edited by realitycx (edited 20 June 2001).]