Can Dragon really be serious though? I understand the comparisons between Easyjet and BA but Dragon are trying to muscle in on CX's service to say Sydney or Tokyo which is a full service, high quality product.
Seems like they are doing this simply as retalliation for CX wanting to get back into China (which CX after all did give to Dragon in the first place). Is this sensible motivation for a sucessful business?
HIALS, my friends at Dragon tell me that in Economy and Business class there will only be drop-down TV's, thus only one channel. If this is true it will not compete at all with the SQ or CX product.
Am I correct in thinking talk of Sydney and Tokyo is just a ploy to scare Cathay into selling out of Dragon to keep CNAC happy, the next item from Thursday seems to support this idea
===================================
Cathay faces losing stake in Dragonair HONG KONG STANDARD
Keith Wallis
Cathay Pacific Airways could be forced to sell all or part of its 17.8 per cent stake in Hong Kong Dragon Airlines (Dragonair) as a condition of winning at least one mainland route.
This follows Dragonair's move on Tuesday to lodge an objection with the Air Transport Licensing Authority (Atla) against Cathay Pacific's application to fly to three mainland cities - Beijing, Shanghai and Xiamen.
Cathay Pacific lodged its application with Atla at the end of August and the deadline for objections closes tomorrow.
Announcing its objection, Dragonair said it believed the three cities were unable to support the competition.
"Allowing the application would result in the uneconomical overlapping of air services,'' it said.
"Dragonair's ability to expand operations to primary destinations outside China has been constrained in the past, leading to its reliance on the Shanghai and Beijing routes.''
Insiders believe Dragonair's opposition has been inspired by its largest shareholder, China National Aviation Corporation (CNAC), which owns 43.29 per cent of Hong Kong's No2 carrier. "It is unlikely Dragonair would have acted alone. We believe CNAC is working behind the scenes, objecting to Cathay Pacific's application in an effort to force the carrier to reduce or sell its entire stake in Dragonair,'' one source said.
Another added: "Cathay Pacific is a very careful company. It is inconceivable that it would have made the application without first sounding out whether there would be opposition.''
He said James Hughes-Hallett, who is chairman of both Cathay Pacific and parent company Swire Pacific, and Cathay Pacific managing director David Turnbull had visited Beijing earlier this year to brief the authorities. "If they went to that trouble you can assume Dragonair was also sounded out.''
Under Dragonair's management structure, five of its directors are from CNAC, five from Citic Pacific and three from Cathay Pacific. Citic Pacific owns 29.35 per cent of Dragonair and 25.5 per cent of Cathay.
One insider alluded to a boardroom battle over whether Dragonair should object to Cathay Pacific's application for mainland rights. "If Citic ganged up with Cathay Pacific then there would be no objection. But it didn't happen probably because the CNAC board members said Citic and Cathay Pacific had a conflict of interest. Therefore CNAC won the day.''
Another added: "Maybe Stanley [Hui, Dragonair chief executive] was overruled. This is Machiavellian behaviour. The mainland shareholders have been jealous of Cathay Pacific's shareholding in Dragonair. Slowly but surely they will force Cathay Pacific to sell its stake.''
One source said there were strong grounds to suspect CNAC involvement given that Cathay did not object to Dragonair's cargo and passenger routes to Taipei awarded as part of the Hong Kong-Taiwan air services pact at the end of June. Neither was Cathay planning to object to Dragonair's application for rights to four Asian cities and Sydney.
"The fact Dragonair has decided to oppose Cathay Pacific's application means the gloves are off,'' a source said. "Maybe CNAC and Dragonair decided that six months' revenue (the length of time it will take Atla to decide on the application) from Beijing and Shanghai was simply too much to give away.''
Dragonair derives about 40 per cent of total revenues from the two routes.
A split would have significant implications for both groups. Last year, Cathay Pacific received HK$188 million in profits from its shareholding in Dragonair and associated companies.
This was nearly a third of its total net profits of HK$657 million.
In first-half 2002, Dragonair and other associated firms contributed HK$141 million towards Cathay net profits of HK$1.4 billion.
13 September 2002