Just the facts, Underpants?
Even by the standards of a rumor network Underpants excels himself in terms of inaccuracy. Dragonair did not "buy" Dragonair in 1990 - they took a 40% controlling interest on condition that CX provided critical management services.
The "bankrupt" bit is almost correct - although was not legally declared. There were 5 aircraft at the time not 3. I am unsure who "Ho" is, but there was no shareholder of that name - Sir Y K Pau's shipping empire were the principal shareholder with a significant holding by founder K P Chao's Novel.
The reason for the move had more to do with "real politik" than fear of competition. Serving Taiwan (Taipei was then the most profitable route in the world on a per seat mile basis) and PRC was becoming increasingly difficult. KA became the China Feeder and CX gave up PEK and SHA.
The change of control to CNAC with Cathay left with only a minority shareholding was again driven by politics but the eventual "purchase" by CX of 100% of KA was part of a complex realignment with share cross holdings by CX and AC.
I am intrigued by CNAC not being allowed to hold airline shares - presumably that would be CNAC HK?
All that, of course, is totally irrelevant to the thread about Jetstar! Forgive the side track.