airways
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CX Receives Licenses To Fly To Mainland

Thu Apr 17, 2003 8:30 pm

I have just got the information about today's decision of the HK Air Transport Licensing Authority about Cathay's request to fly to the mainland.

Cathay Pacific has recevied licenses to fly three times a day to Beijing, three times a day to Shanghai and three times a week to Xiamen. I wonder when they will launch these routes. But probably not this summer...

I haven't heard anything from Dragonair about that, but I suppose they're not happy with these news. Especially in these hard times...

Michael
http://airsider.net
 
N754PR
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RE: CX Receives Licenses To Fly To Mainland

Thu Apr 17, 2003 9:02 pm

Thats very interesting if true. As to when they will start, thats a very big question.
Bush, your a sad, sad man.
 
airways
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RE: CX Receives Licenses To Fly To Mainland

Thu Apr 17, 2003 9:06 pm

Well, I think we can be pretty sure it's true! The news came straight out of Cathay's Press Department.

Michael
http://airsider.net
 
N754PR
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RE: CX Receives Licenses To Fly To Mainland

Thu Apr 17, 2003 9:18 pm

Its confirmed, was on the news.
Bush, your a sad, sad man.
 
Cathay Pacific
Posts: 1715
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RE: CX Receives Licenses To Fly To Mainland

Thu Apr 17, 2003 10:21 pm

Finally some good news from CX!  Smile
cathay pacific, now you're really flying
 
aa61hvy
Posts: 13021
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RE: CX Receives Licenses To Fly To Mainland

Thu Apr 17, 2003 10:23 pm

What planes will they use? A330 to start out with?
Go big or go home
 
Guest

RE: CX Receives Licenses To Fly To Mainland

Fri Apr 18, 2003 2:13 am

Significant news for the oneworld alliance...

All onworld airlines that codeshare with Cathay will probably add their codes to these flights. This effectively means that oneworld will be the first alliance with a connecting hub serving the Chinese market (within the Chinese market itself). Good work Cathay.

Wow, consecutive weeks of bad news for Star. Conversely, consecutive weeks of good news for oneworld. First, AA and BA are given US government approval to codeshare on routes beyond their respective hubs, and now this. The AA/BA codeshare has the potential to damage the status of UA/BMI at LHR, and of Frankfurt and CDG as connecting hubs for their respective alliances. The Cathay entry into China will further compromise UA's position in HK, already made volatile by the recently approved Cathay/AA codeshare.

Now, it is Qantas' turn to figure out how to get the government to accept the deal for Air New Zealand.

Keep adding members Star. Meanwhile, the oneworld airlines continue to make the strategic moves necessary to build a really comprehensive and viable network.
 
N754PR
Posts: 2909
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RE: CX Receives Licenses To Fly To Mainland

Fri Apr 18, 2003 8:10 pm

So, when do you think they will be back to China then?
Bush, your a sad, sad man.
 
airways
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RE: CX Receives Licenses To Fly To Mainland

Fri Apr 18, 2003 8:22 pm

I think they will not start flights to mainland until the situation with SARS get's better and traffic picks up again. I really hope it will get better soon, but I don't see Cathay start the China flights in late 2003. But I'm pretty sure they will launch these flights before the Chinese new year in early 2004.

I haven't heard a comment of Dragonair about the granted license. Was there something in the local HK news that I missed from my remote place?

Michael
http://airsider.net
 
N754PR
Posts: 2909
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RE: CX Receives Licenses To Fly To Mainland

Fri Apr 18, 2003 10:18 pm

At this rate KA will not be a problem as they will not be flying. They are being badly hurt by the SARS thing and some say they only have as little as two months worth of cash....... add the fact that CX will now be hurting their main routes (Beijing & Shanghai) it does not look good.
Bush, your a sad, sad man.
 
CX Flyboy
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RE: CX Receives Licenses To Fly To Mainland

Fri Apr 18, 2003 11:19 pm

As I mentionned on a previous thread, we must remember this is merely the first step. There have been no slots assigned, and the Chinese authorities have not agreed to anything. In fact, they originally said they do not even recognise ALTA, and that the whole thing was meaningless to them. There's no point in ALTA approving it, if the Chinese aren't going to, and let's face it, what Chinese airline would want to compete directly with Cathay Pacific?
 
carnoc
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RE: CX Receives Licenses To Fly To Mainland

Fri Apr 18, 2003 11:31 pm

What Cx flyboy said is correct, Cathay Pacific's application still needs to be approved by Civil Aviation Administration of China (CAAC) and I think it may take up to a few months if Mainland carriers brought enough doubts and concerns over the matter. Meanwhile, I don't think Dragonair will be quiet, they will continue to fight back.

Regards.
 
airways
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RE: CX Receives Licenses To Fly To Mainland

Fri Apr 18, 2003 11:53 pm

Cx_flyboy & Carnoc: Thank's for the insight about the CAAC. I was also wondering whether the CAAC will be happy with the ALTA decission. At least, they are owning an important stake in Dragonair.

About KA's present situation, it doesn't really look good for them, as far as I can see. There has already been a lot of discussions about their situation, even before anyone ever heard of SARS.

Do you think the CAAC will let them go under? I think the Chinese administration is interested in a strong carrier in Hongkong. If they would loose KA, do you think they would launch a new HK based airline through one of the CAAC's airlines?

Michael
http://airsider.net
 
airways
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RE: CX Receives Licenses To Fly To Mainland

Sat Apr 19, 2003 11:12 pm

I have just seen the response from Dragonair, they're not happy...

"We are disappointed with the decision for several reasons," said Dragonair Chief Executive Officer Stanley Hui. "First, we believe it contravenes the Basic Law in respect of China's domestic routes. And second, the decision will result in uneconomic overlapping with the services provided by Dragonair on the three routes, leading to financial devastation for Dragonair. We made a very strong case as to the economic impact that granting the licences would have on Dragonair.

I didn't hear them complaining about basic laws when they got the Taiwan routes...

Michael
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CXCPA
Posts: 356
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RE: CX Receives Licenses To Fly To Mainland

Sat Apr 19, 2003 11:59 pm

Dragonair's comment is totally unlogic. ALTA also gave them the licence. If ALTA give licence to CX is illegal, then the dragonair's licence is also unvalid. So...
 
N503JB
Posts: 291
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RE: CX Receives Licenses To Fly To Mainland

Sun Apr 20, 2003 8:02 pm

***I didn't hear them complaining about basic laws when they got the Taiwan routes...***

You didn't hear becasue CX will not be scare about KA poor In-Flight Service on HKG - TPE route and they want to be a part in China market.
KA scare CX, that's what I can say!

N503JB
JetBlue Airways
HKIA Ramp Spotters
 
buckfifty
Posts: 1278
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RE: CX Receives Licenses To Fly To Mainland

Mon Apr 21, 2003 12:20 am

Usually things get approved on the Hong Kong side much quicker than they do on the mainland. I was told that you have to multiply the ALTA ruling process by five, you'll probably get your answer as to how long it will be before the Chinese make their decision.

And in the current scenario, nothing is assured, especially with government carriers chomping at the bit for a slice of the pie.
 
hkg82
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RE: CX Receives Licenses To Fly To Mainland

Mon Apr 21, 2003 1:41 am

Cx flyboy is absolutely right.

I don’t understand, why is there still dispute between Cathay & Dragonair over this matter? Didn’t Dragonair apply for rights from ATLA to offer services to other Asian cities, such as SIN, BKK, MNL, ICN, etc. & wasn’t their request granted? If KA commenced flights to the aforementioned destinations, then surely this would more than offset the loss in revenue KA would incur if CX resumed flights to the Mainland. This is a vice-versa scenario, as CX would reap in huge profits on their Mainland services to make up for the possible loss in earnings if KA started flights to above-mentioned key Asian destinations.

Hkg82.
 
loejim
Posts: 14
Joined: Tue Apr 22, 2003 4:41 pm

RE: CX Receives Licenses To Fly To Mainland

Tue Apr 22, 2003 4:59 pm

I don't mean to bore you guys with crazy political stuff, but here's the reason why KA made such a claim on CX returning to PRC...

The rationale that ATLA is not a valid arena to discuss air services agreement between HKG & China is because the Basic Law states that HKG government only has the right to negotiate air services with "foreign countries" on international routes.

For "domestic routes" - i.e. between HKG & PRC - the decision on air services arrangements are signed through MOUs (Memorandum of Understanding) between HKG & CAAC. This is different from the ASAs (air services agreements) signed between HKG & other foreign countries. And the negotiation of MOUs had never went through ATLA even in the Colonial British years (Pre- 1997)... Thus KA's claim of ATLA contravenes the Basic Law is a valid on a political point of view...

For the international routes between HKG and other countries, ATLA is the venue to determine carrier designation from HKG. Therefore, CX CANNOT complain on the ground of Basic Law, even if KA has gotten the approval from ATLA.

And agree with previous messages that this is only the very first step (or actually no steps had been taken given that CX got the licence from a venue not recognized by CAAC) for CX. They still need to go through proper HKG government endorsements and negotiations with the CAAC. This could also involve surrendering CX's shareholding in Dragonair - which with Swire Pacific's holdings, constitutes a 35% holdings. So it's still going to be a very long road...
 
ConcordeBoy
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RE: CX Receives Licenses To Fly To Mainland

Tue Apr 22, 2003 5:17 pm

Loejim,

good points... but there seems to be something of a flaw in that logic: namely, Taiwan.

The dispute of whether or not Taiwan is "really China" is well known, yet (IINM) ATLA gave KA the clearance to operate there.

How could the CAAC not see this as an objectionable action... if CX to mainland is to be seen that way?
Faire du ciel le plus bel endroit de la terre c'est impossible sans Concorde!
 
B-HXB
Posts: 678
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RE: CX Receives Licenses To Fly To Mainland

Tue Apr 22, 2003 5:22 pm

UH-HUH. So Dragonair can get licenses to fly all these routes and compete with CX, but when CX wants to get a license to compete against KA, KA suddenly finds an illogical rationale "we'll lose business" to stop them? I think the Atla ruling was spot on when it pointed out that KA seemed more concerned about their own bottom line than promoting HKG as a hub.

CX has a long way to fly before it even gets near starting up mainland China services, but fingers crossed!!

While we're on the subject of KA, is it true that they're being severely hit by this whole Sars thing? I don't want to start any rumours, but I believe I read somewhere that KA's load factor is quite low (even worse than CX) and that their cash reserves are nowhere near what CX have on hand. Can anyone confirm?
 
vr-hkg
Posts: 224
Joined: Sat Oct 06, 2001 7:32 am

RE: CX Receives Licenses To Fly To Mainland

Tue Apr 22, 2003 5:35 pm

Yes, I have read the same, that KA are being hit significantly worse than CX by this.
 
loejim
Posts: 14
Joined: Tue Apr 22, 2003 4:41 pm

RE: CX Receives Licenses To Fly To Mainland

Tue Apr 22, 2003 6:11 pm

Concorde Boy,

Tks for reminding that I mindlessly left the Taiwan issue un-explained...

On the Taiwan issue: HKG signs not ASAs with Taiwan, but Commercial Agreements (among carriers - i.e. CX, KA, CI, BR, AE and any carriers from either side). This is the policy that neither PRC or ROC government get involves in this sensitive matter of country vs renegade province or what not...

Therefore, CAAC has no jurisdiction on HKG negotiating air services with Taiwan, although China claims that Taiwan is part of China and HKG-Taiwan routes should be treated as domestic routes. It is both (PRC & ROC) governments' implicit understanding that this is off-limits area.

That is why the Taiwan issue is different from the China issue here... and this is strictly political!

As for B-HXB's comment on CX entering would give HKG more of an opportunity of becoming an international hub, I just want to express a few underlying points:

1. If CX enters PRC market, KA very likely will have to scale down and terminate some of its existing secondary Mainland cities (19 in total).

2. CX is entering into a market which is currently served by HKG carrier, and if this leads to case 1 scenario, HKG will actually have less direct flights with these secondary cities of Mainland. How can one justify that this serves HKG's hub role better?

3. CX also is already benefiting from the current arrangement with KA feeding onward traffic to CX, and it is already earning money even on the Shanghai-Hong Kong round trip sectors (thru shareholdings of KA).

********************************************************

As for KA's current situation, from my source, it has been "devastated" from SARS. But there is no cash flow problem as of yet...
 
lutfi
Posts: 687
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RE: CX Receives Licenses To Fly To Mainland

Tue Apr 22, 2003 6:46 pm

Loejim,

But you misunderstand function of ATLA. Well, so did Alan Hoo...

ATLA is just to say "HKG airline Y wants to fly to XXX, does any one object?" It then has a hearing if anyone objects, and decides if to give a license or not

It is then up to the HK government to negotiate the rights, if they don't already exist. It makes no difference whether int'l or domestic.

For example KA holds ATLA license to many destinations in China that they don't have traffic rights for yet, so if ATLA is unconstitional, so are KA licenses...

The judge talked about your underlying points. Go read the report, it is well wriiten and has many interesting facts. In brief

1. KA may reduce points. Judge view was that if the points aren't commercially viable, then it is KA's own commercial decision to lose money on them or not, and not an issue for ATLA or HK government. Besides, mainland airlines would continue to fly the routes

2. See (1)

3. The issue is about 6th freedom pax.

Again, I urge you to read the ATLA report at:

http://www.edlb.gov.hk/edb/eng/related/decision.doc






 
loejim
Posts: 14
Joined: Tue Apr 22, 2003 4:41 pm

RE: CX Receives Licenses To Fly To Mainland

Tue Apr 22, 2003 8:46 pm

Lufti,

I fully do understand what ATLA's function is, and it has accomplished its role in granting that licence. On a political standpoint, this is something that needs to be sorted out between the 2 governments. Of course, this is also why by ATLA granting licences, CX does not automatically get the right to serve these ports. There is still the HKG government and CAAC approvals needed.

The point is, through out the hearing, CX's main argument was resuming service to the three main ports in China would promote HKG's role as an international hub.

However, if this function is accomplished at the expense of eliminating existing services between secondary China ports and Hong Kong, then this main support for CX resuming services is not justified.

On a side note, I would welcome if CX does operate all the other ports that KA operates... but I think CX would not do it on a financial point of view as well... so go figure, CX is only looking at the lucrative routes while KA is stuck with the real role of facilitating HKG as a hub? Someone please explain to me the fairness here...
 
ConcordeBoy
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Joined: Thu Feb 01, 2001 8:04 am

RE: CX Receives Licenses To Fly To Mainland

Tue Apr 22, 2003 10:18 pm

There is no fairness in there... but such is the nature of a truly open international market, something of which more and more will be expected of Asian carriers as they attempt to become world-renowned hubs in and of themselves.

[Edited 2003-04-22 15:19:20]
Faire du ciel le plus bel endroit de la terre c'est impossible sans Concorde!
 
loejim
Posts: 14
Joined: Tue Apr 22, 2003 4:41 pm

RE: CX Receives Licenses To Fly To Mainland

Tue Apr 22, 2003 10:47 pm

Fairness may not be the best choice of words... Especially when the decision is a finanical one...

But I just want to stress a point that as a person from HKG, the rationale on improving HKG's position as a hub thru granting CX the licence makes absolutely no sense at all... HKG will lose more destinations/origins for facilitating passengers via HKG both ways...

However, guess everyone is entitled to their own opinion...
 
hkg82
Posts: 1301
Joined: Fri Apr 05, 2002 4:24 pm

RE: CX Receives Licenses To Fly To Mainland

Wed Apr 23, 2003 1:39 am

Yes but as I stated in an earlier post in this thread, wasn’t Dragonair granted the license to offer services to key Asian destinations such as SIN, BKK, NRT, etc.? That would be a compromise over the dispute between CX & KA. This will mean that KA would not have to give up its secondary destinations in China as the profit they earn from the flights to the key Asian destinations can subsidize the cost of operating the flights to the secondary cities in China, just like the flights they operate to PVG & BJS, the money they earn from those flights is used to cover the cost of operating flights to the smaller cities in China, but once CX returns to the Mainland, such flights will come under pressure, as they will be competing with the Cathay brand.

CX being allowed to return to the Mainland will boost HKG’s role as one of Asia’s busiest passenger & cargo hubs (I think we were the busiest international airport in Asia in passenger volume before the SARS outbreak). They will be able to route more passengers (more than they do now with the current arrangement with Dragonair) via HKG for flights to the Mainland because of their relatively large international route network.

If everything plays out the way it should, I believe, it’s a win-win situation for all. However because of the SARS outbreak, this makes matters more complicated (especially for Dragonair) & the timing is not appropriate at this time because of the travel slump. Traffic into & out of HK has dropped significantly, with the exception of flights to China, which has not been affected greatly (e.g. China Southern is adding a 5th daily CAN-HKG-CAN flight).

Btw, welcome to a.net Loejim!!  Smile

Hkg82.
 
airways
Posts: 852
Joined: Sun Mar 11, 2001 7:35 pm

RE: CX Receives Licenses To Fly To Mainland

Wed Apr 23, 2003 2:55 am

That's a very interesting discussion here, thanks for all the facts!

I agree with Hkg82. If KA wants to compete against CX on the Asian routes, they should not complain about new competition on its old routes to the Mainland.

The Taiwan route for example is one of the most profitable for CX as I heard, and now KA has the chance to get a piece of it. CX will lose market share here. And even if KA earlier said they will not launch a price war, if they fly with empty planes as the do now, they will probably start to lower the prices and therefore, the yields will also decline, for KA and CX. But hey, that's how it works. If they cannot work together, we will have a price war, sooner or later. That's sad to see, especially as CX still has a stake in KA.

The KA management does always speak about it's unprofitable network. If only three routes to Mainland are profitable, they should consider to drop the rest. That's how the business works. I don't think they have obligations from the government to operate to these cities (do they?). And if there is a demand, Chinese carriers will pick up the routes if KA decideds to pull back. CX has the same problems, if a route is not profitable, they either have to reduce or drop it in order to stop more money on these flights.

Even if KA is becoming a subsidiary of the new Air China, they will have to face much more competition from Mainland carriers. They will all fly to Hongkong from their Chinese hubs and directly compete with KA. Perhaps the product of some Chinese airlines is not at a standard as the ones of CX or even KA, but the Chinese will become better and better, if KA cannot compete with CX, they will certainly not be able to survive once the Chinese market opens up.

Michael
http://airsider.net
 
ConcordeBoy
Posts: 16852
Joined: Thu Feb 01, 2001 8:04 am

RE: CX Receives Licenses To Fly To Mainland

Wed Apr 23, 2003 3:44 am

But I just want to stress a point that as a person from HKG, the rationale on improving HKG's position as a hub thru granting CX the licence makes absolutely no sense at all... HKG will lose more destinations/origins for facilitating passengers via HKG both ways...

Just capitalism at its best/worst!

If China's wayward approach were applied elsewhere: how easy would it be to "fix" the ailing USA carriers if AA was the only one with rights to London and Latin America? DL the only one with rights to Paris and western Europe? NW the only one with rights to Japan? UA the only one with rights to the remaining Pacific rim.... all forced to cooperate with each other for transfer pax. Get my picture?
Faire du ciel le plus bel endroit de la terre c'est impossible sans Concorde!
 
loejim
Posts: 14
Joined: Tue Apr 22, 2003 4:41 pm

RE: CX Receives Licenses To Fly To Mainland

Wed Apr 23, 2003 8:18 am

Thanks for all of your valuable inputs... this is a great discussion!

I guess this is tough luck for Dragonair as Cathay was the one who had always been protected by the HKG government in their 50 odd years of existence. And Dragonair was never given a chance and had to make it on its own - when they first started in 1985... And the only time they were made profitable were the years of cooperation with CX. And no complaints if the HKG government believes that full frontal open skies is good for the city. Allbeit I believe benefits should be derived from foreign carriers, not 1 local carrier over the other...

As for the comments of all the US carriers, if KA is 1/10th of those carriers, CX would be sweating themselves... KA does not have the network right now, and in this business, network building (especially in mature market like SIN, NRT, etc) is much more difficult than to growing markets (PVG).

I personally think HKG is in a similar situation with Canada and Australia... Where the market can only afford 1 "flag" carrier... not 2... good luck KA...

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