The consolidation of China Eastern Airlines Corp and Shanghai Airlines might not create a stronger carrier, said a top executive from Cathay Pacific Airways after the two carriers set up a task force to proceed with a merger.
Christopher Pratt, chairman of Cathay Pacific, said, "I don’t think putting two weak carriers together would necessarily make a stronger one." As Mandy-Rice Davis said on a memorable occasion, "Well, he would say that, wouldn’t he." In fact, that is a misquotation but is generally accepted.
Cathay Pacific is hurting badly, in part because of the flights from Taiwan to the Mainland now operating directly.
Cathay and subsidiary Hong Kong Dragon Airlines have more than 14 flights a day between Shanghai and Hong Kong and, plainly, any further consolidated opposition would not be overly welcome.
It is considered as one of the golden routes for Cathay because of the high demand for business traffic. The economic downturn, however, has dampened demand on the route, forcing Dragonair to use smaller aircraft – the 150-seater Airbus 320 – to fly some of the flights.
Analysts are positive about the merger, as it will give the combined carrier more than half of the market share in Shanghai, an aviation hub much sought after by both domestic and foreign carriers.
Li Lei, an analyst with China Securities Co., said, "The move is long overdue as Shanghai is the only major city in China that houses two carriers."
CargoNews Asia reported that after years of double-digit growth, China’s airlines are facing strong headwinds as the global financial crisis strikes home.
Its top three carriers, Air China , China Southern Airlines and China Eastern lost more than $4 billion in 2008.