Ryanair and Cathay Pacific face common woe: Competition

Courtesy AFP

Courtesy AFP

UK budget carrier Ryanair has warned that it may miss its profit forecast this year. Earnings are likely to fall below 600 million euros (US$452 million).

Cathay Pacific Airways reiterated its opposition to Qantas’ application to launch budget carrier Jetstar Hong Kong in partnership with China Eastern Airlines and a local investor. A Cathay spokesman confirmed that the airline had filed a formal objection. Approval for the new budget carrier, which Qantas hopes to be able to launch next year, is pending.

Two different news strands from different parts of the world, but they point to the same issue of competition.

Ryanair blamed not only the weakness of the European economy but also price cutting by rival airlines. The hard truth is that bookings for the quarter September to November has dipped, even as the carrier dips prices against falling demand across the industry. So said Ryanair chief executive Michael O’Leary: “We are going to respond to this by being out there first and being aggressive in fare response.”

But isn’t that what competition is about? There is nothing cryptic about the function of the demand and supply curve. In other words, you can’t have your cake and eat it.

Courtesy Cathay Pacific

Courtesy Cathay Pacific

So is this a fear that is confronting Cathay in its objection to Jetstar Hong Kong taking wings? Cathay argued that approval of the new budget carrier would violate Hong Kong Basic Law because the latter does not have its principal place of business in the city, and that allowing access to the carrier would be detrimental to Hong Kong’s interests.

It all comes down to the issue of competition. Cathay may not admit it, preferring to frame the situation differently as when it previously suggested that there was no room for budget carriers in Hong Kong, that considering Hong Kong’s demographics (comparing it with Singapore) a budget carrier would not be a viable proposition. Whether Jetstar Hong Kong will survive the competition is not the issue; Cathay is concerned that it will eat into its pie, competing directly with it and its regional subsidiary airline Dragonair, although Jetstar is only a low-cost carrier which neither Cathay nor Dragonair is one.

So, the next time you hear an airline mouth support for competition, take it with a pinch of salt.

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About Dingzi
Writer by passion, with professional expertise in aviation, customer service and creative writing. Aviation veteran, author, editor and management consultant. Besides commentary on business issues and life-interest topics, travel stories and book reviews, genres include fiction, poetry and plays. Nature lover who abhors cruelty of any form to animals, and a tireless traveler. Above all, a dreamer.

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