The question of Cathay Pacific merging with its wholly-owned Cathay Dragon subsidiary is typically considered from a global view. The far larger Cathay Pacific takes over the lesser-known Cathay Dragon.
Yet where passenger perception matters most – mainland China – the relationship is reversed.
Dragon is the long-standing local brand, originally as Dragonair and more recently Cathay Dragon. It well predates Cathay Pacific, which was seen as the “other” airline part of better-known Dragon. Today, almost all of the group’s flights to mainland China are on Cathay Dragon.
Continuing the brand anachronism in a rapidly growing market makes change more difficult in the future. Cathay knows this and has worked around it.
Planes belonging to the Hong Kong Airline Carrier Cathay Pacific and Cathay Dragon parked in Hong … [+]
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Fully merging Cathay Pacific and Cathay Dragon would not bring the high level benefits from combining two separately owned airlines. Cathay Pacific and Cathay Dragon are already effectively merged in most areas.
Flights are booked on one website. Aircraft have common interiors. Cathay Dragon has a CEO, Algernon Yau, but this is a formality. Yau’s day-to-day job is Director Service Delivery at Cathay Pacific.
These reduce costly duplication. The other typical merger benefit is scale and new opportunities – the whole is greater than the sum of its parts.
But Cathay Pacific and Dragon have integrated planning: which will start a new flight, schedule changes to support the other’s connections.
Merging the two would bring some gains but not the major changes needed for the post-COVID-19 market. Fleet and shareholder restructures continue.
The 2016 rebrand from Dragonair to Cathay Dragon should have been a merger, but there was regulatory uncertainty.
Foreign governments could turn protectionist, refusing to let Cathay Pacific use Dragon’s traffic rights and slots, even if Dragon is wholly-owned and effectively the same. Creative excuses would justify a review and ultimate denial.
Conveniently that could see Dragon lose access from certain Southeast Asian cities to a dozen-odd prime slots in Shanghai. No other non-mainland Chinese airline has as many Shanghai slots as Cathay does. It has more Beijing slots than some mainland airlines do.
Civil jet airplanes of Singapore Airlines and its subsidiaries – Tigerair, Silkair and Scoot at … [+]
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Other airline groups were concerned about aeropolitical consequences if they wanted to coordinate their different brands. Ultimately they overcame it, but there is no rulebook.
Singapore Airlines re-allocated routes and slots between its full-service and low-cost brand in numerous markets including China, India and Indonesia. Singapore Airlines expects to be able to merge with its Silk Air brand.
Thai Airways adjusted its network with Thai Smile.
An Airbus A 320 Thai Smile aircraft maneuvers on the tarmac at the Toulouse-Blagnac airport on … [+]
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Previous problems were not going to be forgotten after last year’s Hong Kong protests and mainland China’s disciplinary action against Cathay.
Those infractions now preclude a Cathay Pacific-Cathay Dragon merger, Reuters said. The reason is different but outcome the same: slots could be lost.
Mainland China’s post-COVID-19 aviation strategy calls for strengthened hubs. Airlines like Cathay divert traffic to outside hubs.
A Hong Kong Express Airways Ltd. aircraft taxis past an aircraft operated by Cathay Dragon, a unit … [+]
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Not merging Cathay Pacific and Cathay Dragon is not a significant loss, although there is greater complexity from now having the low-cost HK Express brand.
Those unfamiliar to Cathay assume Dragon is a budget division – no, but we have one of those, too. AirAsia’s Tony Fernandes used to poke fun at Singapore Airlines having four brands.
Any Dragon efficiencies would ideally be preserved in a merger rather than lost to the highest common denominator. Staffing contracts vary between Cathay Pacific and Cathay Dragon, and having a unified crew would give some synergies.
As for the brand, the “Cathay Dragon” name and brushwing logo helps consumers transition from the Dragon they know to the Cathay that is the future.