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The Competition Commission said on Thursday it has decided to close the investigation into a proposed joint business agreement between Cathay Pacific and Malaysia Airlines, as the two airlines announced they had terminated the proposed collaboration.
The two airlines had previously proposed to enter into a “metal-neutral joint business agreement” in respect of all scheduled air passenger services between Hong Kong and Malaysia operated by the two parties.
The watchdog said a metal-neutral partnership or joint venture differs from a codeshare agreement, as the agreement essentially involves revenue and costs sharing between the airlines on a given route regardless of which airline is operating the actual flight.
It started an investigation “to assess whether the proposed agreement may harm competition in Hong Kong” after going through the information voluntarily provided by the two airlines.
Cathay Pacific and Malaysia Airlines later notified the Competition Commission they had decided not to proceed with the proposed agreement. The Commission hence decided to close the investigation.
Regarding the Commission announcement, Cathay Pacific said on Thursday the discussions with Malaysia Airlines on the proposed business collaboration were terminated on July 31 this year based on commercial considerations, and the airlines have informed the relevant regulatory authorities in Hong Kong and Malaysia of this decision.
“It should be noted that the discussions between the airlines ceased before Cathay Pacific received any definitive comments that the Hong Kong Competition Commission might have had, or the concerns mentioned in the announcement,” it added.
The Commission said in its statement the preliminary assessment during the investigation indicated that implementing the joint business agreement between the two airlines “would likely eliminate all competition between the Parties (Cathay Pacific and Malaysia Airlines)” and “appears to be barriers to market entry and expansion.”
It added that “the competitive constraints exerted by existing competing airlines on the Parties may be insufficient.”
The watchdog also noted that it was concerned the proposed agreement would likely reduce the incentives for the two airlines to offer lower prices and/or to improve the quality of services, which would affect passengers traveling between Hong Kong and Malaysia.
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