HK competition watchdog ends probe into proposed plan between Cathay Pacific and Malaysia Airlines

The Competition Commission has decided to close the investigation into a proposed business agreement between Hong Kong's flagship carrier Cathay Pacific and Malaysia Airlines after the two airlines scrapped the idea.

According to its official statement, the competition watchdog said on Thursday that it had ended its probe after both airlines had decided not to proceed with the plan to share revenue and costs, on a given route regardless of which airline is operating the actual flight. The proposed agreement would also have involved joint sales and marketing. 

Rasul Butt, chief executive officer of the commission, said, “Under the ordinance, undertakings may choose to apply to the commission for a decision as to whether or not an agreement or conduct is excluded or exempt from the Conduct Rules. Undertakings are also entitled to conduct a self-assessment of the legality of their agreement or conduct."

He added that the commission will initiate an investigation into any agreement or conduct if there is reasonable cause to suspect that a contravention of a competition rule has taken place, is taking place or is about to take place. "The commission is mindful of information from public sources that the costs of travel have increased considerably post-pandemic and will be vigilant in identifying and tackling situations where anticompetitive conduct or lack of competition may be a contributing factor," he added.

The proposed agreement first came to light in May 2022, when both airlines jointly made an application to the Malaysian Aviation Commission to exempt the proposed agreement from the country’s competition law. As such, the competition watchdog initiated an investigation to assess whether the proposed partnership would potentially harm competition in Hong Kong.

The commission’s preliminary assessment during the investigation indicated that the markets for air passenger services between Hong Kong and Malaysia are highly concentrated, with both airlines having significant market shares and being each other's closest competitor.

The commission said that implementing the proposed agreement would likely eliminate all competition between both companies as they would effectively operate as a single entity on the routes in question.

There also appears to be barriers to market entry and expansion, and the competitive constraints exerted by existing competing airlines on both companies may be insufficient. Therefore, the commission is more concerned that the proposed agreement would likely reduce the incentives for both companies to offer lower prices and/or to improve the quality of services, which would affect passengers travelling between Hong Kong and Malaysia.

In response, Cathay Pacific told MARKETING-INTERACTIVE that discussions between the airlines regarding the proposed collaboration were terminated on 31 July 2023 due to "commercial considerations".

Cathay added 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 [commission’s] announcement.

"Cathay Pacific has fully complied and cooperated with the authorities in Hong Kong and Malaysia throughout this process."

MARKETING-INTERACTIVE has reached out to Malaysia Airlines for a statement.

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