The article below from NYTimes.com has been sent to you by psa188@xxxxxxxxx /--------- E-mail Sponsored by Fox Searchlight ------------\ SIDEWAYS - OPENS IN NEW YORK AND LOS ANGELES OCT. 22 An official selection of the New York Film Festival and the Toronto International Film Festival, SIDEWAYS is the new comedy from Alexander Payne, director of ELECTION and ABOUT SCHMIDT. Starring Paul Giamatti, Thomas Haden Church, Sandra Oh and Virginia Madsen, SIDEWAYS opens in NY & LA October 22 and will expand across North America in November. Watch the trailer at: http://www.foxsearchlight.com/sideways/index_nyt.html \----------------------------------------------------------/ A Struggle Over Air Routes in East Asia October 22, 2004 By KEITH BRADSHER HONG KONG, Oct. 21 - The pact by Cathay Pacific Airways on Wednesday to buy a stake in Air China has highlighted a struggle across East Asia, and especially in Hong Kong and mainland China, over how vigorously airlines should be allowed to compete with each other on international routes. At stake is the world's fastest-growing regional aviation market, with China at its core. The fight over market access has drawn not only airlines but investment bankers seeking deals and consultants, lawyers and lobbyists seeking contracts. At the heart of the debate lies Hong Kong, home to Asia's biggest airport for international passenger traffic and the world's biggest hub for international air cargo shipments. Many of the arguments here echo those at hubs dominated by a single carrier in the United States. Cathay Pacific is the biggest carrier here, and has opposed allowing other airlines, especially American and Australian carriers, greater rights to fly through Hong Kong and pick up passengers to carry to other Asian destinations. At the same time, however, Cathay and the Hong Kong government have been pressing Beijing to allow more flights between Hong Kong and mainland Chinese cities. The most immediate question now is whether Cathay's planned 9.9 percent stake in the state-owned Air China will help soften objections from Beijing to allowing more Cathay flights to the mainland. Beijing has strictly limited the number of these flights while trying to prepare its domestic carriers for international competition, though it raised the ceiling somewhat last month and has allowed more nonstop flights lately from the United States. Antony Tyler, who oversees Cathay's route negotiations as its director of corporate development, said at a forum on Thursday that the Air China deal made sense even leaving aside the prospect of greater access to the Chinese market. "This is an investment, and getting additional traffic rights into China is a totally separate issue," he said. But earlier in the forum, Mr. Tyler also voiced Cathay's continued desire to offer flights from Hong Kong to Shanghai. Dragonair, which has the Chinese government as its biggest single stakeholder although Cathay also owns a sixth of the shares, conducts a thriving business on the route now. Hong Kong has moved slowly but steadily to allow more flights from other countries, sometimes over the objections of Cathay but not fast enough to suit FedEx Express, in particular. FedEx is now in talks to open an Asian hub 80 miles up the Pearl River in Guangzhou instead, and has been strongly critical of Cathay. "When you look at Hong Kong, Hong Kong is a market of monopolies and duopolies," said David Cunningham, the president of Asian and Pacific operations for FedEx. "My concern for Hong Kong is that, living here and loving it, the world has moved beyond that." Cathay Pacific carries a third of the passengers passing through Hong Kong; it holds its minority stake in Dragonair, which has another tenth of the market; and is now moving to invest in Air China, with another several percentage points of the traffic here. Limits on competition have tended to mean high prices but also superb service. Cathay's numerous and fast-moving flight attendants manage to serve every economy-class passenger a hot meal even during 80-minute flights aboard packed jumbo jets to Taipei. Mr. Tyler acknowledged that air fares here are somewhat higher than in other markets, but attributed this to longstanding factors, notably differences in exchange rates. He insisted that Hong Kong was a competitive market, adding that Dragonair and Cathay compete not only with each other but with at least one other carrier on every route. Last year's lethal outbreak here of severe acute respiratory syndrome, or SARS, underlined the value to Hong Kong of having a locally based carrier, because other airlines were quick to suspend service here while Cathay kept flying, Mr. Tyler said. "We kept Hong Kong connected to the world," he added. In a gibe at the United States, which has sought greater access for its carriers here over the years, Sandra Lee, Hong Kong's permanent secretary for economic development, pointed out that Hong Kong's policies did not include giving so-called soft loans to airlines or allowing airlines to take refuge from creditors in Chapter 11 bankruptcy proceedings. As in Europe, decades of nationalistic policies in Asia aimed at protecting flag carriers from foreign competition are gradually being dismantled. Limits on the numbers of international flights between cities are being slowly raised and, in some cases, eliminated entirely. Together with the arrival of budget carriers like Air Asia of Malaysia and Virgin Blue of Australia that make use of the expanded air service rights, the new freedom to compete is forcing established airlines to control costs and, in some cases, reduce fares. Singapore, Malaysia and Thailand have led the trend toward so-called open skies, drawing more passengers through their airports as a result, sometimes at the expense of Hong Kong. Mr. Tyler said that after concluding Wednesday's deal, he celebrated at an Eagles concert that night. He added, "If I were Lufthansa and United, which have clearly courted Air China, I'm sure I'd think, 'What is this all going to amount to?' " http://www.nytimes.com/2004/10/22/business/worldbusiness/22aviation.html?ex=1099449131&ei=1&en=efb2bad136dfd35e --------------------------------- Get Home Delivery of The New York Times Newspaper. Imagine reading The New York Times any time & anywhere you like! Leisurely catch up on events & expand your horizons. Enjoy now for 50% off Home Delivery! Click here: http://homedelivery.nytimes.com/HDS/SubscriptionT1.do?mode=SubscriptionT1&ExternalMediaCode=W24AF HOW TO ADVERTISE --------------------------------- For information on advertising in e-mail newsletters or other creative advertising opportunities with The New York Times on the Web, please contact onlinesales@xxxxxxxxxxx or visit our online media kit at http://www.nytimes.com/adinfo For general information about NYTimes.com, write to help@xxxxxxxxxxxx Copyright 2004 The New York Times Company