118.
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BA had not dissented from the proposition that Cathay was not caught by the original Guidance. To grant Cathay a licence would reflect what had happened on international routes. Since it was not a British airline it was not inconsistent with the Authority's policy statement to license Cathay. Whatever way Section 3(1)(a) was read, the Authority could decide who to licence based on the merits of their application. It was for the Authority to decide the extra capacity and frequency that should be permitted based on the overall needs of the market and it would be necessary for the Authority in making its decision to choose between the different market forecasts presented and the market share likely to be achieved by each carrier under the various competitive regimes. It would also be necessary to consider the extent to which BA would be affected by loss of traffic and revenue.
119. Cathay had adopted BA's forecast rate of growth and the only difference.
between them was on the estimates of recaptured sixth freedom traffic and tariff stimulation. Tariff stimulation was a matter of guesswork and BA had taken an arbitary 5%. The other carriers had taken more but the figures had not been definitive; a difference in the market forecast of 50,000 would turn a marginal operations into a loss. It was very difficult for either Cathay or BCAL to show that it could operate other than marginally and if their forecasts were too high. they would make a loss.
120.
121.
BA had disputed BCAL's degree of de-rating of their capacity for purposes of its market share model and there had been no evidence to justify the excessive amount by which it had been de-rated. If BA's market forecast was taken into account in the consideration of the proposal for licensing BCAL and Cathay on a 3/4 frequency the proposal was unrealistic. In Hong Kong BCAL had started by arguing that they alone should be licensed but subsequently suggested that political realism had indicated that Cathay might also be licensed. They had also developed the argument that licensing Cathay as well as BCAL might provide a broader range of innovative fares and that more competition might increase the market. Increased competition would not however generate more passengers and the real reason why BCAL had proposed the licensing of BCAL and Cathay remained political realism. In Hong Kong BCAL had produced a document based on de-rated capacity, which they had referred to as a market load factor, and argued that a three carrier regime was the only way to secure an adequate overall provision of capacity. They had claimed that it was not evidence merely a hypothesis and it was never tested.
The same hypothesis had been presented to the CAA which had been told that a market load factor of 65% was necessary and that in order to achieve that figure is was necessary to license three carriers. BA had more than adequately demonstrated why that approach was wholly wrong.
BCAL's case to the Authority had indicated a preference to be licensed alone but they had inverted their order of priorities and said a three/four frequency regime was their preferred alternative. However, under cross examination they had admitted they would prefer a two carrier regime. A three/four frequency regime could not be profitable for everyone and BA's evidence had demonstrated that it would cause losses for all three carriers. Such a regime would cause serious losses to BA and there would be no operational advantages. It would not provide another daily service and would necessitate agreements between the carriers. It would be wasteful of resources and would not increase competition or lead to greater stimulation of the market.
122