Hong Kong's Competition Commission has closed an investigation into a proposed joint venture agreement between Cathay Pacific (CX, Hong Kong International) and Malaysia Airlines (MH, Kuala Lumpur International) after the two airlines abandoned the idea.

In a September 7 statement, the regulator said the two airlines had wanted to enter into a metal-neutral joint business agreement for all their scheduled passenger services between Hong Kong and Malaysia. Distinguishable from a simple codeshare agreement, the joint venture, first flagged in May 2022, would have seen the two airlines sharing revenue and costs on a given route regardless of which carrier operated the actual flight. The proposed agreement would have also involved:

  • Network planning and schedule coordination;
  • Pricing coordination;
  • Inventory management coordination;
  • Distribution systems coordination;
  • Joint sales and marketing;
  • Service and product cooperation; and
  • A frequent flyer agreement.

However, in late July 2023, Malaysia Airlines and Cathay Pacific told the Competition Commission that they would not proceed with the joint venture plan.

ch-aviation schedules data shows both airlines compete on the Kuala Lumpur - Hong Kong route (along with AirAsia and Batik Air Malaysia), while Cathay Pacific also flies the Penang - Hong Kong route. The dominant airline on the country pair is AirAsia, providing 43.06% of the weekly seat capacity. AirAsia is followed by Cathay Pacific (37.2%) and Malaysia Airlines (11.92%). If the joint venture had gone ahead, the two cooperating airlines would have a 49%+ market share (in terms of seat capacity). Fourteen indirect services between Hong Kong and Malaysian destinations with transfer at Kuala Lumpur were also included in the proposed joint venture.

The Competition Commission's preliminary investigations found traffic on the country pair was highly concentrated, and both airlines had significant market shares. "Implementing the proposed joint venture would likely eliminate all competition between the parties 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 the Parties may be insufficient," an earlier statement from the Competition Commission reads. "Therefore, should the proposed joint venture be entered into, notwithstanding that it may generate some efficiencies and benefits, the Commission is more concerned that the proposed joint venture would likely reduce the incentives for the parties to offer lower prices and/or to improve the quality of services, which would affect passengers travelling between Hong Kong and M

Cathay Pacific told the South China Morning Post outlet that they had dropped the proposed joint venture for "commercial reasons" and did so before the Competition Commission had released any definitive comments or concerns.