Qantas’ plan to expand its low-cost Jetstar brand in Hong Kong has hit a brick wall as Chinese authorities back objections by local air competitors – Cathay Pacific and Hong Kong Airlines.
The joint venture with Shun Tak Holdings Limited, China Eastern Airlines and the Qantas Group was first announced in 2012 to tap into demand for a ‘low fare model’ airline in the destination.
The carrier was originally set to take off in 2013, however, was delayed after local airlines disputed Jetstar’s presence.
Today, Hong Kong’s Air Transport Licensing Authority rejected the carrier’s proposal to establish Jetstar Hong Kong, citing concerns that the airline’s final control would be in Australia and mainland China.
The decision follows a hearing, held in February, which centred around objections from Cathay and Hong Kong Airlines.
“Having considered all relevant information including submissions and evidence Jetstar Hong Kong and the objectors presented at the public inquiry, the Authority decided that Jetstar did not comply with Article 134(2) of the Basic Law in having its principal place of business in Hong Kong and that Jetstar Hong Kong’s application be refused.”
Air Transport Licensing Authority
Disappointed by the response, Qantas said it will work with fellow shareholders to ‘review the enterprise’.
According to Qantas, by the end of 2014 it had invested some $10 million in the Hong Kong subsidiary.
CEO Alan Joyce said ultimately it’s ‘the travelling public who have ‘lost out’ because of Hong Kong’s ‘closed’ approach to ‘fresh aviation investment’.
“At a time when aviation markets across Asia are opening up, Hong Kong is going in the opposite direction.”
Alan Joyce, Qantas CEO
“Given the importance of aviation to global commerce, shutting the door to new competition can only serve the vested interests already installed in that market.”
Each party involved in the venture holds a one-third economic share while the Hong Kong based Shun Tak Holdings has 51 percent of the voting rights and ultimate control. Seventy percent of the board is from Hong Kong.