Business Hong Kong

Qantas to review Jetstar Hong Kong after bid rejection

Australia’s flag carrier airline will review its low-cost subsidiary’s operations in Hong Kong after the company’s bid to run more flights in and out of the territory was rejected by the Air Transport Licensing Authority.

Jetstar, a budget airline owned by Qantas Airways, had applied to the authority to operate more scheduled services out of Hong Kong International Airport.

In a statement, Qantas CEO Alan Joyce described the news as “disappointing” for both Jetstar Hong Kong as well as travellers.

“It’s the travelling public who have lost out, because the message from this decision is that Hong Kong appears closed to fresh aviation investment even when it is majority locally owned and controlled,” he said.

“At a time when aviation markets across Asia are opening up, Hong Kong is going in the opposite direction. 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.”

The airline did not say if it would appeal the judgement.

Jetstar Airbus A330-200

Jetstar Airbus A330-200. Photo: Wikicommons

Jetstar Hong Kong was founded in 2012 as a joint venture between the Qantas Group, China Eastern Airlines, and Shun Tak Holdings. Each partner holds one-third of the shares but Shun Tak retains 51 percent of the voting rights, meaning it exercises ultimate control over the airline’s Hong Kong operations.

Jetstar submitted its application for an operating license in 2013, and a public inquiry into the application was held amid opposition from the big four local airlines: Cathay Pacific, Dragonair, Hong Kong Airlines, and Hong Kong Airways Express.

After a two-year wait and month-long public inquiry into the bid, Jetstar Hong Kong’s application was turned down because the airline’s principle place of business is not Hong Kong. In their judgement, the panel said they did not feel Jetstar Hong Kong could “make its decisions independently from that of the two foreign shareholders.”

Jetstar had argued that 70 percent of the board is from Hong Kong and that all local operations would be managed independently of its main office in Melbourne.

Hong Kong International Airport

Hong Kong International Airport. Photo: Wikicommons

The operating license would have allowed Jetstar to schedule more flights from Hong Kong to some of Asia’s most popular holiday destinations, including cities across China, South Korea, Japan, and the Philippines.

Whilst the Licensing Authority was considering Jetstar’s application, the airline was forced to sell some of its fleet. According to Australian Aviation, Jetstar had to sell eight of its nine A320 jetliners. The most recent sale took place in March, when two such aircraft were sold to a Chinese company for US$83 million.

Jetstar Airways was established in 2003 and flies to 35 different destinations.

Qantas to review Jetstar Hong Kong after bid rejection