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Qantas Chief Joyce says Jetstar HK rejection serves vested interests

07/01/2015| 6:27:00 PM|

Qantas said in a statement it would work with Jetstar Hong Kong’s two other shareholders China Eastern and Shun Tak Holdings to “review the enterprise”.

Qantas chief executive Alan Joyce says the decision to reject an operating licence for Jetstar Hong Kong (JHK) serves the vested interests of those already flying and leaves the travelling public worse off.

Hong Kong’s Air Transport Licensing Authority has knocked back Jetstar Hong Kong’s application to fly, leaving the proposed low-cost carrier facing an uncertain future.

The ATLA said although there was “no dispute” the day-to-day management of the airline would be conducted in Hong Kong and managed by a local chief executive, that was not sufficient to establish and meet the principal place of business criteria contained in Hong Kong’s Basic Law.

“In operating as a licensed Jetstar branded airline, JHK is to surrender the right to determine its own network, fare structures and other flight-related matters to the Jetstar Group,” under the business service agreement, the ATLA said in its decision published on Thursday night.

Qantas said in a statement it would work with Jetstar Hong Kong’s two other shareholders China Eastern and Shun Tak Holdings to “review the enterprise”.

“This is as disappointing for the shareholders as it is for the travellers that Jetstar Hong Kong planned to serve,” Joyce said in a statement on Friday.

“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.

“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.”

Qantas said its investment in Jetstar Hong Kong was valued at $10 million in its latest financial accounts. The company did not say if it would appeal the decision.

Jetstar Hong Kong chief executive Edward Lau said he was extremely disappointed by the ATLA ruling.

Lau said the proposed airline’s principal place of business was Hong Kong, noting local businesswoman Pansy Ho was its chairman and there was a local management team in place.

“We will take time to review and consider our next steps,” Lau said in a statement on Thursday night.

“We intend to bring low fare options, a network from Hong Kong that Hongkongers are missing out on and the opportunities of flying in high value overnight visitors from around the region that the travel trade industries should enjoy.”

Jetstar Hong Kong’s application had been vigorously opposed by local carriers Cathay Pacific and its affiliate Dragonair, as well as Hong Kong Airlines and Hong Kong Express.

Cathay Pacific director for corporate affairs James Tong said the ATLA ruling ensured Hong Kong’s economic assets such as its air traffic rights would be used for the benefit of the people and economy of Hong Kong.

“It is the right decision for Hong Kong,” Tong said in a statement on Thursday night.

“As we said during the ATLA hearings, any airline with its principal place of business not in Hong Kong does not comply with Article 134 of the Basic Law.”

Qantas shares were down five cents at $3.19 in morning trade on the Australian stock exchange on Friday.

Hong Kong markets, where Cathay is listed, were yet to open.

Credit Suisse head of Asia Pacific transport research Timothy Ross told Bloomberg News the ATLA ruling was a “significant moral victory for Cathay”.

“The near-term earnings impact Jetstar would have had on Cathay was always going to be limited. Had Jetstar prevailed, it could have been seen as a backdoor means for other carriers to start a hub in Hong Kong,” Ross said.

Bocom International analyst Geoffrey Cheng told the South China Morning Post the ruling would benefit Cathay. The analyst also noted Hong Kong was already well served by low-cost carriers.

“Consumer choice wouldn’t be that affected by there being one less home-based budget carrier, since budget carriers from elsewhere have been coming,” Cheng said.

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TAGS: Alan Joyce | Qantas Group | Jetstar HK
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