Qantas Airways’s hopes of launching a new low-cost carrier in Hong Kong have been all but dashed after the Chinese territory backed a challege by its local rivals Cathay Pacific and Hong Kong Airlines.
The Hong Kong Air Transport Licencing Authority (ATLA) on Thursday rejected the application from Qantas to start a new budget airline on the basis that the ultimate control of the airline would be in Australia and mainland China.
Cathay Pacific and Hong Kong Airlines had objected to Jetstar’s application and a public inquiry on the issue was held in February.
“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,” the regulator said.
Jetstar Hong Kong had formed a key plank of Qantas’s Asian growth strategy. It already has budget carriers operating under the Jetstar brand in Singapore, Vietnam and Japan, and Qantas chief executive Alan Joyce this month described them as “low cost capital investments with huge growth potential.”
At the same time, Jetstar Group chief executive Jayne Hrdlicka admitted the airline had misjudged the ease of gaining regulatory approvals for the venture but remained “patient and longminded” about its prospects.
Qantas, Chinese state-owned carrier China Eastern and Hong Kong’s Shun Tak Holdings each own one-third of the business venture, which was launched in March 2012 and expected to begin flying in 2013. At one point, Jetstar owned nine Airbus A320 aircraft despite not having approval to fly, with plans to add another nine to the fleet once it received regulatory clearances.But over the last year, the airline has sold eight of the fleet, leaving it with just one aircraft for its planned launch, assuming approvals were received. Qantas has invested $33 million in the loss-making venture, with China Eastern having invested the same amount but also extending a $US60 million loan last year.
Shun Tak had been brought on as a partner in 2013 after it became clear the application had met with resistance from regulators and Qantas and China Eastern sought to put a more local face on the airline. Shun Tak boss Pansy Ho has served as the carrier’s chairman since that investment. Since last year, the Hong Kong company has held 51 per cent of the voting rightsand the right to appoint four of seven directors despite its one-third economic interest.
The ATLA said in determining whether the principal place of business was in Hong Kong, its activities must not be subject to the control of senior management, shareholders or related parties located elsewhere. But the regulatory body decided Jetstar Hong Kong could not make decisions independently of Jetstar and China Eastern given they had control over where the carrier would fly, including references to “strategically sensitive routes” and “restricted routes” to which the budget carrier could not fly under their agreement. Pricing of fees and surcharges would also be set by Jetstar.
In addition, despite Shun Tak appointing a majority of directors, board decisions required the approval of 80 per cent of members, meaning no approval could be reached without the support of Jetstar and China Eastern.
Jetstar Hong Kong chief executive Edward Lau did not rule out appealing the decision, which he said had “extremely disappointed” the airline start-up.
“We will take time to review and consider our next steps,” he said. “Jetstar Hong Kong’s principal place of business is Hong Kong. The carrier is chaired by Hong Kong business woman Ms Pansy Ho with a local CEO and management team who lead and manage the business. 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.”
source:- www.newcastleherald.com.au
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