Qantas labels Hong Kong rejection of Jetstar venture disappointing

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Qantas labels Hong Kong rejection of Jetstar venture disappointing
THE AUSTRALIAN JUNE 26, 2015 9:21AM

Qantas CEO Alan Joyce and China Eastern Airlines Ltd chairman Liu Shaoyong at the 2012 announcement of the joint venture. Source: AFP

Qantas chief Alan Joyce has attacked Hong Kong’s rejection of a budget joint venture involving its subsidiary Jetstar and China Eastern Airlines, and says travellers will lose out.

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

Hong Kong regulators rejected plans for Jetstar Hong Kong because they said it could not be considered a local carrier.

Two years after Jetstar Hong Kong applied for the airline licence, the southern Chinese city’s Air Transport Licensing Authority denied the start-up’s application, saying last night its majority foreign ownership meant its main place of business was not in Hong Kong.

Under Hong Kong’s mini-constitution, the Basic Law, which came into force after China took back control of the city from Britain in 1997, airlines operating out of Hong Kong are required to have their “principal place of business” in the city.

In a 150-page ruling, a five-member panel said it “is of the view that JHK cannot make its decisions independently from that of the two foreign shareholders.”

Mr Joyce said Qantas (QAN) will work with its fellow shareholders in Jetstar Hong Kong to review the enterprise.

At December 31, 2014, the Qantas Group’s investment in Jetstar Hong Kong was carried at $10 million.

Expressing disappointment at the decision, Mr Joyce said: “This is as disappointing for the shareholders as it is for the travellers that Jetstar Hong Kong planned to serve.

“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.

“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, Shanghai-based China Eastern Airlines Corp and local partner Shun Tak Holdings Ltd each own a third of the $US198 million ($A257.14 million) venture. Shun Tak joined the venture about a year after it was first announced in an attempt to win regulatory approval.

The licensing authority held an inquiry earlier this year into the application after Cathay Pacific Airways, Dragonair and Hong Kong Airlines objected to the application.

Qantas’ Jetstar brand also operates in Singapore, Vietnam and Japan.

Jetstar Hong Kong had planned to fly short-haul routes to mainland China, Japan, South Korea and Southeast Asia to capitalise on rising numbers of Chinese travellers, including tens of millions that pass through Hong Kong each year.

With AFP
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