Australia's Qantas says rethinking Jetstar Hong Kong after licence snub

[SYDNEY] Qantas Airways Ltd, Australia's flagship carrier, said on Friday that it will reconsider the future of its discount carrier Jetstar Hong Kong after the territory's regulator rejected its application to start operations there.

Qantas released a statement expressing its disappointment and announcing the enterprise was now under review, in a crushing blow to its plans to build a low-cost Asian airline to offset flagging revenue at home.

The airline and its equal partners, China Eastern Airlines Corp Ltd and Shun Tak Holdings, the transport investment business of Hong Kong billionaire Stanley Ho, have yet to decide whether to appeal the decision.

Hong Kong's Air Transport Licensing Authority announced its ruling on Thursday after two years of deliberations, saying it was not convinced Jetstar Hong Kong complied with laws requiring its principal place of business to be in the Chinese territory.

It said Cathay Pacific Airways Ltd, Hong Kong Dragon Airlines Ltd, Hong Kong Airlines Ltd and Hong Kong Express Airways Ltd had objected to Jetstar's application.

Qantas Chief Executive Officer Alan Joyce said Hong Kong appeared to be "closed to fresh aviation investment". "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," he said in a statement.

Qantas said its investment in the joint venture is currently worth A$10 million (S$10.4 million). In March, Qantas said Jetstar Hong Kong had cut its fleet to one Airbus A320 aircraft, from nine initially, as it awaited permission to begin operations.

Cathay Pacific said Jetstar Hong Kong was not based in Hong Kong as such should not be given an operating licence in the city. "The ... decision ensures that important Hong Kong economic assets, its air traffic rights, are used for the benefit of the people and the economy of Hong Kong," it said in a statement.

Qantas shares fell nearly 2 per cent in early trading on Friday, in line with the broader market.

AFP