Jetstar still to apply for HK licence

PUBLISHED : Thursday, 03 May, 2012, 12:00am
UPDATED : Thursday, 03 May, 2012, 12:00am


It has been over a month since the formation of Jetstar Hong Kong was announced, but those looking to fly cheap may have to wait a while as the budget carrier has yet to apply for the licence enabling it to operate here.

To get the licence, Jetstar HK, a joint venture between Australia-based Jetstar Group and Shanghai-based China Eastern Airlines, needs to prove that it is a truly Hong Kong-based carrier even though none of its shareholders is a Hong Kong-based company. Under the Basic Law, the government cannot grant an operating licence or traffic rights to an airline whose 'principal place of business' is not in Hong Kong.

'If the Hong Kong government allows Jetstar, why won't Virgin, Air Asia and Tiger set up Hong Kong-based subsidiaries, too?' said Andrew Pyne, senior partner at Concuros Partners, a consultancy firm for low-cost carriers.

Jetstar's Hong Kong team will be put to the test in proving its local credentials. In order to fulfil the requirement of having the principal place of business here, it has to set up a management team separate from its parents' and a Hong Kong-based board. Market sources said the company was looking for a Hong Kong chief executive from outside the aviation industry.

Another question hanging over the new venture is why it chose Hong Kong instead of Shanghai or another mainland city as its base when its main target group is the growing middle class on the mainland.

Pyne said it would have been easier as a mainland-based company to apply for traffic rights to the mainland, rather than applying for them from Hong Kong.

But Jetstar has served Hong Kong for seven years, and has never had a Shanghai flight. Hong Kong would fit the network in the Jetstar family and connect to its bases in Australia, New Zealand, Vietnam and Singapore.

Jetstar's joint venture in Japan takes off in July and is expected to operate flights to the mainland and Hong Kong.

Hong Kong, one of the busiest international air hubs, is one of the few Asian cities that does not have its own low-cost carrier, which has weighed down its air traffic growth to only 3-4 per cent a year, far lower than Singapore and Indonesia.

Jetstar HK was launched at a time when an unprecedented tide of low-cost carriers swept across Asia. Starting from zero a decade ago, the number of such airlines has surged to 47 and is expected to reach 50 by the end of this year. Some 1,000 new planes have been ordered by budget airlines, which are projected to account for 65 per cent of the total regional market growth in the next 10 years.

Even Japan, one of the most restricted markets, saw its first low-cost carrier, Peach, start operating in March. Two more will come on stream by the end of the year.