Cathay Pacific

Jetstar woos Hong Kong investors to secure regulatory nod

Officials told Sino-Australian venture to follow Cathay's shareholding model, say sources

PUBLISHED : Friday, 10 May, 2013, 12:00am
UPDATED : Friday, 10 May, 2013, 5:25am


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Jetstar Hong Kong, the low-cost airline seeking regulatory approval to set up in the city, is inviting local investors on board to defuse political opposition to its take-off.

The company - owned by China Eastern Airlines and Jetstar Group, a unit of Australian airline Qantas - lodged its application for an operating licence more than six months ago.

The government said it was busy reviewing the regime that regulates new carriers, to explain the delay.

"The government first said the new rules on applications for operating licences would be gazetted in September, then it said December, and then it delayed them to April," said a senior executive at China Eastern who declined to be named.

The Transport and Housing Bureau gazetted the rules on April 19.

"We are now reviewing the new rules and will submit the application very soon," said Jetstar Hong Kong executive Nick Rohrlach.

The delay is more than a procedural problem. The definition of a local carrier under the Basic Law is unclear, and depends on the discretion of Hong Kong officials.

China Eastern has agreed to invite locals to invest if the government requests it, said a China Eastern official.

Sources close to Jetstar Hong Kong said city officials told the company to find local investors and indicated it should refer to the shareholding structure of Cathay Pacific.

"The percentage of Hong Kong shareholdings in Cathay is around 30 per cent, given Cathay and its parent are Hong Kong-listed companies," one source said.

Local investors are understood to have been in talks with Jetstar Hong Kong over the past six months.

"It is our top priority now and the progress is promising," said the Jetstar source who would not elaborate due to a non-disclosure agreement with potential investors.

The chief executive of Qantas, Alan Joyce, said last week investors from the region had expressed interest in the venture.

Jetstar Hong Kong had aimed to be in the air with three Airbus 320s by June. The new target is by the end of the year with two aircraft.

There is no Hong Kong law requiring Hong Kong-designated carriers to have local investors, only that their "principal place of business" be Hong Kong. That means the carrier has to prove its board of directors makes its decisions in Hong Kong.

Some think Jetstar Hong Kong would be a threat to Cathay Pacific. Cathay chief executive John Slosar has said his airline does not fear competition. The concern for Cathay could be that other low-cost carriers will set up in the city if Jetstar gets the nod.