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Jetstar Hong Kong had hoped to take off as the city's budget airline serving destinations within five hours from Hong Kong. Photo: AFP

New | Jetstar bid for Hong Kong licence rejected

Aviation regulator rules out granting licence to joint-venture airline, saying it does not have its principal place of business in the city

The government has dashed Jetstar Hong Kong's hopes of becoming the city's fifth airline, saying it does not qualify as a local carrier, three years after the Chinese-Australian joint venture was formed.

The Air Transport Licensing Authority, which held a public hearing on the proposed budget airline's principal place of business, gave its ruling on Thursday after four months of deliberation.

"Atla decides that Jetstar Hong Kong does not have its principal place of business in Hong Kong and hence refuses [its] application for licence," it ruled on the airline owned equally by Qantas Airways' Jetstar Group, China Eastern Airlines Corp and Shun Tak Holdings.

Jetstar Hong Kong chief executive Edward Lau said the company was "extremely disappointed by the decision" and would weigh its next course of action.

The airline, which had planned to launch in 2013, faced fierce resistance from the city's four airlines, led by Cathay Pacific Airways, which argued the new airline's ultimate control lay with Jetstar in Australia, making it ineligible as a local airline under the Basic Law.

"Even [though] there is no dispute that the day-to-day management would be conducted in Hong Kong and managed by the Jetstar Hong Kong CEO in Hong Kong, as the cases unequivocally indicate, that is not sufficient to establish and meet any principal place of business criteria," Atla said in a 153-page ruling.

In its reasons for the decision, the authority for the first time outlined criteria for the principal place of business, a legal grey area with no clear definition that has been at the centre of the debate.

"The airline has to have independent control and management in Hong Kong, free from directions or decision made elsewhere," it said. "The nerve centre has to be in Hong Kong. By nerve centre, Atla looks at where and by whom the decisions regarding the key operations of an airline are made," including aircraft purchase, route planning, senior management and the freedom to choose its business model.

"JHK cannot make its decision independently from that of the two foreign shareholders" in those aspects, and its "business is mandated to be linked with the Jetstar Group" under its agreement to use the brand name, it said.

Jetstar Hong Kong, forced to sell eight of its nine aircraft in the course of its long wait to take off, had planned to offer low-cost flights to destinations within five hours from Hong Kong.

Shun Tak became the third shareholder in June 2013 and its managing director Pansy Ho Chiu-king was made the chairman after the joint venture between China Eastern and Qantas ran into regulatory hurdles.

Cathay's director of corporate affairs James Tong said: "It is the right decision for Hong Kong … The Atla 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."

"Consumer choice wouldn't be that affected by there being one less home-based budget carrier, since budget carriers from elsewhere have been coming," said Geoffrey Cheng, an analyst at Bocom International.

"The ruling benefits Cathay, which will face less low-fare competition," he said, adding that even if Jetstar had been approved, its threat to Cathay would have been limited.

This article appeared in the South China Morning Post print edition as: Jetstar bid to become HK carrier rejected
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