Hong Kong would not process any applications to start airlines in the city pending the completion of a review of its criteria for designating local carriers, the Transport and Housing Bureau said.
While airlines must be incorporated in the city and have their principal place of business in Hong Kong to be considered local under the law, and the government considers shareholding structure, these are not the only determining factors, according to a statement on the government's website on Tuesday.
It did not say what additional elements would be considered.
Jetstar Hong Kong, a low-cost carrier owned by Qantas Airways and China Eastern Airlines, had secured a local investor and planned to start service at year-end but had not been granted a licence despite having been set up for more than a year, the Hong Kong Economic Journal reported on Tuesday, citing China Eastern chief economist Shan Chuanbo.
A further delay would protect the interests of local airlines such as Cathay Pacific Airways.
Jetstar had a "positive and ongoing dialogue with the regulator" and was aware of the review, the company said in a statement yesterday. It was "confident" of getting approvals before the end of this year.
"I am disappointed, but not surprised, to see the government stalling on the licensing of new airlines," David Webb, the founder of local governance watchdog Webb-site.com  said in an e-mail.
In its statement, the Transport and Housing Bureau said the government would not "provide any recommendations to an investor who is interested in setting up an airline in Hong Kong".
"It is an airline's own commercial decisions to make," it added.