Budget airline start-up Jetstar Hong Kong chairman Pansy Ho Chiu-king yesterday hit back at its opponents, saying the city has room for low-cost carriers.
Speaking for the first time to the media since taking the job last month, Ho, who is Macau gaming tycoon Stanley Ho Hung-sun's daughter, said that a new budget airline would complement the existing services rather than result in "vicious competition".
Her comments followed opposition last week from Cathay Pacific Airways and three other Hong Kong players - Dragonair, Hong Kong Airlines and Hong Kong Express Airways.
While some economists and academics have said more players in the market would be good news for consumers by way of more options with lower prices, some have warned that indiscriminate granting of licences would have far-reaching implications for the city's aviation sector and Hong Kong's clout in future negotiations over bilateral aviation rights with overseas markets.
"The fewer the players, the easier it is for the existing operators to work out their numbers," Ho said.
"But Hong Kong needs more players to balance the market, and we know how to manage capacity and efficiency."
She pointed out that Cathay's weekly promotion on air fares, or "fanfares", is glaring proof of the demand for discounted air tickets.
The Ho family's listed flagship Shun Tak Holdings spent US$66 million in June for a third of Jetstar Hong Kong, which is now split three ways between Shun Tak, Shanghai-based China Eastern Airlines and Qantas Airways of Australia.
Ho said the Jetstar board is composed of seven members, of whom five are Hong Kong permanent residents, including herself, and two mainlander representatives of China Eastern.
Ho trashed Cathay's argument against granting a licence to Jetstar on the grounds that Hong Kong-based shareholders would "not determine management control" and the city would not be the "principal place of business under the Basic Law" as Jetstar's management control would rest in Australia.
"It is inevitable an incumbent service provider will defend its interest, which was what we (Shun Tak) did when Macau opened the gaming market for foreign players about 10 years ago," Ho said. "But we faced the reality of change, and changed our stance."
She conceded that the opposition of existing players meant Jetstar's debut would be delayed for "a few months", from the original target of the end of this year.
Jetstar plans to offer services to destinations within five hours of Hong Kong such as Southeast Asia, Japan, South Korea and the mainland, with its new Airbus fleet of A320 aircraft once it obtains the licence. It aims to build up the fleet to 18 by 2015, according to Jetstar chief executive Edward Lau.
Analysts said if the Hong Kong government granted the licence to Jetstar, it would set a precedent by allowing a foreign airline with a local partner to operate as a city carrier.
"There is debate on the ownership and the control structure of Jetstar, which involves Qantas," said an aviation analyst who did not want to be identified. "Cathay and the Hong Kong government have reasons to question [a licence]."
According to Qantas' filings in June last year to Australia's anti-trust regulator, the Australian Competition and Consumer Commission, the airline sought approval for an agreement with Jetstar in the region, including Hong Kong, in "co-ordinating on all network, scheduling, pricing, marketing, purchasing, customer services and resourcing decisions". The agreement was approved in March and is valid until March 2018.
Since June, the Transport and Housing Bureau has been reviewing the rules for designated air carriers, and no application for new airlines will be processed until that review is completed, which would take a few more months. The Air Transport Licensing Authority, which is a part of the bureau, is responsible for granting licences for passenger airlines and freighters.
Analysts said Britain, the European Union, the United States and Australia had well-defined rules on principal place of business for air carriers and that Hong Kong should refer to the British regime, which is more relevant to the city.