ASIA'S FIRST AND, so far, most successful low-cost airline begins trading as a public company on Monday in Malaysia. It could easily have been in Hong Kong. Three-year-old AirAsia, which can claim to be Asia's first and most successful budget airline, has finally completed its initial public offering, raising about US$200 million to help fund its expansion. With the new breed of airlines stealing the limelight from traditional network carriers in Europe and the United States, AirAsia's IPO is a salutary reminder that Hong Kong has lost ground as a centre for free-market entrepreneurship. For all the government's bluster about liberalisation, few investors have tried to launch a new airline in Hong Kong for the better part of two decades. Contrast that record with the new carriers being launched in Singapore (Valuair, Jetstar Asia and Tiger Airways), Indonesia (Lion Air), Thailand (Nok Air and AirAsia Thailand) and Malaysia with AirAsia. Even Macau is getting into the act, with Australia's Virgin Blue (another relatively new carrier that just listed this year) making overtures to launch a China-focused airline with China National Aviation Co (CNAC) and Shun Tak as partners. Macau officials say privately that other groups are also negotiating for a slice of the city's market, as an alternative low-cost gateway to Hong Kong and the Pearl River Delta. Ironically, government and industry officials agree that there is a need to introduce more locally bred competition into the airline sector at Chek Lap Kok. At an industry forum this month, permanent secretary for economic development and labour Sandra Lee Suk-yee said Hong Kong needed to offer consumers more choice to maintain our lead as a regional air hub and gateway to the mainland. 'We want a level playing field. Let low-cost carriers and [existing] airlines compete on a level playing field ... [then] let the consumer decide,' Ms Lee said. She added: 'This means more competition, [which is] in the interest of the travelling public.' Even Citic Pacific managing director Henry Fan Hung-ling, who sits on Dragonair's board by virtue of Citic Pacific's 28.5 per cent stake in the airline, agrees that new competition on mainland routes from Chek Lap Kok would help reinvigorate Hong Kong's status as a regional hub. The emergence of CR Airways and Hong Kong Express, two local startups with mainland ambitions, was positive for Hong Kong, he said last week. Yet both face significant regulatory and market hurdles that the government shows little resolve in helping to solve. It is not even a matter of startups demanding government subsidies, as Ms Lee has repeatedly said was the case, but the need for a level playing field. That means equal opportunities for route rights and better protection against anti-competitive behaviour. For example, the lack of an open skies arrangement between Hong Kong and the mainland, and the dominance of Dragonair in serving mainland routes from Chek Lap Kok, means limited capacity exists in the system to be tapped by a startup. And on air routes to the rest of the world, the critical mass that Cathay Pacific Airways has built up means it is likewise difficult for a startup to gain a toehold on key international air-travel markets from Hong Kong. Contrast that with the Singapore government's resolve to accelerate air-services liberalisation and competition, allowing its carriers to compete for route rights. Far from the local market being opened progressively, the recent deal for Cathay to take a 9.9 per cent stake in mainland flag carrier Air China probably means there will be less, rather than more, intensive competition through Chek Lap Kok. And industry insiders said privately that negotiations had been ongoing for Cathay to reacquire control of Dragonair from CNAC in the coming months, in order for Cathay to regain more access to the coveted mainland market. Both Cathay and CNAC declined to comment. Whether such a deal materialises, it is clear that instead of moving towards a more open aviation industry as our rivals are, Hong Kong is sliding towards the opposite direction. As such Hong Kong faces a gradual erosion of its status as the region's main air hub and mainland gateway to rival cities. Following a price war launched by state carrier Malaysia Airlines, AirAsia chief executive Tony Fernandes is said to have crashed an exclusive cocktail party in Kuala Lumpur to publicly berate Malaysia's transport minister for allowing the behemoth to engage in alleged anti-competitive behaviour. Perhaps Hong Kong's would-be airline rebels are simply too polite in confronting the industry's sclerosis.