Jetstar Hong Kong's arrival puts airline control rules in the spotlight
Alan Tan says HK faces hard decision on joint ventures of foreign carriers
Jetstar's muscling into the Hong Kong market has left a trail of recriminations. The incumbent airlines, primarily Cathay Pacific, have attacked Jetstar Hong Kong's proposed entry as violating the Basic Law requirement that a Hong Kong carrier must be incorporated and have its principal place of business in Hong Kong. Its objection is that Jetstar Hong Kong will be controlled from Australia by its parents, Jetstar Airways and Qantas.
Restrictive airline ownership and control requirements are common in air-services agreements between countries. Often, like in Hong Kong, these requirements also appear in domestic laws.
Generally in air-service pacts, the principal place of business is taken as the place where the airline is headquartered in and run from. Since effective local control is often a separate, explicit requirement, "principal place of business" is not typically understood to encompass control.
In Hong Kong, however, the Basic Law is silent on control. Cathay's position is that "principal place of business" is all about control, not ownership. This gives the phrase a connotation it does not usually have internationally.
Of course, the Basic Law is a domestic instrument that could well carry a broader meaning. Here, the Basic Law's fudging is quite masterful - it protects Cathay, itself an airline with substantial non-Hong Kong interests. So what makes Jetstar Hong Kong different?
The crux lies in its close association with a foreign airline. Indeed, Jetstar Hong Kong is intended to be run as an integrated operation alongside its parent, Jetstar, and siblings, Jetstar Asia (Singapore), Jetstar Pacific (Vietnam) and Jetstar Japan. In contrast, Cathay's parent, Swire, has no other major airline interests.
The comparison with Hong Kong Airlines and Hong Kong Express is more apt, given their substantial links with mainland China's Hainan Airlines. Yet, because they do not share a common identity or operating platform with Hainan, their association with the latter seems more distant.