No reason to give Jetstar a home in Hong Kong
Andrew Pyne says to comply with the Basic Law, authorities would be right to deny Jetstar a home base in Hong Kong. And, with other low-cost carriers already operating here, consumers wouldn't lose out
More than one year after the project was first mooted, the debate over whether low-cost airline Jetstar should be able to secure designation as a Hong Kong carrier rumbles on. This issue defies easy analysis; indeed, for the layman, the arguments around whether an airline meets the criteria for local incorporation may seem the 21st-century equivalent of the medieval debates on how many angels could sit on the head of a pin. But at its core are some important issues for Hong Kong.
The key question is whether the Hong Kong public risks missing out on the consumer benefits that low-cost carriers bring to the market if Jetstar's attempts to base in Hong Kong are thwarted.
If the official position towards Jetstar's application did represent a barrier to low-cost airlines operating in Hong Kong, this would indeed be a legitimate cause of concern. But this is not the case. Low-cost carriers are already well represented in Hong Kong: the percentage share of aircraft movements at the Hong Kong International Airport now held by the low-cost sector has increased from virtually zero five years ago to over 12 per cent today. It may still be relatively low by European or Southeast Asian standards but it is broadly in line with the picture through North Asia as a whole, where the low-cost carrier revolution is still in its early stages.
In total, there are some 15 low-cost carriers now operating at the Hong Kong airport, a score that compares well with major international airports globally. And, last year, Hong Kong Express was relaunched as the city's first home-grown low-cost airline.
It can still be argued that the cost structure at Hong Kong airport - without its own terminal for low-cost carriers - militates to some extent against low-cost airline operations here. To be fair, the airport authority has to focus on making a return on the huge public investment sunk into developing airport facilities; there is therefore a natural inclination on its part to want to allocate scarce slots to wide- bodied aircraft - A380s or Boeing 777s, for example, with their 350 to 500 passengers a flight - rather than, say, the 180 passengers from a low-cost Boeing 737 or A320 flight.
Nonetheless, the only major short-haul market that remains relatively unpenetrated by low-cost airlines from Hong Kong is mainland China - here, the issues relate more to the Chinese regulatory regime than to Hong Kong. No doubt the low-cost revolution will come to China, but the timing will be set by Beijing, not Hong Kong. So whether Jetstar receives designation to base part of its fleet here is largely beside the (economic) point: low-cost aviation has a well-established and growing presence in the market already.
Ironically, low-cost carriers flying from cheaper base airports than Hong Kong have more, not fewer, opportunities to drive cost advantage over full-service airlines like Cathay Pacific than if they were actually based here.