The ViewJetstar verdict shows cartels in charge in Hong Kong economy

In another victory for Hong Kong’s cartel style of doing business, Jetstar’s attempts to establish a local airline have almost certainly been thwarted by the government.

The tightly controlled local airline market has a total of three players who help keep the cost of flying high for Hong Kong consumers. Now that Jetstar’s no-frills service has been denied a license to operate here it is likely that cheaper flying options for Hongkongers will remain limited. Services of this kind account for no more than 10 per cent of Hong Kong’s passenger traffic, compared to around a quarter of flights out of Singapore.

To add insult to injury the Hong Kong Air Transport Licensing Agency went through the farce of holding a public inquiry into Jetstar’s application. Although its outcome was not hard to predict there was an interesting wrangle over the definition of ‘principle place of business’, the key determinant for whether Jetstar qualified for a license.

Cathay’s lawyer, with evident success, claimed that ‘principal place of business’ did not necessarily mean the place where most of the company’s business was carried out. He argued that the crucial factor was the provision in the Basic Law allowing the Hong Kong government to grant these licenses, which, he stated, was designed to ensure that Cathay could continue operating in Hong Kong following the handover.

Maybe inadvertently or maybe otherwise this argument gives us a vivid insight into the extent to which the cartels are able to have their interests enshrined in law.

Despite all the nonsense about Hong Kong having one of the world’s most free markets, the airline sector is doing its best to make this a joke. Its chosen tool for thwarting competition is to ensure that only allegedly local carriers qualify to be based in Hong Kong.