Two weeks after abandoning plans for an Asia-based premium carrier, Qantas has secured a deal at the other end of the market and will set up a Jetstar franchise in Hong Kong.
The $198 million agreement with codeshare partner China Eastern Airlines, announced today, will see Jetstar Hong Kong operational by 2013, Qantas said. The airline will be the first budget carrier in Hong Kong and just the second in China. Qantas said it would offer fares 50 per cent lower than current Hong Kong airlines.
Though modest at the start – Jetstar Hong Kong will begin life with three Airbus A320s and plans to expand the fleet to 18 within three years – the venture is a significant one for Qantas. China’s travel market is expected to grow from 300 million passengers per year to 450 million by 2015, while budget carriers currently handle only about five per cent of that traffic.
“Jetstar’s vision is to make travel affordable for millions of people across Asia, and the demographics of China with its booming middle class are a key part of that plan,” Jetstar CEO Bruce Buchanan said.
The deal will also see the Jetstar begin to resemble a truly regional brand, with franchises already in place in Singapore and Vietnam and Jetstar Japan set to launch this year.
“Establishing Jetstar Hong Kong in the heart of Asia and on the doorstep of mainland China is a historic opportunity to continue the successful expansion of the Jetstar brand,” Qantas CEO Alan Joyce said. “We know from our experience with Jetstar in Australia and in the setup of Jetstar Japan the benefits of both a premium and low-cost airline operating in the same market.”
China’s second largest airline, China Eastern has a long time relationship with Qantas stretching back two decades. The two carriers have been in talks over establishing Jetstar Hong Kong for the past four years. Under the deal, each airline will contribute $99 million to the new carrier and will hold an equal split of shares.
“We believe there are huge opportunities for the Jetstar low fares model throughout Asia, including Greater China, and are excited to be the first major Chinese carrier to bring this travel option to the region,” China Eastern chairman Liu Shaoyong said.