The two Hong Kong-based carriers Cathay Pacific and sister-company Dragonair have formally objected to the Hong Kong government over Jetstar Hong Kong’s application for a licence to operate, stating: “approval of (the) Jetstar Hong Kong application would violate basic law and undermine Hong Kong’s economy”.
In strongly worded statements following gazettal by the government of Jetstar’s application, Cathay Pacific and Dragonair said the violation would occur because under Hong Kong’s Basic Law Jetstar Hong Kong “does not meet the requirement that it must have its principal place of business in Hong Kong”.
“Public statements previously made in Australia by Jetstar and its parent company Qantas Airways make it clear that Jetstar Hong Kong is a franchise of Jetstar in Australia and that management control of Jetstar Hong Kong would rest in Australia with Jetstar and Qantas Airways. This means that Jetstar Hong Kong’s principal place of business would be in Australia, not Hong Kong,” Cathay Pacific said in its statement on the issue.
“The Hong Kong residence of a particular shareholder of Jetstar Hong Kong and the number of shares held by that shareholder do not determine management control or principal place of business under the Basic Law. Nor does the fact that particular officers of Jetstar Hong Kong are residents in Hong Kong.” the airline said further, rebutting Hong Kong businessman Stanley Ho’s shareholding in the Jetstar Hong Kong.
In June Ho, via his Shun Tak investment company, took a 33 per cent stake valued at $66 million in Jetstar Hong Kong alongside Qantas and China Eastern.
“Any local franchise operation has local managers. This does not stop it from being controlled from overseas. Management control of the Jetstar Hong Kong franchise clearly rests in Australia.’
Concerned about future determinations if the government agreed to licence the Jetstar Group airline, Cathay Pacific added: “In addition to violating the Basic Law, approval of this application would set a dangerous precedent by granting control of Hong Kong’s hard-negotiated sovereign air traffic rights to a carrier that is nothing more than a franchise operation controlled by a foreign airline.
“Handing over Hong Kong’s air traffic rights to a carrier that is a franchise controlled by an Australian airline that itself can influence the Australian government’s negotiations with Hong Kong creates a clear conflict of interest where Hong Kong loses out.
“The reality is that, by its own admission, Jetstar Hong Kong is a franchise of a foreign airline which is also controlled by that foreign airline. The setting up of Jetstar Hong Kong is an attempt by a foreign carrier to gain access to Hong Kong’s pool of traffic rights without a fair exchange of value to Hong Kong.”
Cathay Pacific said it is not against competition and that it already competes with other airlines “every day in Hong Kong and around the world”, including 107 other Hong Kong and foreign airlines serving Hong Kong, 17 of which call themselves low-cost carriers (LCCs).
In its statement, Dragonair added capacity constraints at Hong Kong International Airport (HKIA) as a reason for the objection. “The allocation of scarce slots for aircraft traffic should take into account what is best for the overall benefit of Hong Kong and its economy. We do not believe that Jetstar’s business model will make the best use of the remaining available slots at HKIA.”