Jetstar Hong Kong refused operating licence

written by australianaviation.com.au | June 25, 2015
An Airbus A320 in Jetstar livery in storage at Toulouse. (Gyrostat (Wikimedia))
An Airbus A320 in Jetstar livery in storage at Toulouse. (Gyrostat/Wikimedia))

After more than two years’ of deliberations, Hong Kong’s Air Transport Licensing Authority (ALTA) has formally rejected Jetstar Hong Kong’s application for an operating licence.

In a 150-page finding published on Thursday, the authority deemed that Jetstar Hong Kong did not meet the legal requirement of Hong Kong being the planned low cost carrier’s principal place of business, obeserving that “JHK [Jetstar Hong Kong] cannot make its decisions independently from that of the two foreign shareholders.”

The application had been vigorously opposed by Cathay Pacific, Dragonair, Hong Kong Airlines and Hong Kong Express.

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Continued the report: “Its business is mandated to be linked with the Jetstar Group by reason of the definition of Business within the SHA [shareholders’ agreement] and the requirement to enter into a business service agreement with the Jetstar Group… It has no freedom to operate and obtain licence from any other airlines to operate an LCC. Furthermore, when the BSA [business service agreement] is studied, it can be seen that it is not a mere licence of intellectual property relating to software and branding but actually a surrender of the right to determine its own network, fare structures and other flight-related matters to Jetstar Group and/or JET and/or the Jetstar Group CEO.”

Chief executive officer Edward Lau said Jetstar Hong Kong was “extremely disappointed” by the decision.

“We will take time to review and consider our next steps,” Lau said in a statement.

“We genuinely believe that Hong Kong is Jetstar Hong Kong’s Principal Place of Business. The carrier is chaired by Hong Kong business woman Ms Pansy Ho with a local CEO and management team who lead and manage the business.”

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Jetstar Hong Kong is jointly-owned by Shun Tak Holdings, Qantas and China Eastern Airlines. Following a change to the shareholder voting structure in 2014, Shun Tak holds a majority 51 per cent of voting rights, with Qantas and China Eastern having 24.5 per cent voting rights.

It would have been the fourth Jetstar franchise in the fast-growing Asian region behind Singapore’s Jetstar Asia, Vietnam’s Jetstar Pacific and Jetstar Japan.

Speaking to reporters on the sidelines of the International Air Transport Association (IATA) annual general meeting in Miami on June 7, Jetstar group chief executive Jayne Hrdlicka acknowledged there had been some missteps in the application process.

However, Hrdlicka said she was still “very confident” about Jetstar Hong Kong’s prospects.

“We’ve learned the importance of patience in Hong Kong and not underestimating the importance of carefully and thoughtfully working through the process with the government,” Hrdlicka said.

“Our expectations were not lined up with the reality of the way this government’s making decisions in Hong Kong and we are perfectly comfortable with that.

“We’ve got two shareholders who have more experience being patient and long-minded than we do and we are learning through that process.”

As it waited on a decision on its operating licence Jetstar Hong Kong has gradually sold all bar one of the nine new Airbus A320s it had acquired.

Plans to launch a Jetstar affiliate in Hong Kong were first announced in March 2012, at which point flights were to begin in 2013.

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8 Comments

  • Rumsey

    says:

    hardly surprising, what a lot of wasted Qantas money has been poured into this.

  • Raymond

    says:

    So we seem to bend over backwards to accommodate the Chinese in many respects (Hong Kong is part of the PRC), but when it comes time to reciprocate a little, nup, doesn’t happen.

  • Craigy

    says:

    Hong Kong is a special economic area which has effectively its own laws etc. This was a part of the agreement for the transfer back to China

  • Philip Smith

    says:

    Just looked up ownership of Cathay Pacific and Swire Group is 45% shareholder.
    Last time I looked Swire was a British company.
    So a major shareholder is Foreign Company.
    More than what Qantas would be in this venture.
    So I say no more.

  • John Harrison

    says:

    Well Well Alan Joyce, do you get the message now. You tried and wasted a hell of lot of Qantas money doing it. Give up now and get back to improving Qantas and its overseas brand. You always show your true colours with all the effort you always put into Jetstar brand.
    Lets hope some sense returns to the Qantas brand and the public can believe in Qantas again instead of always pushing Jetstar.

  • Vincent

    says:

    Just my opinion….

    When Hong Kong was founded in 1842. She was British. When the Communist came into power in 1949, they had been bullying the UN and British to return HK to China. If that not gonna happen, they would use forces to taking HK back. While the treaties about HK were kept safely in Taipei, Taiwan, Republic of China. Enough history there…

    Agreed with Rumsey, a company which had no direct connection in Hong Kong and co-operating with another foreign company whom is not even based in Hong Kong, I just can’t see any sense out from this. Even the chinese still has to stick with all the Common Laws and other Business laws in Hong Kong, which is totally different to that in the communist state.

    Getting a Hong Kong company to joining the party at later stage is just a big no no.

    Simple Business mistake I would say from day 1.

    Swire is a British company and Cathay was founded when Hong Kong was still British, so that make sense.

  • Andrew

    says:

    Cathay like Emirates is a protected company. So unlike Qantas. Why does Australia consider more open skies when most other states offer unashamed protectionism?

  • Sean

    says:

    I think this is great news, It’s time Qantas started looking inwards to their own prime airline without wasting so much money on useless projects and trying to drown out every other competitor by flooding the market. Surely they would have seen from the start the chances of starting an airline in Hong Kong when the primary place of business for Jetstar is based in Melbourne. just seems absolutely crazy.

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