Jetstar Hong Kong to decide on next step by September

written by australianaviation.com.au | August 5, 2015
Jetstar group chief executive Jayne Hrdlicka speaks at the CAPA - Centre for Aviation Australia Pacific Aviation summit in Sydney.
Jetstar group chief executive Jayne Hrdlicka speaks at the CAPA – Centre for Aviation Australia Pacific Aviation summit in Sydney.

Jetstar Hong Kong will have until September to decide if it will challenge the Hong Kong government’s decision to deny it an air operator’s certificate.

The proposed low-cost carrier, a joint-venture between Qantas, China Eastern and Shun Tak Holdings, was left with an uncertain future in June when the Hong Kong Air Transport Licensing Authority (ATLA) ruled it did not meet the territory’s principal place of business test.

Jetstar group chief executive Jayne Hrdlicka says the Jetstar Hong Kong board was currently looking all available options in response to the ATLA’s decision.

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“The Jetstar Hong Kong board has not made any decision on what it will do,” Hrdlicka told delegates at the CAPA – Centre for Aviation Australia Pacific Aviation Summit in Sydney on Wednesday.

“It has a number of different options and it is going through those options as you would imagine quite diligently.

“We have got I think until the third week in September to decide what we want to do and the board will make its announcement once the decision has been made.”

In its June decision, the ATLA said Jetstar Hong Kong did not meet the legal requirement of Hong Kong being the planned low cost carrier’s principal place of business as “JHK [Jetstar Hong Kong] cannot make its decisions independently from that of the two foreign shareholders.”

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Officially, the parties have said the decision is under review. However, analysts say there is unlikely to be any way back for the proposed franchise.

Hrdlicka said the decision was “devastating” and a “tragedy” for the people of Hong Kong, given it denied them choice.

“The thing that is so devastating about Hong Kong is it was needless,” Hrdlicka said.

“The incumbents should have looked at – and I know they did – the circumstances in all markets where low fares have been developed thoughtfully, because it has grown the pie for everybody.”

Meanwhile, Hrdlicka said the Australian domestic leisure market was currently doing “OK”, describing it as “not the best we have ever seen but also not the worst we have ever seen”.

“We would hope to see a steady demand improvement over the course of the next one or two years,” Hrdlicka said.

Jayne Hrdlicka during a question and answer session at the summit.
Jayne Hrdlicka during a question and answer session at the summit.

And the Jetstar group chief executive said Jetstar has benefitted from Virgin’s move upmarket in recent times.

This was based on Jetstar’s revenue per available seat kilometre (RASK) figures on its off-peak flights from the past nine months, which Hrdlicka said had been “higher than they have ever been before”.

“When Virgin moved to create a bundled price that competes with Qantas . . . that move pushed customers out of Virgin to Jetstar because Virgin just became too expensive,” Hrdlicka said.

“Core, passionate, loyal Virgin customers have been abandoned in Virgin’s move to be a more premium, carrier in the marketplace and you can see it in our numbers.”

Virgin has reported a full year net loss of $93.8 million for 2014/15, while Tigerair Australia posted an underlying loss before tax of $9.8 million for the three months to June 30.

By contrast, Qantas was expected to post net profit for 2014/15 in the vicinity of $600 million, according to market estimates, when it hands down its full year financial results on August 20.

Virgin was due to release more financial figures at its full year results presentation on August 7.

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