Reaction to the Qantas deal to partner China Eastern Airlines in a new low-cost carrier based in Hong Kong, has been generally favourable.
Analysts say the news of the Hong Kong partnership is confirmation that the Jetstar franchise is where Qantas management sees its growth and future, with a brand it believes can become much larger and more profitable than Qantas can ever be.
The announcement to launch Jetstar Hong Kong comes barely two weeks after Qantas abandoned talks with Malaysian Airlines for an Asian premium-airline venture.
Qantas and China Eastern will each invest $96 million over the next three years in Jetstar Hong Kong.
Based on the model Jetstar has rolled out elsewhere in Asia, the new low-cost airline will begin flying in the middle of next year using three Airbus A320 aircraft, serving short-haul routes in China, Japan and South Korea, before growing to 18 short-haul planes by 2015.
Ben Sandilands, writing his Plane Talking blog, said by entering Cathay Pacific’s territory “the Qantas low fare franchise in Asia is now well and truly in the war zone by adding a brand in the fragrant harbour to those services it already flies out of Singapore (Jetstar Asia) and within Vietnam (Jetstar Pacific) and to which it will add Jetstar Japan flights in the near future”.
The South China Morning Post quoted aviation experts, who noted “regulatory and licensing issues could cause significant headwinds for Jetstar Hong Kong… even before it takes to the skies”.
Jetstar group CEO, Bruce Buchanan, said Jetstar’s Singapore franchise, Jetstar Asia, already served 10 cities in China, and that Jetstar Hong Kong would be strongly complementary to those services, as well as flights into China that he anticipated would be flown by Jetstar Japan and in due course, Vietnam based Jetstar Pacific.
Meanwhile, China Eastern Airlines (MU) chairman Liu Shaoyong has called on the Chinese government to make an $18 billion-$20 billion capital injection into China’s big three state-owned carriers to alleviate increasing financial pressure.
The debt ratio of China’s big three airlines— Haikou-based MU, Guangzhou-based China Southern Airlines (CZ) and Beijing-based Air China (CA)—all reportedly exceed 70%.
by Ian Jarrett
