Regulators have grounded plans for a low-cost venture between Qantas and China Eastern.
Qantas had hoped to launch a start-up operation in Hong Kong under its low-cost Jetstar brand but the application has been rejected by Hong Kong’s Air Transport Licensing Authority.
After opposition from rivals Cathay Pacific, Dragonair and Hong Kong Airlines, the regulator threw out the application on the basis that the ultimate control of the airline would be in Australia and mainland China, not in Hong Kong.
The business venture was launched in March 2012 and had been scheduled to start operating the following year.
After initial resistance from regulators, Hong Kong-based Shun Tak was brought in as a local partner in 2013. Since then Qantas, Shanghai-Based China Eastern and Shun Tak Holdings have each owned one third of the venture.
Since last year, Shun Tak has held 51% of the voting rights and the right to appoint four of seven directors.
But the changes did not go far enough to persuade regulators, who argue that the Hong Kong partner still can’t make decisions independently from that of the two foreign shareholders.
Under Hong Kong law, operating licences are only granted to an airline if its principal place of business and centre of its decision-making is in the city.
Jetstar Hong Kong chief executive Edward Lau said he was’extremely disappointed with the decision and did not rule out an appeal.
Qantas already has low-cost airlines operating under the Jetstar brand in Singapore, Vietnam and Japan.
