tip off
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Scoot adds Singapore-Hong Kong and pressures Jetstar HK

The interminable waiting game for Qantas in setting up Jetstar Hong Kong became more insufferable this afternoon when Singapore Airlines’s widebody low fare brand Scoot announced services between Singapore and Hong Kong from 15 November.

Jetstar HK is essentially still born in the SAR because Qantas’s avowed aim, of setting up a Qantas controlled Jetstar franchise in Hong Kong is by definition in conflict with its Basic Law requirement that airlines carrying the Hong Kong flag must be both based and controlled in Hong Kong.

However Scoot will now be moving in on Singapore based Jetstar Asia’s A320 services between Singapore and Hong Kong with a wide body 777-200. In Hong Kong, where slots are scarce and begging to be used by jets offering more seats than single aisle jets, Scoot has an opportunity to make life hard for both Jetstar Asia straight away, and Jetstar Hong Kong in however many years it takes for the Hong Kong authorities to approve or disapprove its application to operate.

Which poses the question, why can’t Jetstar achieve the coverage it desires in Hong Kong by flying to and from the SAR with jets from its other franchises, Jetstar Asia (now) and Jetstar Japan and Jetstar Pacific (Vietnam) subject to future traffic deals, as an alternative to the high costs and obvious hostilities that apply in Hong Kong?

The obvious part answer to that question is that it needs to be Hong Kong based to fly its low fare franchise between the SAR and cities in China, Korea and SE Asia in general.  But it ought to be just as obvious that it isn’t going to get those rights soon enough to prevent Scoot making it marginal between Hong Kong and its existing Singapore base.

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  • 1
    Dan Dair
    Posted September 19, 2013 at 10:01 am | Permalink

    This is the kind of stuff that leaves me baffled….
    Presumably Qantas / Jetstar have people in pretty well-paid jobs who’re really screwing-up the corporate planning.?
    How simple would it be to run some of the planned HK services from elsewhere right now & then turn them over to HK when it’s finally ‘set-up’.?
    Also, how simple would it be to set up a ‘free-standing’ operational entity in HK, run as a cost-centre of Qantas or Jetstar & trading as Jetstar HK.
    As a cost-centre it would be semi-autonomous & could reasonably be said to be free from direct influence of Qantas / Jetstar Australia, especially if the CEO kept his big mouth discreetly shut when referring to their HK business arm.
    Self-evidently, any business set-up in HK by foreign investors will have some level of outside influence. Presumably, the trick is to find out where that line is drawn.?
    You’ll forgive me if I look baffled & wonder why this wasn’t done as part of the original business planning.?
    It was clear months ago that there was likely to be problems with the way the HK entity was being set-up.
    Is there a fall-back position / Plan B, or do Qantas / Jetstar just intend to pour money into the pockets of a bunch of corporate lawyers until the HK Government finally rejects their application.?

  • 2
    patrick kilby
    Posted September 19, 2013 at 12:57 pm | Permalink

    I think they knew they would have a fight on their hands and that is what they have been doing lobbying an negotiating, some in public and most not. Note Cathay’ holding company (Swire) is also offshore, being British, which has about the same level of control of Cathay as QF will have of Jetstar HK, and has of Jetstars Asia and Japan i.e not a lot.

  • 3
    Ben Sandilands
    Posted September 19, 2013 at 3:35 pm | Permalink

    Patrick,

    You are not up to date with the transition of the Swire interest from that of a controlling entity to a substantial but no longer controlling entity.

    It is a complex, and intriguing story in which strategic and far sighted withdrawal is a phrase that comes to mind, and I have no doubt it will be exhaustively debated and dissected when the objections to the Jetstar HK project are dealt with, … in coming years.

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