Nov 23, 2012

Cathay Pacific response to Jetstar Hong Kong looms

Some day soon, the Jetstar Hong Kong project has a strong chance of being approved, but also of triggering a massive and industry changing response in airline activity concerning China

Ben Sandilands — Editor of Plane Talking

Ben Sandilands

Editor of Plane Talking

Hong Kong Airport, on a clear day, five years ago: Wikipedia Commons

One of the clearest signs that the Hong Kong authorities are close to making a decision on the Qantas and China Eastern proposal for a Jetstar Hong Kong franchise is this interview just published by Flightglobal with Cathay Pacific chief executive John Slosar.

The interview adds, as one assumes would have been the intention, to speculation that Cathay Pacific hasn’t been idle in waiting for the decision, but actively planning a low cost carrier brand of its own should Jetstar Hong Kong win approval.

It could also have the strategic aim of delaying the issuing of any approval by its urging that “fair and reciprocal” opportunities be given to all carriers to mount similar ventures in Hong Kong.

This swings the doors open on the prospect of a free-for-all frenzy among all sorts of entrants, such as AirAsia or Tiger, in which despite the dilutory effects this would have on any Qantas sponsored venture, the Cathay Pacific advantage would be its exceptional brand power and rock solid customer loyalty in the Hong Kong market.

There is a saying about ‘being careful about what you wish for’. Cathay Pacific clearly wishes for approval to be denied. Qantas may not be wishing for an ‘everybody join in’ approval.

If the current emphasis in Qantas is to be capital light, a financial black hole sucking up every dollar that comes near it in Hong Kong may not be what it intended.

But it is important to keep one thing in mind. Low fare carriers have enormous up-sides in Asia, and none larger than in China. If there were to be no low fare franchises set up in Hong Kong, the SAR is inevitably, and in the near term, going to be served by PRC based low fare carriers, where as far as can be ascertained at the moment, any such activity is seen as being the natural territory of China flag carriers, not those of non-China controlled or branded enterprises.

This is another way of saying that Qantas may have started something in Hong Kong that Cathay Pacific can’t stop, even if the Qantas project is stopped.

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2 thoughts on “Cathay Pacific response to Jetstar Hong Kong looms

  1. moa999

    Personally don’t see that Cathay is too worried.

    They are already competing against Hong Kong Airlines (Hainan) who are offering fares substantially below Cathay (eg. 1500v2500 HKD on HKG-PVG returns) and it doesn’t seem to be impacting greatly.

    They are making a pre-emptive strike with some well priced, albeit limited number, of fanfares launched on Tuesdays,

    Can’t see Cathay getting into bed with the like of Tiger or Air Asia and whilst some other potential partners for them, I daresay none as well aviation connected as Qantas’s partner

  2. kash charles

    Ok ever since low cost airlines like Air Asia/Jetstar Asia Hong Kong airlines entered the market , cathay has GAINED market share on that route, Cathay is probably one of the few airlines in the world that has been able to fend of low cost airlines with its current business model!!!

    If anything I think cathay is preparing to up capacity massively and do the same thing it did to the DEAD Oasis Hong Kong Airlines

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