Dec 14, 2012

Jetstar Hong Kong to face at least two new competitors

Qantas's idea of a Jetstar franchise in Hong Kong looks like being so good that it is going to be imitated by two new HK low cost carriers at the same time.

Ben Sandilands — Editor of Plane Talking

Ben Sandilands

Editor of Plane Talking

An un-rebranded Hong Kong Express 737-800 on a clear day in the Pearl River delta: Wikipedia

*Updated with ACCC announcement at foot of article

If it seems to be taking a long time for Hong Kong authorities to approve Jetstar’s application to open a new centre for its franchise in China’s Special Administrative Region in conjunction with China Eastern this report in Air Transport World may explain the wait.

It says two other Hong Kong based low fare carriers will launch during 2013, one a subsidiary of China’s Spring and Autumn Airlines  春秋航空 to use its full name, and the other a rebranding of Hong Kong Express  香港快運航空有限公司 , which was much earlier said to have been approached by Qantas to consider being rebranded as Jetstar Hong Kong before the China Eastern venture was formulated.

Given persistent allegations that Jetstar Asia based in Singapore, and Jetstar Pacific in Vietnam are unprofitable drains on the operations of full service Qantas long haul and domestic operations (and persistent if undocumented denials of those allegations by Qantas) the situation doesn’t sound like being so much capital light for the Qantas venture but profit light.

A Spring Airlines A320: Wikipedia Commons

Could three prove too much company in Hong Kong?   It could be a convenient way for the Hong Kong authorities to deal with the difficult questions arising from the Jetstar Hong Kong application, in that approving it could also be setting it up to fail in a disastrous frenzy of prolonged discounting.

The last thing the fragile state of Qantas needs at the moment is another black hole sucking up money, in a market where China savvy China brands might just hold a natural advantage over the little known Jetstar brand.

But to say this could also be seen as aiding an unfair effort to contain Jetstar.

Let’s say instead, bring on Jetstar Hong Kong, and let the quality rise to the top or sink to the bottom, as the case may prove to be.

*Update Although many readers might have expected the Jetstar franchises to cooperate with each other, this is not strictly the case, but may soon be, as this notice this morning from the ACCC sets out below.

The Australian Competition and Consumer Commission has issued a draft decision which proposes to grant authorisation to Qantas Airways Limited and Jetstar Airways Pty Ltd for coordination involving four Asian based Jetstar branded joint ventures: Jetstar Asia, Jetstar Pacific, Jetstar Japan and Jetstar Hong Kong.

The proposed authorisation facilitates the Jetstar joint ventures coordinating with each other on passenger and cargo services, predominately on intra-Asian routes. It also allows their airline owners to support and expand each joint venture and to relate the joint ventures to their own businesses.

“The ACCC considers that the coordination is likely to result in public benefits to consumers by increasing the likelihood of additional Jetstar flights and destinations in Asia, and providing increased online connections for consumers,” ACCC chairman Rod Sims said.

“The ACCC considers that the coordination is likely to result in little, if any, detriment due to the fact that the Jetstar joint ventures are unlikely to be close competitors with each other with or without authorisation, nor are the joint ventures likely to be close competitors with their owners.

“More important, in most instances where overlap does occur, there are multiple competitors present. As a result the ACCC considers that the proposed coordination is likely to result in little, if any, detriment”.

The proposed authorisation does not extend to coordination between any of the airline owners.

The Qantas Group has established these joint ventures because the international regulatory environment makes it impossible for the Qantas Group to wholly or majority own airlines outside Australia.

The joint ventures are:

  • Jetstar Asia;
    • which is based in Singapore, and is a joint venture between the Qantas Group and a Singapore citizen;
  • Jetstar Pacific;
    • which is based in Vietnam, and is a joint venture between the Qantas Group and Vietnam Airlines;
  • Jetstar Japan;
    • which is a joint venture between the Qantas Group and Japan Airlines; and
  • Jetstar Hong Kong;
    • which is a joint venture between the Qantas Group and China Eastern Airlines.

Authorisation provides immunity from court action for conduct that might otherwise raise concerns under the competition provisions of the Competition and Consumer Act 2010. Broadly, the ACCC may grant an authorisation when it is satisfied that the public benefit from the conduct outweighs any public detriment.

The ACCC will now invite further submissions from the applicants and interested parties in relation to the draft determination prior to making a final decision on whether to authorise the conduct. The applicants or interested parties may also request that a conference be held to make oral submissions on the draft determination.

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One thought on “Jetstar Hong Kong to face at least two new competitors

  1. J.W.

    not good news for the future JQ HK, their presumed strategy of mainland china routes in addition to south east asia now appears to be encroached at both ends by established players that likely have lower cost bases and deeper pockets (in the case of HKA at least). should be an interesting blood bath of low fares ex-hkg for 2013.

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