Qantas chief says Jetstar Hong Kong decision sends worrying signals about rise of protectionism
August 4, 2015 by Jordan Chong
Qantas chief executive Alan Joyce says the Hong Kong government’s decision on Jetstar Hong Kong sends worrying signals about the rise of protectionism in the aviation sector.
Jetstar Hong Kong, a joint-venture between Qantas, China Eastern and Shun Tak Holdings, was left grounded in June when the Hong Kong Air Transport Licensing Authority (ALTA) ruled the proposed airline did not meet the territory’s principal place of business test.
Joyce said the decision showed a “blatant application of the rules to Jetstar Hong Kong that did not apply to the other carriers”.
“That is a distortion and shouldn’t be allowed,” Joyce told delegates at the CAPA – Centre for Aviation Australia Pacific Aviation summit in Sydney on Tuesday.
“We certainly went into a process, looking, as we always do, that the process was going to be legitimate, fair and balanced.
“If those rules and that decision was applied to Cathay or Hong Kong Express, they wouldn’t have qualified as a Hong Kong carrier. In fact those if those rules applied to Virgin and Tiger here in Australia they wouldn’t qualify to operate in this market.
“We are all about the same rules being applied to the carriers operating in the same market.
Moreover, the Qantas chief executive said he was “extremely worried about what that means in terms of protectionism”.
In its June decision, the ATLA said Jetstar Hong Kong did not meet the legal requirement of Hong Kong being the planned low cost carrier’s principal place of business, obeserving that “JHK [Jetstar Hong Kong] cannot make its decisions independently from that of the two foreign shareholders.”
It would have been the fourth Jetstar franchise in the fast-growing Asian region behind Singapore’s Jetstar Asia, Vietnam’s Jetstar Pacific and Jetstar Japan and Joyce noted those airlines were able to be established on an even playing field.
“This is the first time setting up an airline that we have seen different rules apply to different people in the same jurisdiction,” Joyce said.
“That’s why it was a surprise to us and that’s why we don’t believe it is the right call and we think it is a very dangerous call for fair competition.”
Officially, the parties said the decision is under review. However, analysts say there is unlikely to be any way back for the proposed franchise.
In terms of Jetstar Hong Kong’s options following the ATLA decision, Joyce said in a statement after the conference: “Jetstar Hong Kong has to decide what its next steps are, but from a Qantas perspective we won’t be investing any more funds in this airline.”
Qantas said in June its investment in Jetstar Hong Kong was valued at $10 million in its latest financial accounts.
Meanwhile, Joyce said Qantas’s proposed partnership with China Eastern would hopefully make the Chinese carrier’s Shanghai hub more competitive with rival hubs such as Hong Kong.
“If we look at most of the traffic going over Hong Kong connecting into the rest of China, that’s what we want to offer more competition against,” Joyce said.
“The best way of doing that is with China Eastern.”
Qantas and China Eastern’s application for their proposed alliance is currently before the Australian Competition and Consumer Commission (ACCC). The competition regulator said in its draft decision it was inclined to reject the tie-up arguing it would give the airlines too much power on the Sydney-Shanghai route.
However, the two airlines have received strong backing from the Australian and Chinese governments, as well as tourism and industry groups.
source
Australian Aviation