Qantas New Budget Airline in Hong Kong

Jetstar

A new low-cost carrier based in Hong Kong will be established a 50-50 joint venture with China Eastern Airlines and Quatas.

Depending on approval from regulators, Jetstar Hong Kong is expected to begin service next year. Qantas says it will be the first discount carrier based in Hong Kong. The airline, which will launch with a fleet of three Airbus A320s, will fly short-haul routes within Asia in greater China, Japan, South Korea and southeast Asia.

Bruce Buchanan

Jetstar chief executive Bruce Buchanan says Jetstar Hong Kong fares will be half the price of existing full-service airlines in the region.

And Mr Buchanan believes the launch is an opportunity for enormous growth as China's middle class expands. "That's going to grow to something like 700 million by the end of this decade, and we are going to go from something like 80 cities to potentially serving in excess of 200," Mr Buchanan said. "Jetstar Hong Kong's fares will be 50 per cent less than existing full service carriers, which we've seen create new travel demand in our markets across Asia because it enables people to take more trips, more often."Jetstar's vision is to make travel more affordable for millions of people across Asia, and the demographics of China with its booming middle class are a key part of that plan.This is a unique opportunity for Jetstar to capitalise on the enormous potential of the Greater Chinese market, where the penetration rate of low cost carriers is less than 5 per cent, using a model that we know delivers for customers and shareholders," added Mr Buchanan. "Hong Kong is one of the Asia Pacific's major travel hubs, with around 40 million passengers a year and a population base of around 7 million. Greater China has a travel

market of almost 300 million passengers per annum, forecast to grow to 450 million by 2015."

Alan Joyce

The new carrier was an "historic opportunity" to expand in the world's largest aviation market, Qantas chief executive Alan Joyce said. "We see tremendous potential for the Qantas Group in Asia and we're looking forward to working more closely with China Eastern Airlines to deliver on it," Mr Joyce said. "Establishing Jetstar Hong Kong in the heart of Asia and on the doorstep of mainland China is a historic opportunity to continue the successful expansion of the Jetstar brand in this region. We know from our experience with Jetstar in Australia and in the setup of Jetstar Japan the benefits of both a premium and a low cost airline operating in the same market. This will also apply to Jetstar Hong Kong, which will leverage the local knowledge and scale of China Eastern Airlines with the successful low cost model of Jetstar," added Mr Joyce.

Liu Shaoyong

China Eastern Airlines chairman Liu Shaoyong said the airline would help to stimulate tourism in Hong Kong. "We believe there are huge opportunities for the Jetstar low-fares model throughout Asia, including Greater China, and are excited to be the first major Chinese carrier to bring this travel option to the region," Mr Liu said. "Cooperation with Qantas Group is a key step in China Eastern Airlines' international expansion strategy and an excellent opportunity for China Eastern Airlines to develop low cost carrier operations to complement its existing business model.Jetstar Hong Kong's low fare model will enable people to fly more often for less and will help to stimulate the Hong Kong tourism industry and the broader economy." 

Vice Chairman and President of China Eastern Airlines, Mr Ma Xulun, said: "Jetstar Hong Kong will maximise synergies by combining Jetstar Group's resources including brand management, commercial management, safety, aircraft maintenance and IT systems with China Eastern Airlines' leading position in the Chinese aviation market."

Nomura transport analyst David Fraser believes the move is critical for Qantas to ensure future growth.Earlier this month, Qantas suffered a major setback to its Asian expansion plans after talks to launch a premium carrier with Malaysia Airlines failed, and Mr Fraser believes Qantas has put the plan for a premium carrier aside to focus instead on budget travel. "The only opportunity for them really to grow both domestically and internationally is through their Jetstar brand," Mr Fraser said.

Jetstar

Qantas says it has no plans to move its operations to Hong Kong.Qantas shares jumped at the start of trade following the announcement and at 10:25am (AEDT) they were 2.9 per cent higher at $1.78.

The Jetstar Group is Asia Pacific's fastest growing and largest low fares network by revenue, with airlines in Singapore, Japan, Vietnam, Australia and New Zealand. It operates up to 3,000 flights a week to almost 60 destinations, including 30 in Asia and eight in Greater China. The Jetstar Group is on track to carry more than 20 million people in FY12.