Hong Kong rejects Jetstar budget airline bid

AP News
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Posted: Jun 25, 2015 7:56 AM

HONG KONG (AP) — Hong Kong regulators on Thursday rejected an application for a budget airline joint venture involving Australia's Qantas and China Eastern Airlines, saying it could not be considered a local carrier.

Two years after Jetstar Hong Kong applied for the airline license, the southern Chinese city's Air Transport Licensing Authority denied the startup's application, saying its majority foreign ownership meant its main place of business was not in Hong Kong.

Under Hong Kong's mini-constitution, the Basic Law, which came into force after China took back control of the city from Britain in 1997, airlines operating out of Hong Kong are required to have their "principal place of business" in the city.

In a 150-page ruling, a five-member panel said it "is of the view that JHK cannot make its decisions independently from that of the two foreign shareholders."

Qantas Airways Ltd., Shanghai-Based China Eastern Airlines Corp. and local partner Shun Tak Holdings Ltd. each own a third of the $198 million venture. Shun Tak joined the venture about a year after it was first announced in an attempt to win regulatory approval.

The licensing authority held an inquiry earlier this year into the application after Cathay Pacific Airways, Dragonair and Hong Kong Airlines objected to the application.

Qantas' Jetstar brand also operates in Singapore, Vietnam and Japan. Jetstar Hong Kong had planned to fly short-haul routes to mainland China, Japan, South Korea and Southeast Asia to capitalize on rising numbers of Chinese travelers, including tens of millions that pass through Hong Kong each year.

Hong Kong is a self-administered region of China with its own legal and financial system.