Qantas low-cost off-shoot Jetstar is stepping up its Asian expansion plans with the launch of JetStar Hong Kong - a joint venture with China Eastern Airlines.
Target markets for the new carrier, which initially have three Airbus A320s, include Greater China, Japan, South Korea and South East Asia. It will be the first low fares airline based in Hong Kong, traditionally seen as a difficult low-cost market due to high costs.
Services are due to kick off in 2013, with the fleet expected to reach 18 A320s by 2015.
Jetstar Hong Kong is underpinned by a total maximum capitalisation of up to US$198 million. The shareholding will be equally held by China Eastern Airlines and Qantas Group, which will be equal partners in the Joint Venture. The maximum exposure for each partner is US$99 million over a three year period.
“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,” said chairman of China Eastern, Liu Shaoyong
"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," said Liu.
Qantas Group Chief Executive Officer, Alan 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 Joyce.
Vice chairman and president of China Eastern Airlines, 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.”
Chief Executive Officer of the Jetstar Group, Bruce Buchanan, said the new airline would trigger new travel demand as the first low cost carrier based in Hong Kong and only the second currently based in Greater China.
“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,” said Buchanan.
“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.
• Barathan (Bara) Pasupathi is the new chief executive officer of Jetstar Asia, stepping up from his role as chief financial officer. Pasupathi has 16 years’ experience in senior roles across the energy, aviation and finance sectors, including three years as Jetstar Asia’s first Chief Financial Officer. Outgoing chief executive officer Chong Phit Lian, who announced her attention to pursue other interests outside of aviation last December, will remain on the board.