Jetstar Hong Kong ready for take off into booming Chinese market

THE local tourism industry today welcomed the Qantas Group move to extend its reach into China by creating a sixth Jetstar regional airline, to be based in Hong Kong.

The new Jetstar Hong Kong will be equally owned between Qantas and China Eastern Airlines with a start-up capital of $189 million for the service, which is expected to begin flying next year.

The venture will give the Qantas Group, which recently put off its strategy to create a premium-class airline out of Singapore or Malaysia, another chunk of the potential of the booming Asian market at the discount end.

Jetstar Hong Kong will be the first discount airline based in the city and give discount access into mainland China, complimenting the existing Jetstar Asia, based in Singapore and Jetstar Pacific, based in Vietnam.

The new airline is also expected to give added penetration into the massive north Asia market, in tandem with Jetstar Japan, which is due to begin flying later this year.

Tourism Australia's manging director Andrew McEvoy said the new links could only be good for tourism into Australia, promising a further rise in the 558,000 annual visitors from mainland China and 166,500 via Hong Kong. Chinse tourism grew 20 per cent last year.

As an industry in transition but, importantly, one whose future growth strategy is so closely aligned to the powerhouse markets within Asia, the improved capacity wrapped into this deal is good for Australian inbound tourism,'' Mr McEvoy said.

Tourism Australia has a memorandum of understanding with Jetstar over growing inbound visitor numbers, with the Qantas Group to invest a maximum of $94 million in Jetstar Hong Kong over the coming three years.

The airline, which services 10 Chinese cities at present, has promised to cut existing Asian fares into and out of Hong Kong by 50 per cent.It will begin with a fleet of three Airbus A320s, increasing to 18 of the aircraft within the next three years.

The new airline will come as a welcome sign of expansion for Qantas Group, after the frustration of announcing three weeks ago that its premium airline in South East Asia would not go ahead at present.

Qantas chief executive Alan Joyce said Jetstar Hong Kong would give the group a platform for accessing the world's largest, fastest-growing and most profitable aviation market but there were no plans to join China Eastern in any new premium airline venture.

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,'' he said.

Mr Joyce said the model pioneered in Australia of a premium airline working with a budget subsidiary would apply to Jetstar Hong Kong, which would use the local knowledge and the scale of China Eastern.

He said it was a way for creating extra value for shareholders with a sensible investment and so far investors had shown great excitement at what we're doing in Asia.''China Eastern Airlines' chief Liu Shaoyong forecast extending his airline's 20-year relationship with the Qantas Group, which has to this time been limited to code sharing.

Co-operation 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,'' he said.

Jetstar is expected to supply its Melbourne-based expertise in areas including IT systems, safety, commercial and brand management to integrate with the China Eastern Airlines to assist the new airline.

Mr Buchanan said the present penetration of low cost carriers into China was less than five per cent, compared to around 30 per cent in Europe and Australia, creating great opportunity.

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,'' he said.

He said there was potential to vastly expand Hong Kong's airline passenger market of 40 million per year, while China's yearly airline passenger market is 350 million and is expected to grow to 450 million by 2015.

The new airline will join Jetstar group discount airlines in Australia, New Zealand, Singapore, Vietnam and Japan which operate 3000 flights per week and are on track to carry 20 million passengers this year.

Source - heraldsun.com.au