Qantas Asia link raises Chinese tourism hopes

QANTAS has expanded its Asian network, setting up a new joint-venture low-cost carrier, Jetstar Hong Kong, to take advantage of the huge market for cheap airfares in China.

Jetstar Hong Kong will begin flights in mid-2013, with short-haul routes in China and to Japan, South Korea and southeast Asia. Jetstar is made up of Jetstar Airways in Australia and New Zealand, Jetstar Asia in Singapore, Jetstar Pacific in Vietnam and Jetstar Japan, slated for launch in July 2012. 

"A key part of the Qantas strategy is to have expansion of the Asian markets ... the largest aviation market in the world, the most profitable aviation market in the world,'' Qantas chief executive Alan Joyce, speaking from Hong Kong, told reporters. Qantas said on Monday that the new budget airline will be set up in Hong Kong under an agreement with China Eastern Airlines. 

Mr Joyce said Qantas had had a close relationship with China Eastern for 20 years via a code-sharing arrangement. Qantas and China Eastern will each hold a 50 per cent stake in the joint venture. 

The maximum cost of establishing the airline will be $A190 million, to be equally shared by Qantas and China Eastern. The new airline will start with three Airbus A320s in 2013, growing to 18 A320s by 2015. The alliance and the establishment of Jetstar Hong Kong remain subject to regulatory approvals. 

Asked how long it would take for the new joint venture to be profitable, Mr Joyce said: "We're obviously not going to give details of the business case.'' He said the Qantas group's other low-cost venture in Asia, Jetstar Asia, had already created value for Qantas shareholders. 

"The same will be true, I have no doubt, of Jetstar Japan, and this one will be the same,'' he said. Jetstar chief executive Bruce Buchanan said Jetstar wanted to capitalise on the enormous potential of the Chinese market, in which there is only one other budget carrier. 

China had a travel market of almost 300 million passengers per year and that was forecast to grow to 450 million by 2015. Hong Kong was a major travel hub in Asia, with about 40 million passengers travelling through it a year.

"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,'' Mr Buchanan said. 

He said governments around Asia were now encouraging low-cost airlines because they could see the economic benefits that they created, especially for tourism. 

"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. Mr Joyce said other carriers were looking at Hong Kong, but Jetstar had "first-mover'' advantage. 

He said Jetstar Hong Kong was ready and able to go, and would be able to put three aircraft in the air before the middle of next year. "We can take the opportunity faster than anybody out there,'' he said. 

Mr Joyce said the Qantas group was keeping an eye out for all opportunities in Asia, including both premium and low-cost airline ventures. "We have the capabilities of doing much more than we're doing today,'' he said. 

"We have huge amounts of expertise in both the premium and the low-cost end now.'' But Qantas was not currently looking at establishing another premium brand via a joint venture. Qantas shares were 4.5 cents higher at $1.775 at 1125 AEDT on Monday.

Source - couriermail.com.au