- Qantas of Australia and China Eastern Airlines are to launch Hong Kong's first budget airline
- Jetstar Hong Kong will be a $198m joint venture in which both airlines hold equal stakes
- It will be the first time that major Chinese and foreign airlines collaborate
Qantas of Australia and China Eastern Airlines are to launch Hong Kong's first budget airline in a landmark deal for foreign participation in the Chinese aviation industry.
Jetstar Hong Kong will be a $198m joint venture in which Qantas and China Eastern hold equal stakes. It plans to start flying next year.
It will be the first time that major Chinese and foreign airlines have together established a passenger airline, with previous partnerships limited to cargo joint ventures or codeshare agreements.
In establishing a budget carrier, Qantas and China Eastern are targeting an under-served segment of the Chinese market. Although air travel has risen in China, the country has little in the way of discount options.
Hong Kong Express, partially owned by China's Hainan Airlines, has said it wants to convert itself into a budget carrier. Oasis Hong Kong offered low-fare long-haul flights before it stopped flying in 2008 after incurring big losses.
Liu Shaoyong, China Eastern chairman, said ithe Qantas venture was "a key step in China Eastern Airlines' international expansion strategy and an excellent opportunity ... to develop low-cost carrier options to complement its existing business model".
We "are excited to be the first major Chinese carrier to bring this travel option to the region", he said.
China Eastern is one of the country's three major government-owned airlines. While highly profitable, the airlines have been struggling to differentiate their business models and to break into new markets.
Qantas has been losing money in its international operations, but Jetstar, the group's budget airline, has been a bright spot. It has Asia's fastest-growing low-fares network by revenue, with airlines in Singapore, Japan, Vietnam, Australia and New Zealand.
Alan Joyce, Qantas chief executive, said the Hong Kong venture was "a historic opportunity to continue the successful expansion of the Jetstar brand in this region".
"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," he added.
Subject to regulatory approval, Jetstar Hong Kong will take off in 2013 with a fleet of three Airbus 320s, aiming for 18 A320s by 2015. It will offer short-haul flights to Japan, South Korea, south-east Asia and greater China -- a region that includes mainland China, Hong Kong and Taiwan.
Fares will be 50 per cent less than existing full-service carriers, according to Bruce Buchanan, Jetstar chief executive.
Low-cost airlines have done well in the area around Hong Kong, though the main players -- AirAsia, Indigo and Lion -- are based in Malaysia, India and Indonesia.
In China, where passenger traffic has grown at a double-digit pace for much of the past decade, Spring Airlines is the only budget carrier of note and it is far smaller than its Asian peers.
Hong Kong is a top Asian travel hub, with about 40m passengers a year. Greater China -- a region that includes mainland China, Hong Kong and Taiwan -- has an air travel market of nearly 300m passengers per year, which industry groups forecast will grow to 450m by 2015.
Additional reporting by Neil Hume in Sydney