iscover
No aircraft, no staff and no licence to fly. The wind-up of Jetstar Hong Kong is all but complete.
The failed venture has sold all its Airbus A320s and made most of its staff redundant after the three major shareholders cut off any further funding of the proposed airline in response to the Hong Kong government’s rejection of its application for an operating licence.
Qantas chief executive Alan Joyce says the airline group had spent $30 million on Jetstar Hong Kong, a joint-venture with China Eastern and Shun Tak Holdings.
“That was the total investment, it won’t be any more than that. There is no more money going in,” Joyce told shareholders at the Qantas annual general meeting in Perth on Friday.
“There are no aircraft left, they have been all sold and we are winding down the employees that are currently there and I think just about all the employees have actually left the business.
“We have accepted the decision of the Hong Kong authorities and will move on. We are not happy with that decision.”
In June, Hong Kong’s Air Transport Licensing Authority formally knocked back Jetstar Hong Kong’s application for an operating license.
In the months that followed China Eastern, Shun Tak and Qantas all declared they would make no further investment in the proposed airline, effectively accepting the regulator’s decision.
Undeterred by the unsuccessful venture, Joyce said Qantas was an “entrepreneurial business” that would continue to seek new opportunities to grow.
“I don’t think it is appropriate to say that we shouldn’t be doing these things because if we don’t do these things we won’t create new businesses, we won’t create new opportunities, we won’t grow the profitability and diversify the organisation,” Joyce said.
“We take risks on business because that’s the way you create profits.”
Joyce’s comments on Jetstar Hong Kong were prompted by a question from a shareholder, who among other things asked if Qantas could have chosen a better joint-venture partner than Shun Tak Holdings, particularly given chief executive Pansy Ho’s background.
The shareholder quoted from a 2009 special report to the New Jersey Casino Control Commission, which said: “Apart from her financial, professional and personal dependence upon her father, Pansy Ho’s relationships with several other individuals who are known or alleged to be associated with organised crime independently call into question her personal suitability as MGM’s business association with her”.
The report also noted Ho did not have any criminal convictions or bankruptcies.
Qantas chairman Leigh Clifford said he was unaware of the reference to Pansy Ho.
“Obviously, we did our due diligence, and I was personally involved in some of it,” Clifford said.
Meanwhile, Deputy Prime Minister and Minister for Infrastructure and Regional Development Warren Truss told an industry conference the federal government would continue to seek concessions from Hong Kong in exchange for an expanded air services agreement between the two countries.
Cathay Pacific has utilised all available traffic rights under the current bilateral for flights to Australia’s main four gateway cities of Brisbane, Melbourne, Perth and Sydney. Therefore, Cathay is unable to add any additional flights and local rival Hong Kong Airlines is prevented from starting service to those four major ports without any expansion in the bilateral agreement.
The Australian and Hong Kong governments have been negotiating on and off in recent times, with Hong Kong understood to be seeking extra capacity. However, the two sides have been unable to reach an agreement, with Australia believed to be seeking further access to points beyond Hong Kong.
“We’ve got serious issues with Hong Kong and we really expect some concessions from Hong Kong that deal with those issues before we are all that keen about signing new agreements with them,” Truss told delegates at the Regional Aviation Association of Australia (RAAA) national convention in the NSW Hunter Valley on Friday.
“But those negotiations I hope will progress more constructively in the months ahead.”
Jason
says:So the Hong Kong authorities, and Cathay, won. I bet the same authorities will continue to expect open skies into Australia. So much for free trade and open skies to encourage competition
PeterL
says:Hong Kong and Cathy should get nothing. They are a disgrace the way they treated Jetstar HK and now they expect Australia to roll over and give them more rights here, NO!
Ron
says:Now there’s a surprise. Maybe Mr Joyce should stick to managing the airline he was given rather than setting up a new airline in a market where the government might be expected to have enough spine to protect its established airlines.
Erik Weseman
says:If Hong Kong wants to get along, it will have to go along as it currently wants more access to Australian airports for its carriers but refuses to offer anything in return for Australia’s airlines. How unfair is that? I hope Canberra tells Hong Kong to take its one-sided proposals and stick them where the sun doesn’t shine. But one way the Hong Kong government can help break the stalemate is to offer to let Jetstar Hong Kong take wing.
Joel
says:Money well spent Alan. You’d think an operating license would be one of the first things they’d make sure they can get before allocating aircraft and staff to an enterprise.
Matt
says:With all due respect Joel, I am not sure what it is like in HK but in the vast majority of countries (everyone of them I know), you need to have key personnel and sometimes aircraft in place before you can even put in an application for an operators certificate with the government. Look at fly kiwi in nz, they had the crew, facilities and aircraft in place before they had their AOC (which was granted in the end). Carriers have to prove they can conduct the operation before they get the licence. Trying to go for an operating certificate with out people or an aircraft is like walking and showing up to a drivers licence test without a car.
steve
says:Well said Matt. It is a catch 22, but the important point here is that the HK government could have been a lot of proactive and upfront about what they want so that applicants know, rather than be totally non-transparent and let vested interests dictate the process. It is truly regrettable and everything against what HK should have represent. There is no leadership and no governing. It is just public servants turning up to work and all they want to do is to avoid getting sued. Disappointed.
Harry Johnson
says:The rules are exactly what they were in 1997. Jetstar is not a Hong Kong based airline! In Principle Place of Business(IPPB) legislation in Hong Kong has not changed. Someone should have done a bit more research BEFORE they spent all that money! Maybe someone should look at the other franchises. Jetstar Japan is a Black Hole and Jetstar Asia is 99% Qantas owned franchise. Which means all the losses belong to Qantas. Shareholders are the losers here. Alan Joyce says he spent $30 million, that is a load of Irish &%%&! He has spent a hell of a lot more than that!
Steve
says:I think the difference between the sort-after rights between the two countries is that Hong Kongs airlines are looking for more rights for flights to and from Australia. These are equal seats/flights that Australian airlines would also share between the two countries, while Jetstar was looking to set up shop based in Hong Kong as a foreign controlled carrier, and didn’t actually meet the established Hong Kong airlines ownership/control law criteria to do so…laws that Qantas should have known and met before throwing their money away. This would be the same as Cathay Pacific setting up its own subsidised carrier based in Australia, not meeting Australian ownership/control laws.p then throwing their toys when they don’t get it. Read the report. Comparing what Hong Kongs airlines want out of Australia and what Jetstar tried to do in Hong Kong is an entirely different ball game.
JO
says:JQ HKG, sought to get an AOC outside the laws of the land. It doesn’t matter if this is fair or not, there are regulation to be complied with. If JQ employed some higher caliber staff to structure and set this operation up they would be flying now. As usual, they pay peanuts to employ clowns. They got what the deserve.
Simon L
says:Hong Kong has offered true open skies to Australia, where by Australian carriers would have unlimited access (except mainland China, which is done by the mainland government) between Australia and Hong Kong, and beyond Hong Kong. Qantas could operate A380s 5 times a day between Hing Kong and London.
Hong Kong is asking in return to grant Hong Kong unlimited access to Australia, and beyond Australia.
Qantas and Virgin have blocked this as they don’t want the additional competition one the pacific routes. Australian carriers already enjoy rights to fly beyond Hong Kong, while Hong Kong carriers are not permitted to from beyond Australia.
Interesting to see everyone above blaming everyone except Qantas and Virgin that have been ripping the Australia public off for years. Why is it cheaper to fly to Europe than from one side of Australia to the other ?