Australian flagship carrier Qantas and China Eastern Airlines (中國東方航空) said yesterday they would launch a new Hong Kong-based budget airline next year, aimed at cashing in on China’s booming aviation market.
The new low-cost Asian carrier, Jetstar Hong Kong, will fly short-haul routes, including in China, Japan, South Korea and Southeast Asia, the partners announced.
The move marks a major expansion of Jetstar, Qantas’ budget brand, which flies domestic Australian and Asian routes, and comes as the embattled carrier struggles to refocus on Asia, the world’s fastest-growing aviation market.
Photo: Reuters
“This is a unique opportunity to capitalize on the enormous potential of the Greater China market, where the penetration of low-cost carriers is less than 5 percent,” Jetstar CEO Bruce Buchanan said.
“Jetstar’s fares will be 50 percent less than [those of] existing full-service carriers, which we’ve seen create new travel demand in our markets across Asia because it enables people to make more trips, more often,” he said.
Qantas and China Eastern — which will each have an equal stake in Jetstar Hong Kong — told the Australian Stock Exchange that the new airline would have a maximum capitalization of US$198 million.
Jetstar Hong Kong, which will be a pioneer in the China budget market, will launch with a fleet of three Airbus A320s, but will increase that number to 18 by 2015.
“We believe there are huge opportunities in the Jetstar low-fares model throughout Asia, including Greater China,” Shanghai-based China Eastern Airlines chairman Liu Shaoyong (劉紹勇) said.
Greater China boasts a travel market of almost 300 million passengers a year, which is forecast to grow to 450 million by 2015 as middle-class spending and travel surge in the vast nation, according to Qantas.
The announcement comes little more than a fortnight after Qantas’ Asian plans were dealt a blow when talks with Malaysian Airlines over a premium joint-venture Asian airline collapsed.
Qantas is instead moving to build on the successful business model of budget Jetstar, which has branded operations in Singapore, Vietnam and Japan, by boosting traffic through more affordable travel.
“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,” Qantas chief executive Alan Joyce said.
Jetstar Hong Kong’s base will give it a springboard into China and a home in one of Asia’s key aviation hubs, through which about 40 million passengers pass each year.
“The number of Chinese people traveling internationally is growing at an incredible rate,” said John Lee, chief executive of the Tourism and Transport Forum, an Australian tourism lobby group, welcoming the announcement.
“An estimated 70 million Chinese traveled overseas in 2011 and that’s expected to grow to 110 million by the end of the decade as household incomes continue to rise,” he said.
Investors also welcomed the news, with Qantas’ share price jumping 2.6 percent to A$1.775 after the announcement.
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