Qantas will make a major play for the rapidly expanding Chinese middle class with the launch of Jetstar Hong Kong, a joint venture with China Eastern Airlines.
Services are slated to take to the skies in mid-2013 with a fleet of three Airbus A320s, to rise to 18 by 2015. Markets served will include Greater China, Japan, South Korea and South East Asia.
Jetstar chief executive Bruce Buchanan described the deal as a “unique opportunity” for the group to capitalise on the potential of the Chinese market where penetration of low cost carriers was currently less than 5%.
He predicted passengers would benefit from increased competition with Hong Kong’s first low cost carrier offering fares 50% lower than full service carriers.
Hong Kong had, until now, seen “very slow growth rates”, he said, anticipating that increased competition would bring it in line with regional averages.
The Chinese middle class currently numbers 300 million, expected to rise to 450 million by the end of the decade.
The 50% stake marks an investment of US$99 million by Qantas over three years, with Buchanan keen to stress the new project would not see Australian jobs lost overseas.
“The benefits of exporting the brand all flow back into Australia which is great for the general economy,” he said, adding that Jetstar’s other airlines also stood to benefit from improved connectivity.
Meanwhile, Qantas chief executive Alan Joyce denied it would work with China Eastern on a second venture to create a premium airline in the region, although he said the group was “still exploring” options in Singapore and Malaysia. It was also “keeping an eye out” for any further opportunities in Asia.
“We have got the capability to do much more than we’re doing today,” Joyce claimed.
Tourism Australia welcomed the development as “further proof of the growth potential of China,” predicting benefits for inbound tourism.
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