Jetstar Hong Kong faces an ambush

The budget carrier's Hong Kong plans are under attack.

Tom Richardson

Tom is a holder of the CFA Society of the UK administered Investment Management Certificate (IMC) and has more than a decade's professional experience in the investment management industry in Australia and the UK. Tom now works as a writer and editor for TMF Australia and has two easy to remember rules of investing he likes to follow. Avoid overpaying for growth stocks and avoid paying at all for stocks that are cheap for a reason. Tom prefers growth investing over value investing and says it's not rocket science, just avoid overpaying for the best returns.

Published September 11, 2013 11:31 am AEST

Jetstar's plans to start operating out of Hong Kong have come under fire from rival operators, who have opposed its license application. Qantas (ASX: QAN) owns 33.3% of Jetstar Hong Kong, alongside local Hong Kong property conglomerate Shun Tak and China Eastern Airlines.

The Hong Kong islands' proximity to mainland China provides a ready made and rapidly growing market for successful low-cost carriers. Jetstar's opposition is coming from Hong Kong's premier carrier Cathay Pacific, which has filed legal objections to Jetstar Hong Kong's license application.

News reports today suggest that Hong Kong Airlines and its affiliate carrier Hong Kong Express have also filed regulatory objections with Hong Kong's Air Transport Licensing Authority. A decision on the license is expected within the next few months.

Jetstar is already a strong brand in Asia and Jetstar Hong Kong would significantly add to its presence. The group has shareholdings in Jetstar Singapore, Vietnam and Japan and is the largest low-cost carrier in the Asia Pacific by revenue.

Foolish takeaway

Hong Kong as a strategic gateway to China represents a valuable prize to the Jetstar business. No wonder rival carriers are in a dogfight over their competitive interests. Jetstar Hong Kong remains confident of gaining regulatory approvals and success should bring long-term rewards.

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Motley Fool contributor Tom Richardson does not own shares in any of the companies mentioned in this article.

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