In a move reminiscent of pre- 1997 colonial days of intensely protectionist behaviours, Cathay Pacific and Hong Kong's other airlines, Dragonair, Hong Kong Airlines and Hong Kong Express have challenged the Hong Kong Government to declare that proposed new low cost startup Jetstar Hong Kong is not a local company and can not therefore be granted traffic rights as if it were one. The newcomers' parentage goes back to Jetstar Australia and its creator and owner Qantas.
Hong Kong may have the image of a free booting city state dedicated to competition but in fact it never was. It has almost always strenously protected its own and within its own there has been a clear pecking order originally led by the two rival trading companies, Swires and Jardines. Over time Hutchison Whampoa and one or two more elbowed their way into this tight top tier. Since 1997 Chinese mainland influence has grown inside and outside these players but regardless of that anyone trying to break into their prime business spheres has a tough job on their hands. Just ask the French supermarket operator, Carrefour. In the end they just gave up the struggle.
Cathay and the other Hong Kong airlines have claimed that Jetstar Hong Kong would be primarily controlled from Sydney . This would mean that their principle place of business would not be the city state as is required under the post 1997 Basic Law. That would bar them from gaining anything but 5th freedom rights in Hong Kong.
There is an understandable fear that the appearance of a true low cost and low fare local competitor could damage the existing Hong Kong airlines' profitability which could also mean them having to downsize and lay off staff. Jetstar would arge that any loss of other airlines' jobs would be more than compensated for by the additional ones it creates. Much more fundamental though is the fear that Jetstar could gain traffic rights between Hong Kong and the mainland. These are extremely valuable to the current incumbents. Cathay's view is clearly that there is no reason why it should accept losing a single passenger to anyone through increased competition and the arival of a new entrant. Again this is a reasonable enough stance for a business in their position to take. The world is not about love and brotherhood if it costs you money. It is the duty of any business to look after its own and its shareholders' interests first and foremost.
As a counter move, Jetstar has now brought on board ,with a 33% holding, Hong Kong's Shun Tak Shipping Company , originally a specialist in Hong Kong-Macau ferries but vastly expanded since its development into Shun Tak Holdings which was floated in 1972. Jetstar Hong Kong has also appointed a local Chairwoman, Shun Tak's Managing Director Pansy Ho, and a board with a local majority.
As we noted above, the parent of all the Jetstar subsidiaries and franchises is Cathay Pacific's One World alliance partner Australia's Qantas who last April ditched the most recent version of their historic partnerships with One World founding member British Airways in favour of a deal with that airline's arch rival Emirates. So much then for alliances when the chips are really down. Embroiled in the Hong Kong contest are two airlines, Cathay and Qantas who are not anaesthetised by the superficial bonhommie of alliances but fully understand what competition is all about. Also as noted above, cooperation is all very well until it costs you a single dollar, pound or whatever. Then self interest steps in. Any member of any alliance who does not understand that is living dangerously and ,as far as the shareholders are concerned, on another planet.
Several balls are in play here.
Hong Kong may have the image of a free booting city state dedicated to competition but in fact it never was. It has almost always strenously protected its own and within its own there has been a clear pecking order originally led by the two rival trading companies, Swires and Jardines. Over time Hutchison Whampoa and one or two more elbowed their way into this tight top tier. Since 1997 Chinese mainland influence has grown inside and outside these players but regardless of that anyone trying to break into their prime business spheres has a tough job on their hands. Just ask the French supermarket operator, Carrefour. In the end they just gave up the struggle.
Cathay and the other Hong Kong airlines have claimed that Jetstar Hong Kong would be primarily controlled from Sydney . This would mean that their principle place of business would not be the city state as is required under the post 1997 Basic Law. That would bar them from gaining anything but 5th freedom rights in Hong Kong.
There is an understandable fear that the appearance of a true low cost and low fare local competitor could damage the existing Hong Kong airlines' profitability which could also mean them having to downsize and lay off staff. Jetstar would arge that any loss of other airlines' jobs would be more than compensated for by the additional ones it creates. Much more fundamental though is the fear that Jetstar could gain traffic rights between Hong Kong and the mainland. These are extremely valuable to the current incumbents. Cathay's view is clearly that there is no reason why it should accept losing a single passenger to anyone through increased competition and the arival of a new entrant. Again this is a reasonable enough stance for a business in their position to take. The world is not about love and brotherhood if it costs you money. It is the duty of any business to look after its own and its shareholders' interests first and foremost.
As a counter move, Jetstar has now brought on board ,with a 33% holding, Hong Kong's Shun Tak Shipping Company , originally a specialist in Hong Kong-Macau ferries but vastly expanded since its development into Shun Tak Holdings which was floated in 1972. Jetstar Hong Kong has also appointed a local Chairwoman, Shun Tak's Managing Director Pansy Ho, and a board with a local majority.
As we noted above, the parent of all the Jetstar subsidiaries and franchises is Cathay Pacific's One World alliance partner Australia's Qantas who last April ditched the most recent version of their historic partnerships with One World founding member British Airways in favour of a deal with that airline's arch rival Emirates. So much then for alliances when the chips are really down. Embroiled in the Hong Kong contest are two airlines, Cathay and Qantas who are not anaesthetised by the superficial bonhommie of alliances but fully understand what competition is all about. Also as noted above, cooperation is all very well until it costs you a single dollar, pound or whatever. Then self interest steps in. Any member of any alliance who does not understand that is living dangerously and ,as far as the shareholders are concerned, on another planet.
Several balls are in play here.
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