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China Eastern Airlines to launch low-cost airlines with Qantas

By Tu Lufang (Beijing Daily)

14:22, March 28, 2012

Edited and translated by People's Daily Online

China Eastern Airlines recently signed an agreement with Australia’s Qantas Airways Ltd. to launch a Hong Kong-based, low-cost airline joint venture, Jetstar Hong Kong, under Qantas’ low-cost Jetstar brand.

Jetstar Hong Kong, with 115 million U.S. dollars in registered capital, will be capitalized at 198 million U.S. dollars. The two companies will each own 50 percent of the joint venture, and each invest 57.5 million U.S. dollars.

Jetstar Hong Kong will start with three Airbus A320s, and its jets number will grow to 18 by 2015. If its establishment is approved by the Hong Kong regional government, the joint venture will be the city's first low-cost carrier.

Traditional airlines are facing hard times due to the global economic slowdown and rising oil prices, while low-cost carriers are actively making inroads into the territory of traditional airlines. The International Air Transport Association expects airlines to turn a global profit of merely 3 billion U.S. dollars in 2012 amid fiercer competition.

Tony Tyler, director-general of the IATA, said that airline performance is closely tied to global GDP growth. Historically, when GDP growth drops below 2 percent, the global airline industry returns a collective loss. Tyler added that he would not be surprised to see a collective loss this year.

While initially considered an unpromising company, Chinese lost-cost carrier Spring Airlines has expanded its fleet from just one aircraft to 30 in just a few years, and is planning to go public on China’s A-share market. The airline has launched flights to Japan, and is preparing to purchase wide-body aircraft to operate long-range international flights if its financing plan goes well.


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