Qantas and China Eastern to launch new HK budget airline

China Eastern Airlines and Qantas will soon launch a new low-cost venture based in Hong Kong.

Travel Insurance News - 26/03/2012

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The tie-up, which will give birth to Jetstar Hong Kong, marks China Eastern’s first attempt at entering the booming low-cost market in the Asian region. The Australian flag carrier said in a press release issued this week that the new airline would commence operations in 2013 and would receive an official combined investment of US$198 million (£125 million).

Officials said initial routes would be operated via three Airbus A320 jets and that the fleet would grow to 18 planes by 2015.

The news comes after Qantas said that it was walking away from talks with Malaysian officials in an attempt to establish a new premium airline based in Kuala Lumpur in a bid to rescue its ailing international operations.

Barclays Capital analyst Patrick Xu said that the deal was a “good move” for China Eastern, the second largest state-backed carrier in the country, noting the airline could rationalise its fleet and allocate capacity to the new venture, meaning it will likely not over invest in its primary fleet.

The venture puts the two airlines at in a good position, analysts say, as low-cost carriers only account for around 5 to 10 per cent of the region’s market, as opposed to in excess of 30 per cent in Europe and the US and 50 per cent in Australia.

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