Jetstar Hong Kong eyes 7% market share by 2015

Singapore
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Jetstar Hong Kong expects to be profitable within three years of operations and to gain a 7% market share by 2015.

The low-cost carrier (LCC), a joint venture between Qantas Airways - through its subsidiary Jetstar - and China Eastern Airlines, will begin operations in mid-2013 with three Airbus A320s. It plans to expand its fleet to 18 aircraft by 2015.

"The capacity per year, [when you] add it all up, is about 5 million. If you project to 2015 and if there is growth in the Hong Kong market, we might have a market share of 6-7%," says China Eastern Airline's chairman Liu Shaoyong at a press conference announcing the new carrier in Hong Kong.

He expects the carrier to be profitable by its third year, despite high fuel costs, because of a higher aircraft utilisation rate and by offsetting some fuel costs through surcharges.

Jetstar's CEO Bruce Buchanan emphasised the importance of keeping operating costs low, adding that the carrier has been able to keep a cost base 50% lower than its competitors and is one of its highest ancillary revenue earners.

"It's very clear what happens when LCCs come in. We will drop fates by 50%," he says, adding that this would trigger new travel demand.

China Eastern and Qantas will pump in $198 million into the joint venture, each holding a 50% share. The maximum exposure for each carrier is $99 million over a three-year period.

Hong Kong, an aviation hub through which about 40 million passengers travel each year, has a population base of around 7 million. Greater China, meanwhile, has a travel market of almost 300 million passengers per annum, a number which is expected to grow to 450 million by 2015.