26 October 2016
Incumbent airlines in Hong Kong should welcome Jetstar, not fear it. Photo: HKEJ
Incumbent airlines in Hong Kong should welcome Jetstar, not fear it. Photo: HKEJ

Scare tactics hide benefits Jetstar HK could bring

The recent article “Is Jetstar Hong Kong push worth it?” struck me as a little odd.

Not only because the processing of the airline’s application has been dragging on for several years but because the author goes as far as to suggest a conspiracy theory and calls on the government to beware of “Trojan horses”.

Such an allegation is not only deceiving but fails to acknowledge the bigger picture.

Engaging the general public in a high-brow discussion peppered with industry-specific detail is nothing more than a scare tactic.

Air rights are not a shield to protect incumbent airlines from new market entrants or competition.

In fact, the interesting allegation that Jetstar Hong Kong executives may leak confidential information to the venture’s shareholders logically implies that airlines that are already established here may also do the same to their parent company in Britain.

The argument therefore becomes somewhat hollow.

Purported causes for concern are vested anti-competitive interests in disguise.

This is what is really going on.

The city’s largest carrier is possibly one of Asia’s best-protected airlines.

As a result, the Hong Kong aviation market is its stronghold, together with its ally in this game — accounting for over 50 percent market share.

The uneven playing field is even more apparent in the low-cost carrier sector.

At present, there is only one home-based low-cost carrier in the city, which means consumers are deprived of choice.

The “ferocious competition” offers a stark contrast to other Asian cities like Singapore.

The full-service carriers in Hong Kong together hold over half of the market share as opposed to Singapore-based full-service carriers which hold slightly over one-third of that market.

In Hong Kong, four carriers from two major airline groups are now objecting to a new market entrant, and in doing so they are barring travelers’ access to low-cost options.

These days, both leisure and business travelers demand choice.

Frequent flyers seek a much wider choice of destinations to suit their travel needs.

Thematic travel — such as coffee tours, marathon or cycling packages to new destinations — cannot be provided by full-service carriers alone, because of their different business model and target markets.

Low-cost carriers open up access to new travel destinations, bring overnight visitors to the city from across Asia and boost the local tourism and retail industries, all of which benefits Hong Kong.

This is exactly what Mr. Tony Tyler, director general of the International Air Transport Association and former chief executive of Cathay Pacific Airways, has said: “In many parts of the world, the low-fare sector has tapped into demand from new market sectors. So they have grown the market, rather than cannibalized it.”

Seizing growth opportunities will help to enhance the diversity of tourists to Hong Kong, since overnight visitors will generally spend more in Hong Kong, bringing tourism benefits to the retail industry, which has been experiencing a downturn in business.

Playing the protectionism card and delaying a new Hong Kong-based low-cost carrier from entering the market by measures including calling for a judicial review is not the direction in which our city should be heading.

The recent establishment of the Competition Commission is to ensure the interests of Hongkongers are protected by promoting a constructive and competitive environment, to ultimately benefit consumers by ensuring that choices are not restricted and manipulated by several conglomerates.

The longer that start-up airlines such as Jetstar Hong Kong are delayed from establishing themselves in the city, the further competition is constrained to the detriment of the economy, not to mention opportunity costs.

To see where Hong Kong is falling behind, one only has to look at Singapore, which has three home-based low-cost airlines that have contributed to the market’s growth over the last several years – those low-cost airlines filled a gap in the market that full-service carriers were unable to fill.

Restrictive aviation regimes are outdated.

Maintaining the status quo stunts the growth potential of the city’s development, is short-sighted and may cause irreversible damage to our future.

Embracing competition might not be good for incumbents in the short term, which is why, if one were to take a cynical view, articles such as those from Mr. Dodwell are starting to appear.

Yet what full-service carriers should start to appreciate is the potential benefits that they stand to gain in the longer term.

Let us all embrace competition as a key ingredient for a healthy and prosperous economy and together pave the way for a better future for Hong Kong.

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Lecturer of Department of Logistics and Maritime Studies, the Hong Kong Polytechnic University

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