China Eastern Airlines A319. Courtesy, Airbus

China Eastern Airlines (MU) and Qantas Group (QF) are planning to launch a low-cost subsidiary, Jetstar Hong Kong. The Hong Kong-based joint venture (JV) is expected to launch in 2013.

The new JV, subject to regulatory approval, will make MU the first state-owned Chinese carrier with an LCC. According to MU, the new JV will have a registered capital of $115 million; each airline will own a 50% share of the LCC.

“The low-cost airline market in Hong Kong has a significant development potential and room for growth, which provides the company with opportunities for investing and developing the businesses in [a] low-cost airline,” MU said in a written statement.

MU chairman Liu Shaoyong said, "Cooperation with Qantas Group is a key step in China Eastern Airlines' international expansion strategy and an excellent opportunity for China Eastern Airlines to develop low-cost carrier operations to complement its existing business model.”

“Establishing Jetstar Hong Kong in the heart of Asia and on the doorstep of mainland China is a historic opportunity to continue the successful expansion of the Jetstar brand in this region,” QF CEO Alan Joyce said. 

Jetstar Hong Kong is expected to operate three Airbus A320s, initially on intra-Asian routes starting from Hong Kong, and plans to expand its fleet to 18 A320s by 2015.

Jetstar Group CEO Bruce Buchanan said the new airline will “trigger new travel demand” because it will offer fares at 50% less than full-service carriers.

An industry insider said that if Jetstar Hong Kong is successful, MU will consider launching a new company called “Jetstar China to further explore the low-cost airline market in China.” China has only one LCC, Spring Airlines (ATW Daily News, Feb. 13).

In recent years, the number of LCCs in the Asia/Pacific region has been growing.

Peach Airlines, the JV established by ANA and Hong Kong First Eastern Financial Investment Group began operations in March (ATW Daily News, Jan. 17). AirAsia Japan, a JV between All Nippon Airways (ANA) and AirAsia, will launch in August (ATW Daily News, Feb. 3). Singapore Airlines plans to launch its low-cost subsidiary, Scoot, this year (ATW Daily News, March 20).

QF’s new LCC Jetstar Japan has pushed up the launch of its domestic services to July 3, several months ahead of schedule (ATW Daily News, Feb. 10).