May 3 (Bloomberg) -- Qantas Airways Ltd., Australia’s largest carrier, has been approached by investors seeking stakes in units of Jetstar budget airline across Asia as it readies to start a venture with China Eastern Airlines Corp. in Hong Kong.
The investors offered more for their stakes than Qantas had invested, Qantas Chief Executive officer Alan Joyce told a Macquarie Group Ltd. conference in Sydney today. He didn’t elaborate. Qantas and China Eastern will each invest up to $99 million over three years to set up a Jetstar unit in Hong Kong, where no budget airline has a hub, the companies said last March.
“First mover advantage is key,” Joyce said. “We’ve already had people approach us wanting to pay a multiple of what we’re investing in them to get a share in it.”
Qantas has added flights and is buying 14 Boeing Co. 787 Dreamliner aircraft for Jetstar as it attempts to tap Asian demand for budget flights, which has more than doubled low-cost carriers’ share of regional traffic since 2007, according to data compiled by Bloomberg Industries.
Singapore Airlines Ltd. has also started budget airline Scoot and is the largest investor in low-cost carrier Tiger Airways Holdings Ltd. amid economic growth in China, India and Southeast Asia.
Jetstar, run by Jayne Hrdlicka, accounts for 20 percent of revenue and 31 percent of operating income at Qantas. It has grown to be Asia’s largest budget airline, carrying paying passengers over 36 million kilometers during 2011, compared with 24 million kilometers at nearest competitor AirAsia Bhd., according to data compiled by Bloomberg Industries.
Hong Kong Base
No budget carrier currently has a hub at Hong Kong Airport, the base of Cathay Pacific Airways Ltd. Hong Kong Express, an affiliate of Hong Kong Airlines, has said it will convert to a low-cost model.
Oasis Hong Kong Airlines Ltd., which operated budget long-haul flights, collapsed in 2008 after racking up losses of about HK$1 billion ($129 million) in under two years.
Qantas is taking start-up costs and losses as it builds and expands Jetstar affiliates in Japan and Hong Kong, Joyce said today. The latter venture should get regulatory approval in the territory by the end of this calendar year, he said.
The Japanese venture should double its fleet over the next 18 months toward a target of 24 aircraft, while Jetstar Hong Kong will target 18 aircraft in the next few years, he said.
Joyce said the investor interest illustrated confidence about the future of Jetstar’s Japanese and Hong Kong Jetstar affiliates, without specifying which divisions the investors had sought stakes in.
Via Jetstar, Qantas has a wholly-owned domestic carrier in Australia and New Zealand and four ventures in Asia. Qantas and Japan Airlines Co. each have 33 percent stakes in Jetstar Japan, which began operations in 2012, with Mitsubishi Corp. and Century Tokyo Leasing Corp. sharing the remaining third.
Singapore-based Jetstar Asia, which began flights in 2004, is owned 49 percent by Qantas and 51 percent by Westbrook Investments Pte. Jetstar Pacific, based in Vietnam, is 70 percent owned by Vietnam Airlines Co.
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