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Jetstar extends to Hong Kong in China Eastern Airlines deal

BUSINESSDESK: Qantas Group, owner of the discount Australian airline brand Jetstar, has announced a joint venture with China Eastern Airlines to create Jetstar Hong Kong.

The low cost carries model will service short haul routes in China, Japan, South Korea and South East Asia starting in 2013. The deal is worth about $244 million dollars, with both companies taking a 50 percent share in the airline.

“Jetstar Hong Kong’s fares will be 50 percent less than existing full service carriers, which we’ve seen create new travel demand in our markets across Asia because it enables people to take more trips, more often,” said Bruce Buchanan, chief executive at Jetstar Group.

Jetstar Hong Kong is city’s the first low cost carrier and only the second currently based in Greater China.

“This is a unique opportunity for Jetstar to capitalise on the enormous potential of the Greater Chinese market, where the penetration rate of low cost carriers is less than 5 percent, using a model that we know delivers for customers and shareholders,” Buchanan said.

In February, Jetstar reported an 82 percent slump in first half earnings even as it raised its share of New Zealand’s domestic route to 19.9 percent from 14.9 percent a year earlier. The improving fortunes for Jetstar came at the same time its parent Qantas’s profits sank to A$42 million in the six months ended Dec. 31.

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