Jetstar HK gets $60 million China Eastern loan

22-Jul-2014 Intellasia | SMH | 6:00 AM Print This Post

China Eastern Airlines has extended a $60 million loan to Jetstar Hong Kong at a time when the Qantas Airways-backed budget carrier has yet to receive regulatory approval to operate.

Qantas, China Eastern and Hong Kong’s Shun Tak Holdings each hold a one-third stake in Jetstar Hong Kong.

The loan from China Eastern was announced to the Hong Kong stock exchange last week. It will not change the ownership structure, but it means the budget carrier will be in the Chinese state-owned airline’s debt. Qantas has not extended any fresh equity or debt capital to Jetstar Hong Kong alongside China Eastern.

“Jetstar Hong Kong has the strong support of our shareholders as we move through the regulatory approval process towards launch, however does not comment about financial arrangements,” a Jetstar spokeswoman said.

Qantas has $66 million of equity invested in Jetstar Hong Kong, down from an initial $99 million investment in 2012, due to the sale of a stake to Shun Tak last year.

Jetstar Hong Kong sold three of its nine Airbus A320 aircraft earlier this year and its board is understood to be considering the sale of a further three planes. That would leave it with three aircraft, the minimum believed to be needed to obtain its Air Operator’s Certificate.

The timing of the regulatory process is now unclear. Jetstar chief executive Jayne Hrdlicka in May declined to provide any targeted dates.

“I wish I had a crystal ball,” she said at the time. “What we have learned through this process is that we need to be patient and comfortable with whatever time frame.”

Two Jetstar Hong Kong aircraft were visible during a visit to Airbus’ headquarters in Toulouse in June. Jetstar Hong Kong is paying financing and storage fees for the aircraft. China Eastern this month announced it would convert its full service China United subsidiary to a low-cost carrier, in a move that sparked speculation it could abandon its interest in Jetstar Hong Kong. However, the loan extended last week shows that is unlikely to be the case.

Jetstar Hong Kong would represent the fourth Asian arm of Jetstar, after Jetstar Asia in Singapore, Jetstar Pacific in Vietnam and Jetstar Japan.

Qantas last year injected around $60 million into Jetstar Japan to support the airline’s fleet growth at a time when the weak yen was weighing on the business.

More recently, Jetstar Pacific received a $35.7 million capital injection from its shareholders to help support its expansion plans.

Flag carrier Vietnam Airlines, which owns 70 per cent of the airline, contributed $25 million of fresh equity to the recapitalisation.

But Qantas, which owns the remaining 30 per cent, was able to fund its proportion without injecting cash because Jetstar Pacific has agreed to forgive a $10.7 million debt owed to the Australian carrier.

Jetstar Pacific is the smallest of the Asian ventures in operation. It has a fleet of seven A320 aircraft and a network of nine destinations with 298 flights a week. Jetstar Pacific plans to grow to 10 aircraft by the end of the year with more domestic and international flying to commence in 2014. million-china-eastern-loan-20140721-zv81g.html


Category: Hong Kong

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