Hong Kong's Jetstar Hong Kong decision could be a milestone in liberalisation. Or a compromise

The competitive outlook is not encouraging when a flag carrier feels the need to seek government protection, as Cathay Pacific has done in protesting Jetstar Hong Kong's application to operate scheduled services. The Hong Kong flag carrier manages to argue that despite the additional business and visitors Jetstar Hong Kong would bring, the proposed LCC ultimately "would undermine the Hong Kong economy". And allowing its entry would be to waste Hong Kong's "hard-negotiated sovereign air traffic rights", argues Cathay.

Hong Kong must find a solution that complements its business-friendly environment yet also does not put Cathay at peril or open the door for other carriers to establish a Hong Kong base with ease. Yet a final decision on Jetstar Hong Kong extends beyond the territory's borders and the local laws that have been called into question. There is the matter of Chinese politics as Cathay uses Air China, while Qantas and Jetstar use China Eastern, to gain influence in mainland China that would trickle down into Hong Kong. And Qantas' approval for Jetstar Hong Kong comes as Cathay has unsuccessfully sought greater access on routes to Australia, under a bilateral still driven by reciprocity. In the end it is possible neither Qantas nor Cathay will receive exactly what they want, an outcome of what will be one of the most complex aeropolitical rulings this decade.