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Could Hong Kong Regulations Trip Up Jetstar’s New Venture?
CNBC.com | March 27, 2012 | 05:06 AM EDT

Qantas’ planned joint venture with China Eastern Airlines could run into regulatory headwinds in Hong Kong, according to an expert on aviation policy who advised the former Hong Kong governor Chris Patten on the industry.

“In the rush to excite the markets and placate Qantas shareholders has anyone bothered to read the fine print? Those weasel words, ‘subject to regulatory approval’ were included in the press releases – and this may turn out to be far more than a formality,” Andrew Pyne, Senior Partner at Concuros Partners, an aviation consultancy firm said in an email.

When a country such as Australia negotiates an air services agreement with another country, only airlines owned and controlled by Australian nationals are allowed to exercise the Australian set of traffic rights that exist under it.

Since Hong Kong isn’t a country, Pyne pointed out, it allows only businesses that are incorporated and based in Hong Kong to use the territory’s traffic rights under what’s know as the Incorporation and Principal Place of Business (IPPB).

“There is no way in which an airline carrying an Australian branding and controlled in effect from Sydney and from Shanghai can be said to have its principal place of business in Hong Kong," Pyne said. "Many have tried to circumvent the IPPB rules; none have succeeded."

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