Cathay Pacific has launched a blistering attack against Jetstar Hong Kong's bid for the right to launch services from the Asian city, claiming Hong Kong risks "losing out".
Hong Kong's flag carrier has lodged a formal objection with regulatory authorities in which it claims the budget airline would be in violation of the city's constitutional law because its principal place of business is in Australia, even though it has a local shareholder and managers.
"Any local franchise operation has local managers. This does not stop it from being controlled from overseas," Cathay Pacific said. "Management control of the Jetstar Hong Kong franchise rests in Australia."
Cathay Pacific said approval of Jetstar's application for a licence to operate services would "set a dangerous precedent by granting control of Hong Kong's hard-negotiated sovereign air traffic rights to a carrier that is nothing more than a franchise operation controlled by a foreign airline".
"The setting up of Jetstar Hong Kong is an attempt by a foreign carrier to gain access to Hong Kong's pool of traffic rights without a fair exchange of value to Hong Kong," it said.
"It is not in the best interests of Hong Kong."
Jetstar Hong Kong is a joint venture between Qantas, Shanghai-based China Eastern and more recently Shun Tak Holdings, the Hong Kong conglomerate founded by gambling and shipping billionaire Stanley Ho.
Qantas had originally slated the middle of this year for the launch of the budget offshoot, but delays in gaining regulatory approval have meant it is unlikely to get off the ground until at least December.
Cathay's formal objection is far stronger than a statement it made late last month. It also claimed in its latest attack that giving Jetstar Hong Kong approval to fly would "severely weaken" the city's ability to negotiate with foreign governments for expansion of air services.
"Doing so would also open the door to similar attempts to grab Hong Kong's air traffic rights by other foreign airlines based in rival aviation hubs to Hong Kong," Cathay said.
Cathay's subsidiary airline Dragonair has also filed a formal objection, claiming Jetstar would not make the best use of the few remaining landing slots at the city's busy airport.
Jetstar has said it was confident the Hong Kong offshoot would meet all the requirements for approval, including that concerning its principal place of business.
Separately, Australia's competition watchdog has chosen not to stop Air New Zealand from raising its stake in Virgin Australia by 6 per cent to 26 per cent.