Shun Tak to form 3-way JV with Qantas, China Eastern

Here's how it can milk benefits.

According to Maybank Kim Eng, it attended Shun Tak’s analyst briefing last evening in relation to its investments in Jetstar Hong Kong, a low-cost carrier (LCC). 

Maybank also noted that Shun Tak is entering into a three-way joint venture, partnering with Qantas and China Eastern. We were surprised by the announcement given this is a new business for Shun Tak and it had just embarked on China property opportunities since October last year.

Here's more:

Implication: Shun Tak’s entry seems to be key in securing the license, given that Hong Kong laws require companies to be incorporated and have a principal place of business in HK.

The company expects to break even in 3-4 years on the back of a strong partnership with Qantas and China Eastern, which would allow them to leverage on their existing networks and experience.

Furthermore, Jetstar plans to manage its fleet "efficiently," meaning faster turnaround time and effective fleet deployment.

Action: The investment could diversify Shun Tak’s earnings to be more recurring than the traditional lumpy property development business if done successfully.

There are also synergies to be achieved together with the company’s existing hospitality and transportation business. HK has a population of 7.2m, with 48.6m visitor arrivals, and no other budget carrier is established as a hub. They could potentially capture a market segment of cost-conscious passengers and pose some competition to existing full-service carriers.