On March 2012, Qantas told the market it would launch a low-cost carrier in Hong Kong, Jetstar Hong Kong. More than two years later it is still waiting for a licence.

It was another stumbling foray into Asia by the Australian flag carrier, which has missed many of the rewards of the Chinese tourist boom and has, insiders say, no discernible long-term strategy for the world’s fastest-growing aviation market.

The controversial Emirates alliance was inked after Qantas cancelled plans for a premium airlines joint venture with Malaysia Airlines. It was counter to any Asian-focused expansion strategy and has ripped Qantas passengers out of Bangkok, Singapore and Hong Kong. After the deal Qantas chief executive Alan Joyce breathlessly told the National Press Club:

“But we now have the new Dubai and Singapore schedules in place, and it looks very exciting. Our customers are going to love it.”

Maybe some do, but I have yet to meet one living in Asia. In fact, here are legions of customers who don’t like it that they cannot fly to Europe on Qantas via either Bangkok or Hong Kong.

If it ever successfully gains a licence, Jetstar Hong Kong will be the fourth attempt Qantas has made at establishing a low-cost carrier (LCC, in market-speak) in Asia. So far none of its Asian ventures — Singapore-based Jetstar Asia, Japan-based Jetstar Japan or Ho Chi Minh City-based Jetstar Pacific (it has significant minority stakes in all three) — has turned a buck.

LCCs are crowding the skies in the region. The 3317 aircraft collectively on order wildly outstrip even the most bullish forecasts of passenger growth, airports are bursting with over-capacity, landing slots in some places can be as hard to find as hens’ teeth, and analysts say pricing on many routes is unsustainable.

The entire industry — including most traditional carriers like Thai Airways, Malaysia Airlines and Qantas itself — is swimming in a sea of red ink. Regional low-cost pioneer AirAsia’s Bangkok-based AirAsia Thailand is the only single LCC to have made money outside its home market, according to Singapore-based Credit Suisse airline analyst Timothy Ross.

The woes of the Asian LCC sector were writ large recently when Singapore Airlines offshoot Tigerair posted losses of US$47 million, a reversal of the previous year’s US$46 million profit, having sold off shares in its Australian venture to Virgin, closed down its Philippines operations and scaled back its Indonesian Tigerair Mandala operation.

In the past 18 months Jetstar has had to recapitalise its Japanese venture to the tune of $60 million and restructure a Vietnamese business Ross estimates is still losing “tens of millions of dollars each year”. In February it put on hold any further investment in Singapore as new rivals continue to route out of the region’s financial hub.

Meanwhile, Jetstar Hong Kong has bought nine aircraft; some are sitting at the headquarters of maker Airbus in Toulouse, France, while others are being leased out.

Qantas has already been forced to rework the Hong Kong venture, originally a partnership with Shanghai-based carrier China Eastern Airlines. It now includes a shareholding by Shun Tak Holdings, a company controlled by the family of Macau gambling tycoon Stanley Ho. It has installed Pansy Ho, one his daughters, as chair of Jetstar HK.

Insiders told Crikey that the company’s senior executives had little idea what they would confront in Hong Kong, vastly underestimating the firepower that Qantas’ erstwhile Oneworld partner Cathay Pacific would throw at slowing or even halting the granting of Jetstar’s licence.

“For the moment, Qantas/Jetstar’s Asian strategy appears to be half pregnant.”

Ross believes the Jetstar Hong Kong deal may never happen. Meanwhile, Jetstar’s low-cost lunch in HK is being eaten by Hong Kong Express, a subsidiary of China’s most service-oriented and fourth-largest domestic carrier, Hainan Airlines, which has successfully rebranded itself as Hong Kong’s low-cost carrier in the past 12 months, servicing a growing number of destinations in north and south-east Asia. And Cathay Pacific, with its roomier economy seats and better in-air service, has shown it will match HK Express prices on key routes. Cathay or Jetstar — you decide.

In this morning’s South China Morning Post, Jetstar HK chief executive Edward Lau, with a whiff of desperation, made the company’s case in print.

In terms of base fares, Jetstar — with smaller seats than all its main rivals — is almost never the cheapest option. If you want to fly Jetstar because of any Qantas frequent flyer allegiance you fork out an extra $30 just to get points. Qantas lounges in the region are only open when its “premier” brand has flights arriving or departing. In Bangkok, Asia’s most popular tourist destination and gateway to Thailand, which 950,000 Australians visited last year, that’s now just once a day.

A comparison by Crikey of prices from Bangkok to Singapore — one of the region’s main trunk routes — on both May 16 and June 4 (with a meal and 20 kilograms of luggage) showed Jetstar to be the most expensive out of four LCCs (AirAsia, Tigerair and Scoot). Jetstar’s meals, “comfort packs” and booking fees were all more expensive than its rivals’.

In China, the world’s soon-to-be largest aviation market, Qantas’ strategy is fractured, to say the least. In May 2009, just as the avalanche that is the outbound Chinese tourist trade was beginning to surge, it gave up its slots to fly directly in and out of Beijing. Since then, it has flown just one flight a day into Shanghai. To connect to its partner on the Beijing route China Eastern, customers must change terminals and re-check luggage. Jetstar has made a number of failed attempts at getting into the market.

In December last year, Qantas inked a code-share arrangement with China’s biggest carrier, Guangzhou-based China Southern, which now flies almost 40 flights a week to Australia.

Qantas complains long and loud about government-backed airlines that fund its domestic rival Virgin but seems happy to strike deals with other government-backed airlines like China Eastern, China Southern and Emirates when it suits.

Qantas has also cut direct flights from Hong Kong to Perth, where many Chinese businessmen and government officials want to head. Sources in the company say the route was losing money, yet rival Cathay has picked up the slack.

For the moment, Qantas/Jetstar’s Asian strategy appears to be half pregnant. Jetstar’s three operating ventures, all of which have different boards and management, have between them 42 aircraft (18 each for Jetstar Asia and Jetstar Japan and just six for Jetstar Pacific.) It’s neither a small, nimble niche player nor one of region’s emerging single-company big boys such as AirAsia, Indonesia’s Lion Air or Cebu Pacific from the Philippines.

After last week’s losses Tigerair sacked its CEO Koay Peng Yen, and other commercial executives are rumoured to be headed for the door. The company has said it will consolidate its operations in an effort to remain competitive and profitable.

Perhaps Qantas/Jetstar should do the same.