Qantas chief executive Alan Joyce has hit out at Hong Kong's aviation regulator after it rejected the airline's bid to set up a Jetstar subsidiary in the territory.
Hong Kong's Air Transport Licensing Authority on Thursday backed a challenge by Cathay Pacific and other local airlines against the Jetstar Hong Kong joint venture.
Mr Joyce said the airline was reviewing the venture but blasted the decision.
"At a time when aviation markets across Asia are opening up, Hong Kong is going in the opposite direction," he said in a statement.
"Given the importance of aviation to global commerce, shutting the door to new competition can only serve the vested interests already installed in that market."
The authority found that the venture did not comply with Hong Kong's Basic Law, the territories mini-constitution, because it was majority owned by two foreign shareholders.
"The authority decided that Jetstar Hong Kong did not comply with the basic law ... in having its principal place of business in Hong Kong and that Jetstar Hong Kong's application be refused," an Air Transport Licensing Authority statement published on Thursday said.
"Jetstar Hong Kong cannot make its decisions independently from that of the two foreign shareholders," it said.
Qantas owns one third of the venture as does Chinese-state owned China Eastern Airlines and Macau casino tycoon Stanley Ho's Hong Kong-based conglomerate Shun Tak Holdings, which paid $US66 million ($A85.71 million) for its stake in 2013.
Shun Tak holds 51 per cent of the voting rights in the airline, giving it ultimate control of the venture.
Mr Joyce said the decision was bad news for travellers.
"It's the travelling public who have lost out, because the message from this decision is that Hong Kong appears closed to fresh aviation investment even when it is majority locally owned and controlled."
The venture, which owns just one aircraft, has been described as being worth $257 million, based on the Shun Tak investment, though Qantas places the carrying value of its investment at $10 million.
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