The carrier is a three-way joint venture between Australia's Qantas, China Eastern Airlines and Macau casino tycoon Stanley Ho's Hong Kong-based conglomerate Shun Tak Holdings.

Under Hong Kong law, an airline will only be given an operating licence if its principal place of business and centre of its decision-making is in the city.

"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 Thursday said.

"Jetstar Hong Kong cannot make its decisions independently from that of the two foreign shareholders," it said.

Shun Tak paid US$66 million for a third of the airline in 2013, in a bid to help it to set up locally, after it applied for regulatory approval in 2012.

"Jetstar Hong Kong is extremely disappointed by the decision," its chief executive officer Edward Lau said in a statement.

"We genuinely believed that Hong Kong is Jetstar Hong Kong's principal place of business," Lau said, adding that the airline is chaired by local businesswoman Pansy Ho, the daughter of Stanley Ho.

But Jetstar's Hong Kong application faced opposition from the city's flag carrier Cathay Pacific, which said the airline is not based in Hong Kong.

The low-cost carrier had planned to fly to destinations in China, Japan, South Korea and Southeast Asia.

"It is the right decision for Hong Kong," Cathay Pacific corporate affairs director James Tong said in a statement following the decision.

"The Air Transport Licensing Authority decision ensures that important Hong Kong economic assets, its air traffic rights, are used for the benefit of the people and the economy of Hong Kong," Tong said.

Qantas owns the Jetstar brand and has other joint ventures in Japan, Singapore and Vietnam.