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New Budget carrier for booming Asian travel demand

All Nippon Airways to launch budget airline

Sep 09, 2010

TOKYO — Japan's All Nippon Airways (ANA) will launch a low-cost carrier operating both international and domestic short-haul routes, anticipating booming Asian travel demand, the airline said Thursday.

The new company will be established by the end of this year, ANA said, and aims to begin services out of Kansai International Airport, Osaka, in the second half of 2011.

The carrier said it had signed an agreement with Hong Kong-based private equity firm First Eastern Investment Group to establish "the first Japanese low-cost airline" in a bid to reshape the country's costly air travel market.

Japan's existing cheaper domestic carriers such as Skymark and Air Do have been unable to offer the kind of heavily discounted fares associated with budget airlines in the United States and Europe due to higher operating costs.

Japan still has the highest landing fees in the world.

But Shinichiro Ito, president and chief executive of ANA, told a press conference Thursday that the planned new carrier, which will operate independently from ANA, would offer tickets at half current fare levels.

Ito added that fares would be low enough to attract customers in Asia who were previously deterred by price.

"By offering unprecedented rates, we will reach audiences who never left their country because of price," said Ito.

ANA said it would cut costs by requiring customers to pay for all in-flight services and operate only with e-tickets.

The airline's move comes as international competition is set to rise as Tokyo's Haneda airport -- located nearer the capital than main hub Narita -- will begin serving more foreign routes this year with a fourth runway.

Qantas Airways' budget Jetstar airline already flies between Japan and Australia.

The carrier "came to the conclusion that a low cost carrier would be the right approach to compete effectively in this market," Ito said.

ANA is also looking to capitalise on the woes of its rival, Japan Airlines, which has recently shed routes as part of a painful state-led restructuring programme.

JAL said last week it was also looking into the possibility of launching a low-cost carrier.

Another catalyst for ANA is the boom in travel between China and Japan.

The Japan Tourism Agency aims to almost quadruple the number of Chinese tourists to 3.9 million in 2013 from 1.01 million last year.

"Regardless of the intense competition in the air transportation industry, we anticipate an increase in passenger traffic demand in East Asia," said Ito.

He said ANA had begun looking into the possibility of launching a low-cost carrier in 2008, before the eruption of the global financial crisis slashed air travel demand and hammered the industry.

The new company will be 66.7 percent owned by Japanese investors, with ANA holding a 39 percent stake.

First Eastern will hold the remaining 33.3 percent stake, the maximum foreign ownership currently allowed in Japan.

ANA's move comes as struggling rival JAL recently announced details of a rehabilitation plan that will see thousands of job cuts as well as route closures and a debt waiver.

In January the flagship carrier went under, owing 26 billion dollars in one of Japan's biggest-ever corporate failures, but it has continued flying while undergoing a painful state-led restructuring process.

All Nippon Airways to launch budget airline
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Source: AFP

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