Japan's first budget airline targets China

PUBLISHED : Tuesday, 08 February, 2011, 12:00am
UPDATED : Tuesday, 08 February, 2011, 12:00am

Japan's first budget airline, being formed by Hong Kong's First Eastern Investment Group and All Nippon Airways, will fly routes to China next year, cashing in on a rapidly growing demand for travel between the two countries.

The low-cost carrier, which is yet to be named, will launch domestic services from Kansai Airport in November, followed by regional destinations next year.

'The mainland market is a top priority because Japan is a compelling destination for the mainland people,' said Victor Chu, the chairman of First Eastern, which has invested US$7 billion in 35 mainland cities over the past two decades.

The number of Chinese travellers to Japan grew 50 per cent last year and was expected to increase further because of the recent relaxation of visa requirements, Chu said.

He estimated the number of Chinese visitors to Japan would reach four million next year from 1.35 million last year.

Chu said the joint venture had adopted a business model that would differentiate the airline from Hong Kong Oasis Airlines, a budget carrier that went bankrupt in 2008 amid staggering oil prices.

He said the airline would rely on low fares, low costs and short hauls. Air fares will be 50 per cent lower than those charged by carriers on Japanese domestic routes.

Fares to destinations in China will be competitive with Chinese carriers since they will only fly to airports that offer lower landing fees and other charges.

'Low-cost carriers will emerge as mainstream air traffic carriers in Asia,' Chu said. 'The major mainland airports should encourage budget carriers or they will lose out to the neighbouring airports.'

Chu said he would like the airline to fly to destinations in northern China, such as Dalian, Tianjin and Beijing, to eastern China, including Shanghai and Hangzhou, and to southern China, including Shenzhen, Guangzhou and Macau.

The budget airline will have a cost advantage over rival Japan Airlines by getting rid of the tight regulations on the number of cabin crew, which are strictly applied to the two existing Japanese airlines - ANA and JAL.

With longer and more flexible flying hours allowed for pilots and flight attendants, the company could cut its operating costs, Chu said. Moreover, Kansai has offered lower landing fees and airport charges in the hope that the budget carrier can bring in more Chinese visitors and help revitalise the local economy.

The airline, which will apply for an air operator's certificate from Japanese regulators, has committed to lease 10 new narrow-body aircraft, with the first to be delivered in September. Chu said they would acquire 10 advanced single-aisle aircraft, either the Boeing 737-900 or the Airbus A320 NEO (new engine offering).

First Eastern agreed to take a 33 per cent stake in the budget carrier while ANA will hold 39 per cent. A Japanese investor, who will be named next month, will own the rest.

Price advantage

Compared with those charged by Japanese carriers, the budget airline will offer air fares that are lower by: 50%