Peach Aviation prepares to take off

Undeterred by the economic and business disruption caused by Japan's deadly earthquake and tsunami, Japan's first budget airline Peach Aviation still plans to launch operations in Osaka early next year.

The airline, formed by Hong Kong's First Eastern Investment Group, All Nippon Airways and the government-owned Innovative Network Corp of Japan, begins operations in March next year.

While First Eastern's chairman Victor Chu said it was too early to gauge the March 11 earthquake's impact on business, he said the airline's home-base city of Osaka had benefited rather than been disadvantaged so far.

'In the long run, Tokyo could still be affected by power shortages, but so far Osaka remains more or less normal in its everyday activities. Some big corporations based in Tokyo have even considered forming a second headquarters in Osaka.'

However, Chu said the nuclear crisis at Fukushima would still affect foreign investment in Japan. While Peach was keeping to its original development plan, investors and management were already reviewing the business outlook and strategies.

'We may have to diversify our clients from leisure travellers and tour groups to other areas,' Chu said. 'Inevitably the disaster will increase Japan's reliance on the mainland economy, but whether the incident will increase the rate of Japanese corporates outsourcing their works to China, we will have to wait and see.'

Before the crisis, he expected the number of Chinese travellers to Japan would triple from 1.35 million last year to about four million next year.

The low-cost carrier will fly to mainland destinations including Dalian, Beijing and Shanghai by 2013. However, when it starts next March, it will only service Sapporo and Fukuoka from its base in Kansai International Airport, with a third route to Seoul due to open two months later.

The airline was much welcomed by the Japanese community, cheered by its promise to generate 1,000 local jobs within the next five years. Peach is expected to have 200 employees next year - with the first batch of 72 cabin crew to be recruited next month.

Despite high oil prices, Peach's ticket fares would be half of the current prices offered by ANA and Japan Airlines.

Chu said the cheap fares were possible because Kansai offered big discounts in landing costs and provided a terminal five minutes' bus ride from the main terminal, boosting flight turnaround efficiency.

Peach will not fly to Hong Kong, however, because Chek Lap Kok airport offers no discounts or a low-cost carrier terminal to budget carriers. Peach planned to eventually add six planes to its fleet of 10 Airbus A320 NEOs (new engine offering), with the first expected in November. Chu expected an initial investment of US$200 million will sustain operations for at least three years.

$200m

The initial investment, in US dollars, in Peach Aviation from First Eastern

-The airline's name echoes fruit's Asia origins