Japan's All Nippon Airways and Malaysia's AirAsia said on Thursday they will launch a new low-cost airline in Japan to further tap Asia's burgeoning budget-travel market.
Strong economic growth, a rising middle class and the lack of reliable land and sea transport infrastructure have been fuelling the growth of budget airlines in Asia, which recently overtook North America as the world's biggest passenger air travel market.
"We are seeing a gradual rise in passenger numbers travelling on LCCs (low-cost carriers) in Japan. I think this trend will continue, it's a growing opportunity to tap new demand," said Kotaro Toriumi, an aviation sector analyst at Josai International University in Japan.
The new carrier, AirAsia Japan, will be based at Narita airport near Tokyo and capitalised at 5 billion yen ($63.4 million).
ANA, Japan's biggest airline in terms of passenger traffic, will hold 67 percent and AirAsia will hold the remaining 33 percent.
ANA's President Shinichiro Ito said at a briefing in Tokyo that the new airline, which plans to start domestic and international flights in August 2012, will make a profit in its first year of operations.
"The presence of AirAsia Japan is to serve the highly lucrative travel market in Japan. Air travel is deeply entrenched in the social and business life of the Japanese even under a high cost environment," AirAsia said in a statement.
AirAsia in June sealed a record-breaking $18 billion order for 200 aircraft from Europe's Airbus Industries .
Japan has long been considered a difficult market for budget carriers because high labour costs and landing fees, coupled with limited availability of airport slots kept new entrants out.
Better access in recent years, however, has attracted cheap foreign carriers, forcing ANA to expand into the low-cost market to keep pace.
The pact with AirAsia represents ANA's second recent foray in bargain air travel. Earlier this year, it set up Japan's first low-cost carrier, Peach Aviation, with Hong Kong investor First Eastern Investment Group.
Peach plans to start flights in March 2012 from Kansai International Airport in western Japan to destinations within three to four hours' flying time.
Domestic rival Japan Airlines has signed a 10-20 billion yen joint venture agreement with Australia's Jetstar, a unit of Qantas Airways , to create a new discount airline, the Nikkei business daily reported earlier.
Other airlines in Asia better known for high levels of service rather than cheap tickets are also looking at the low end of the market.
Singapore Airlines , the world's second-largest by market value, is planning to set up a long-haul budget carrier by the middle of next year.
AirAsia has drawn up plans to buy an extra 100 Airbus A320neo jets, potentially taking its record-breaking order to 300, a source with direct knowledge of ongoing discussions had told Reuters.
ANA shares advanced 0.4 percent to close at 271 yen, while the broader Nikkei 225 Average ended flat. ($1 = 78.865 Japanese Yen) (Reporting by Mariko Katsumura in Tokyo and Niluksi Koswanage in Kuala Lumpur; Editing by Edmund Klamann and Vinu Pilakkott)
UPDATE 3-ANA, AirAsia to set up low-cost carrier in Japan | Reuters
