Japanese carrier All Nippon Airways (ANA) plans to launch a new low-cost airline in Japan with the help of a major private equity firm based in Hong Kong.
ANA and First Eastern Investment Group have announced the new venture. The flights would begin late next year. The new carrier, which will be capitalised with $179 million initially, will be based at Kansai International Airport.
“Regardless of the intense competition in the air transportation industry, we anticipate an increase in passenger traffic demand in East Asia, and came to the conclusion that a low-cost carrier would be the right approach to compete effectively in this market,” Shinichiro Ito, the chief executive of ANA, said in a statement.
The LCC will operate both international and domestic short-haul routes out of Osaka Kansai International Airport and will operate independently from ANA.
The entities have announced the signing of a MoU to establish what they claim will be the “first Japanese low cost airline”. But according to the Centre for Asia Pacific Aviation, despite ANA’s claim, LCCs have been established in the Japanese domestic market since the mid/late-1990s (eg Skymark Airlines, Air Do), as well as new entrants last decade (StarFlyer, AirNext, Ibex, Fuji Dream and SkynetAsia. Overall, the market environment in Japan does not currently favour LCC operations, with LCCs often being described more as “low-fare carriers”, due to the high cost environment in that country, with these operators being constrained by a few key factors.
According to a report filed by ft.com, airlines in Japan pay a Y26,000 or $310 surcharge on every kilolitre of fuel they buy, about 25 times more than they do in the US, while landing charges at Kansai are 12 times as high as those at London’s Heathrow and double those at New York’s JFK, according to industry data. The high fees pushes the cost of a round-trip flight from Tokyo to Osaka – about an hour apart by air – to Y40,000 before early-booking discounts. Mr Chu said the new airline, which will pay lower wages than ANA, would aim to charge half what incumbent carriers do on the same routes.
As per the information available, the carrier stated it plans to “stimulate new demand through pricing that is competitive to other low-fare transportation providers such as bus and train operators”.
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