All Nippon Airways Co. said Thursday it has teamed with a Hong Kong investment group to launch a budget airline, aiming to tap the growing but competitive Asian market.
The airline, which will fly both international and domestic routes, is expected to start operations in the second half of fiscal 2011, ANA officials said.
Domestic investors will own a 66.7 percent stake in the low-cost carrier, with ANA as the top shareholder, the officials said.
Hong Kong-based First Eastern Investment Group will hold the remaining 33.3 percent. First Eastern invests in infrastructure, real estate and other projects, mainly in China.
The still-unnamed carrier will operate separately from the ANA brand, the officials said. Specific routes have also yet to be decided on.
“The purpose of this business is to create a new airline network in the East Asian region including Japan by entering segments that the ANA brand could not cover,” said Shinichi Inoue, who heads the airline’s policy team for Asia.
“To be specific, we will build an overwhelmingly low-cost operation and offer airfares that will defy the status quo” to cultivate new demand in the growing market, he added.
The discount airline is expected to offer airfares that are 50 to 70 percent of the regular fares of the domestic carriers, including ANA and Japan Airlines.
The budget carrier will be based at Kansai International Airport in Osaka Prefecture.
Inoue said the new airline will follow the approach taken by other budget carriers to cut costs, such as using only one type of aircraft and asking employees to handle a range of tasks to improve productivity.
ANA’s move comes on the heels of steps taken by Asian rivals to open Japan routes with cut-rate fares.
Spring Airlines, a Shanghai-based budget carrier that began flying out of Ibaraki Airport in July recently surprised the public when it announced it was offering ¥4,000 one-way tickets between Ibaraki and Shanghai.
There are already five budget airlines operating flights to other parts of Asia out of Kansai airport.
In addition, Japanese budget carrier Skymark Airlines Inc., which mostly focuses on domestic routes, has been expanding its network in recent years.
But experts warn that ANA’s attempt to compete in the budget market comes with risks because the cost structure of the large domestic airlines is so different from those of the carriers in elsewhere in Asia.
For instance, other Asian carriers are not burdened by the high aviation-related taxes and airport fees in Japan.