• Kyodo

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Cash-strapped Air Do and Australian aircraft leasing firm Ansett Worldwide signed a deal Tuesday that will cut leasing fees for two aircraft by 30 percent.

The discount will reduce costs for the airline, formally known as Hokkaido International Airlines, by more than 1 billion yen in the 2002 business year.

Attention will now shift to whether Air Do will succeed in concluding a tieup agreement a with major airline to secure future profitability.

Air Do has been in talks with Japan Airlines on a possible tieup as JAL has been providing maintenance services to its aircraft since 1998, when it launched its one-way Tokyo-Sapporo service for just 16,000 yen — 36 percent lower than other airline’s regular prices at the time.

But since late April, Air Do has also been sounding out All Nippon Airways on possible cooperation, in view of ANA’s efforts to fend off competition from the recently approved JAL-Japan Air System alliance, which is set to get off the ground in October.

Air Do will decide on an alliance strategy after examining the terms each camp offers, officials said.

Meanwhile, Air Do still cannot pay 1.05 billion yen in airport usage charges that have been in arrears since August. The Hokkaido government, Air Do’s largest creditor, has suggested that Air Do conclude a code-sharing arrangement with a major airline to stabilize its revenue.

Other local government officials are calling for the airline to accept capital from another airline, but Air Do does not want to do so since a capital tieup could force it to raise fares; low prices are Air Do’s strongest selling point.

Air Do is contemplating asking a reluctant Hokkaido government to provide additional credit after it secures the possibility of reaching some sort of deal with another airline.

Air Do’s business has been flagging since 2000. its passenger numbers plunged following price cuts by major airlines on the same Tokyo-Sapporo route, forcing the airline to increase fares in 2000.

Air Do has already received a total of 4.7 billion yen from Hokkaido municipalities and the local business community since its financial trouble surfaced in late 2000.

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