A new low-cost airline hopes to capitalize on recent changes in the government’s aviation policies and give Okinawans a cheaper option of getting to and from the mainland.
Lequios Airlines Co., established primarily by local firms in 1997, is currently capitalized at 600 million yen but hopes to boost its capital to 3.6 billion yen by March, according to Lequios President Kimio Chinen.
Lequios, whose name derives from an old Portuguese term meaning “people of Okinawa,” is currently negotiating with the Land, Infrastructure and Transport Ministry to obtain permission to launch operations.
If all goes well, Chinen said he hopes to win the ministry’s approval in the fall.
The company plans to launch its first flight, linking Okinawa’s Naha airport and Tokyo’s Haneda airport, in March, 2003. To this end, it has already concluded a seven-year lease on a Boeing 767-300ER with GE Capital Aviation Services of the United States.
Chinen said Lequios initially plans to operate two flights a day but hopes to double the frequency — and lease another plane — by next summer.
But the president doesn’t see Haneda as the sky’s limit.
“Okinawa is located at the center of Asia, and only about 30 minutes by air to Taiwan,” he said, voicing readiness to expand the firm’s operations overseas.
He’ll have an advantage if he does: Naha has one of the few 24-hour airports in Japan, which could allow the new airline to eventually operate international cargo flights capable of completing round trips in one night, Chinen said.
Countries and regions such as Hong Kong, the Philippines, Guam, Cambodia and Vietnam are theoretically no more than 3 1/2 hours away, he said.
Although Air Do and Skymark Airlines Co., two small carriers that entered the domestic market in 1998, have suffered due to price competition from major airlines, Chinen said that his airline will be better positioned to fend off the majors.
For one, he said, the barriers facing those wishing to exploit the Haneda-Naha route are less severe for new carriers, following the implementation of special economic promotion measures for Okinawa.
In 1997, the government reduced landing fees at Naha airport to one-sixth of the standard fees charged by other major domestic airports. It also slashed fuel tax by 50 percent.
“The measures will save us more than 2 billion yen a year,” Chinen said. “And the (annual) sales of our company are projected at around 9.5 billion yen.”
Furthermore, with Japan Airline Co. and Japan Air System Co. scheduled to integrate in the fall, the transport ministry and the JAL-JAS alliance have agreed to provide smaller carriers with further assistance and thus avoid the application of antimonopoly legislation by the Fair Trade Commission.
Specifically, under consultation with the commission, JAL and JAS have pledged to give away some of their check-in counters and boarding bridges at Haneda airport, along with slots for nine flights.
“The current policies have changed (in a way to favor new carriers),” said Chinen. “That’s a big difference.”
In addition, Lequios plans to keep salaries relatively low by, among other measures, hiring some foreigners as pilots.
While some maintenance work will be entrusted to other airlines in Japan, heavy maintenance work will be taken care of by Evergreen Aviation Technologies Corp. of Taiwan. This will save 1 billion yen in annual costs, Chinen said.
The Sept. 11 terrorist attacks have also given Lequios an opportunity. With airplane demand having dropped across the globe, leasing charges for the firm’s aircraft have declined by about one-third, Chinen said.
Keeping operational costs down is a key in Lequios’ strategy to take on the established airlines, but Chinen said additional strategies will be vital to survive in the industry.
To grab passengers from the old boys, the airline is expected to offer cut-rate fares. In a business simulation plan released in December, Lequios set its Haneda-Naha fare at 24,000 yen. That compares to the 35,000 yen average charged by the major airlines on the same route.
The airline said, however, that it has yet to finalize the fare as it continues to review its cost structure.
As with Air Do and Skymark, major airlines are expected to wage a price war against Lequios once the fledgling airline launches its operations.
The fare war has been a main factor in plunging Air Do into a financial crisis.
Lequios, however, doesn’t appear to be counting on low fares alone to corral customers.
“We can’t beat major airlines merely with prices, given the huge difference in our (financial) strength,” Chinen said, adding that Lequios plans to offer its passengers more leg-room by reducing the number of seats on its aircraft.
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