Asia's crowded budget airline market gets one more entrant - JAL

Japan Airlines will set up a carrier in July for medium-to-long-haul international flights.
Japan Airlines will set up a carrier in July for medium-to-long-haul international flights.PHOTO: REUTERS

TOKYO (BLOOMBERG, REUTERS) - Asia, where more than a dozen new low-fare carriers started in the past two decades, got a new entrant in Japan Airlines Co (JAL).

Japan's second-largest carrier is deepening its bet in the market for frills-free air travel by setting up a carrier in July for medium-to-long-haul international flights. The yet-to-be named carrier will start operating two Boeing 787-8 aircraft, JAL said in a statement on its website on Monday.

JAL - already a shareholder in low-fare carrier Jetstar Japan Co - is targeting a larger slice of the budget-air travel market, which has been slow to take off in Japan relative to other parts of Asia. As visitors to Japan surged, low-fare carriers such as AirAsia Bhd, Jetstar Japan and Peach Aviation Ltd began offering more services to compete against full-service operators JAL and ANA Holdings as well as Shinkansen bullet trains.

Economic growth has spawned a new class of first-time fliers from Vietnam to the Philippines. Low-fare airlines have taken up more than half of the market share in Southeast Asia, putting pressure on profitability for full-service carriers, the International Air Transport Association has said.

The new airline will be based at Narita International Airport and will offer flights to Asia, Europe and the Americas.

JAL will invest 10 billion yen to 20 billion yen (S$121.7 million to S$243.5 million) in the business, with the aim of reaching profitability within three years from the launch, the company said.

ANA has said it will launch medium-length international flights, potentially flying as far afield as India, as it integrates its low-cost carrier units under the Peach brand name.

JAL, by contrast, holds only a minority stake in Jetstar Japan, a joint venture with Qantas Airways' low-cost brand Jetstar which flies narrow-body aircraft. JAL said it would continue to invest in Jetstar Japan.

The new long-distance carrier is a totally different proposition from Jetstar Japan, which "is purely short-distance", JAL's new president Yuji Akasaka told reporters. Jetstar Japan has given its approval for the move, the president said.

A Melbourne-based spokesman for Jetstar was not immediately available for comment.

JAL said it plans to have outside investors in its new low-cost carrier which will be a consolidated subsidiary.

Other players are also looking to take advantage of Japan's growing status as a tourist destination, with AirAsia Japan having relaunched and airlines such as Hong Kong Express and Singapore's Scoot adding flights to Japan.