JAL to set up long-haul budget carrier

Newly hired employees of Japan Airlines at the group's initiation ceremony in a hangar of Haneda Airport in Tokyo last month. The group is eyeing a larger slice of the budget air travel market, which has been slow to take off in Japan relative to oth
Newly hired employees of Japan Airlines at the group's initiation ceremony in a hangar of Haneda Airport in Tokyo last month. The group is eyeing a larger slice of the budget air travel market, which has been slow to take off in Japan relative to other parts of Asia.PHOTO: REUTERS

It will start operating in summer of 2020, and offer flights to Asia, Europe and the Americas

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

Japan's second-largest carrier is deepening its bet in the market for frills-free air travel by setting up a carrier for medium-to long-haul international flights.

The yet-to-be named carrier will start flying in the summer of 2020 with two Boeing 787-8 aircraft.

The airlines - already a shareholder in low-fare carrier Jetstar Japan - 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, Jetstar Japan and Peach Aviation 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 South-east 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 (S$121.7 million) to 20 billion yen in the business, with the aim of reaching profitability within three years from the launch, the company said.

ANA 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 that 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.

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

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

BLOOMBERG, REUTERS

A version of this article appeared in the print edition of The Straits Times on May 15, 2018, with the headline 'JAL to set up long-haul budget carrier'. Print Edition | Subscribe