ANA to form LCC with Hong Kong-based investment firm

ANA 777-300ER. Photo: By Rob Finlayson.

All Nippon Airways and Hong Kong-based First Eastern Investment Group signed an MOA to establish what the two are calling “Japan’s first low-cost airline” to operate both international and domestic routes from Osaka Kansai International.

ANA said Osaka was chosen as a base because it is a 24-hr. airport and has excess capacity. The as-yet-unnamed airline, which will have its own brand and management independent from ANA, is to be established before year end. Japanese investors will have a 66.7% stake, of which ANA will hold 39%. First Eastern will have the remaining 33.3%, which is the maximum level of foreign ownership allowed under Japanese law. Flights are expected to commence in the second half of 2011.

ANA President and CEO Shinichiro Ito said ANA has been working to substantially improve its network between Japan and Asia. “Regardless of the intense competition in the air transportation industry, we anticipate an increase in passenger traffic demand in East Asia, and came to the conclusion that a low-cost carrier would be the right approach to compete effectively in this market,” he said.

According to ANA, the airline will follow the standard LCC template with a point-to-point network focus, a single aircraft type, high-density seating, "maximum utilization of LCC infrastructure," and "high employee productivity." Service levels will be simple, with additional items available for sale. Information about fleet size and aircraft type was not provided. Startup capital is put at ¥10 billion-¥15 billion ($119 million-$179 million) and the airline expects to make a profit in its third year.

Although ANA claims to be the first to launch an LCC in Japan, others have come before it, the most well known being Skymark and Air Do, both of which are operating. The Centre for Asia Pacific Aviation also identified StarFlyer, AirNext and Ibex as efforts to launch low-cost airlines in Japan.