JAL, Qantas found low-cost Jetstar Japan

Japan Airlines Co and the low-cost unit of Qantas Airways Ltd will start Jetstar Japan, the country's third new budget carrier announced this year, as competition intensifies for low-fare travelers in Asia.

JAL, Qantas and Mitsubishi Corp, Japan's largest trading group, will commit a total of ¥12 billion ($156 million) in capital, according to an e-mail statement from the Tokyo-based airline. Each will own a third of the new company on a voting rights basis, it said. Jetstar Japan will start on domestic routes by the end of 2012 with a fleet of Airbus SAS A320 aircraft, targeting ¥100bn in annual sales within a few years, Bruce Buchanan, chief executive officer of Qantas's Jetstar unit, told reporters today in Tokyo. Rival All Nippon Airways Co is starting two low-cost airlines serving Japan, while budget carriers Spring Airlines and AirAsiaX have added flights to the country. "There may be some competition between operating JAL, a traditionally high-cost firm, and this low-cost joint venture," Minoru Matsuno, president of Value Search Asset Management Co, a Tokyo-based investment advisory firm, said in a telephone interview today. Skymark Airlines Inc and other low-cost carriers operating in Japan won't be affected much by the competition from Jetstar Japan because they have "good know-how and experience," he said. Jetstar Japan, which said it may offer fares 40 per cent below current rates, expects to use the low-cost model to increase the popularity of air travel and may add destinations in China, the Philippines and South Korea within a few years. The venture "will broaden the spectrum of travelers as it creates new demand in this market," JAL President Masaru Onishi said in the statement. Jetstar Airways Pty, the Qantas budget unit that operates domestic and overseas services, already flies between Australia and Japan. Jetstar Japan will fly from Tokyo's Narita airport and Osaka's Kansai International. ANA's low-cost venture, Peach Aviation Ltd, said it plans to start domestic flights from Osaka by March and add service to Seoul from May. Tokyo-based ANA will also start a budget carrier called AirAsia Japan with AirAsia Bhd, Asia's biggest discount carrier, with flights set to begin in August next year from a hub at Narita. It will operate domestic and international routes. "All Nippon Airways has a much stronger commitment to its low-cost carrier business," Ryota Himeno, an analyst at Mitsubishi UFJ Morgan Stanley said in a telephone interview after today's Jetstar Japan press conference. "At the moment we are not able to tell who leads the newly launched company among Japan Airlines, Qantas Group and Mitsubishi."

Shanghai-based Spring Airlines started flights to Ibaraki airport, an hour's drive to the north of Tokyo's Narita, last year, while AirAsia X started flights to Haneda airport in December. JAL, which slashed routes and staff under bankruptcy protection, is increasing code-shares and tie-ups with other airlines to boost its network.