Japan Airlines to set up low-cost carrier, targeting Asian demand

TOKYO (Reuters) - Japan Airlines Co Ltd (JAL) 9201.T is launching a low-cost carrier offering medium to long-haul flights, aiming to tap growing Asian demand for budget air travel.

Slideshow ( 2 images )

The new airline will be based at Narita International Airport and will offer flights to Asia, Europe and the Americas, JAL said in a statement on Monday.

The as-yet unnamed airline plans to start flying in the summer of 2020 with two wide-body Boeing 787-8 aircraft.

JAL will invest 10 billion yen to 20 billion yen ($91.44 million to $182.88 million) in the business, with the aim of reaching profitability within three years from the launch, the company said.

Budget flights have been slow to take off in Japan, which is dominated by full-service carriers JAL and ANA Holdings Inc 9202.T and has a sophisticated high-speed rail network, but with growing numbers of Asia travelers taking to the air the two Japanese airlines are looking to expand their low-cost offerings.

“Full-service airlines typically have high costs, but in Japan this is especially so,” said Will Horton, senior analyst at research consultancy CAPA Center for Aviation. “Japan needs new platforms to capture foreign visitors. They are not like the Japanese who are sticky in wanting to fly a costly Japanese full-service airline.”

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 Ltd's QAN.AX 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.

Jetstar Japan said in a statement that the new airline would be complementary because it would bring more international visitors to Japan who would then travel on its domestic network.

“We are in discussions with JAL about opportunities for Jetstar Japan and the new low-cost carrier to work closely together,” Jetstar Japan said.

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.

($1 = 109.3600 yen)

Reporting by Sam Nussey in Tokyo; Additional reporting by Maki Shiraki in Tokyo and Jamie Freed in Singapore; Editing by Muralikumar Anantharaman