Low-cost carriers grow in Asia
All Nippon Airways is on the lookout for partners in a bid to set up a low-cost carrier (LCC), the Nikkei reported Monday. It will offer flights at half the going-rate on major international routes within six hours of Japan.
ANA’s announcement comes as part of a growing trend in the region; a surge in low-cost carriers. Reuters reports the move could help ANA compete with Chinese and Southeast Asian discount airlines tapping into Japan’s cheaper airports.
But ANA are not the only ones to enter the growing LCC market; announced on the same day, Thai Airways and Singapore’s Tiger Airways will collaborate to launch LCC Thai Tiger.
The jump in LCCs in the region reflects the strong economic growth and increase in the number of middle-income families from China, India, as well as Vietnam and Indonesia. The Airline Transportation Association (IATA) estimates that passenger growth in the Asia-Pacific will increase by 15.5% this year, double that of Europe.
ANA will finance its new operation through investment funds and partnerships with overseas airlines, while retaining a 30-50% stake itself. The new airline will be based in Kansai Airport, though given the expensive landing fees, ANA is seeking to enter into negotiations with the government for price cuts.
For aircraft manufacturers, the fast-growing LCC market could lead in a further increase in orders. 62% of LCCs in Asia have purchased Airbus aircraft so far, says Glen Fukushima, President of Airbus Japan, in Eurobiz’s July issue. While Boeing has traditionally dominated the Japan market, ANA’s announcement could present a new opportunity for Airbus to broaden its presence in the Japanese market.
“Something else that might enhance our opportunities to sell in Japan would be if there were fewer regulations hindering the development of low-cost carriers,” says Fukushima. Operating costs and requirements in Japan are among the highest in the world.