All Nippon Airways to Start Discount Carrier Amid Surging Travel in Asia - Bloomberg
All Nippon Airways Co., Asia’s largest listed carrier by sales, will team with a Hong Kong investor to set up a discount airline amid rising demand for budget travel.
The carrier will be based at Kansai International Airport in Osaka and will start flying in the second fiscal half of 2011, All Nippon, also known as ANA, said in a statement in Tokyo today. ANA will hold a 39 percent stake in the venture, while Hong Kong-based Victor Chu’s First Eastern Investment Group will own 33.3 percent, the maximum foreign ownership permitted in Japan.
The airline’s plan to join the low-fare fray comes after China’s Spring Airlines and Qantas Airways Ltd.’s budget unit Jetstar started discount flights to Japan. ANA’s biggest local rival Japan Airlines Corp. has also said it is considering setting up a low-cost carrier.
“ANA has to set up a low-cost carrier to keep up with overseas carriers,” said Mitsushige Akino, who oversees $450 million in assets in Tokyo at Ichiyoshi Investment Management Co. “The lessons they learn with a discount carrier could help them cut costs in their main flying unit.”
The new budget airline will consider buying five Boeing Co. 737 or similar aircraft to start domestic routes and then expand to China and other overseas destinations, Chu said today in a phone interview.
All Nippon rose 1 percent to 316 yen at the close of trade in Tokyo today. The announcement came after the market closed.
Profit Outlook
Japanese investors will own 66.7 percent of the discount carrier, including ANA’s stake, the airline said in the statement. Start-up capital for the venture will be between 10 billion yen and 15 billion yen ($179 million), Yuji Hirako, ANA vice president of corporate planning, told reporters in Tokyo.
“We hope to make a profit from the third, fourth or fifth year,” said Hirako. Setting up the discount carrier will help ANA to cut up to 70 percent of costs, President Shinichiro Ito told reporters.
At least 20 budget carriers have started in Asia-Pacific in the past decade as economic growth in the region, home to the world’s two most-populous countries, enables more people to fly. The potential for cheap flights in the region has also attracted investments from Virgin Group’s Richard Branson in a Malaysian no-frills carrier.
Tiger Airways Ltd., a budget carrier part-owned by Singapore Airlines Ltd., last month said it’s starting a new low-fare airline in Bangkok with Thai Airways International Pcl.
Japan Air
ANA set up an office in Hong Kong in 2008 to examine the possibility of starting up a low-cost carrier. It delayed a decision on a new carrier after a global recession led companies to slash travel and tourists cut back on overseas travel.
Japan Airlines, which is restructuring under bankruptcy protection, last month said it’s studying prospects for starting a low-cost carrier. The carrier has agreed on an 872 billion yen turnaround plan that waives 88 percent of unsecured liabilities, cut jobs and sells planes.
ANA predicts it will return to profit this fiscal year as the company reduces its workforce and adds flights. ANA forecasts net income of 5 billion yen in the year started April 1, compared with a loss of 57 billion yen last business year.
ANA’s partner First Eastern is a Hong Kong-based investment group, founded by Chu, with stakes in more than 100 projects in China, including infrastructure and real- estate development, according to the statement.
To contact the reporters on this story: Chris Cooper in Tokyo at ccooper1@bloomberg.net; Kiyotaka Matsuda in Tokyo at kmatsuda@bloomberg.net
The carrier will be based at Kansai International Airport in Osaka and will start flying in the second fiscal half of 2011, All Nippon, also known as ANA, said in a statement in Tokyo today. ANA will hold a 39 percent stake in the venture, while Hong Kong-based Victor Chu’s First Eastern Investment Group will own 33.3 percent, the maximum foreign ownership permitted in Japan.
The airline’s plan to join the low-fare fray comes after China’s Spring Airlines and Qantas Airways Ltd.’s budget unit Jetstar started discount flights to Japan. ANA’s biggest local rival Japan Airlines Corp. has also said it is considering setting up a low-cost carrier.
“ANA has to set up a low-cost carrier to keep up with overseas carriers,” said Mitsushige Akino, who oversees $450 million in assets in Tokyo at Ichiyoshi Investment Management Co. “The lessons they learn with a discount carrier could help them cut costs in their main flying unit.”
The new budget airline will consider buying five Boeing Co. 737 or similar aircraft to start domestic routes and then expand to China and other overseas destinations, Chu said today in a phone interview.
All Nippon rose 1 percent to 316 yen at the close of trade in Tokyo today. The announcement came after the market closed.
Profit Outlook
Japanese investors will own 66.7 percent of the discount carrier, including ANA’s stake, the airline said in the statement. Start-up capital for the venture will be between 10 billion yen and 15 billion yen ($179 million), Yuji Hirako, ANA vice president of corporate planning, told reporters in Tokyo.
“We hope to make a profit from the third, fourth or fifth year,” said Hirako. Setting up the discount carrier will help ANA to cut up to 70 percent of costs, President Shinichiro Ito told reporters.
At least 20 budget carriers have started in Asia-Pacific in the past decade as economic growth in the region, home to the world’s two most-populous countries, enables more people to fly. The potential for cheap flights in the region has also attracted investments from Virgin Group’s Richard Branson in a Malaysian no-frills carrier.
Tiger Airways Ltd., a budget carrier part-owned by Singapore Airlines Ltd., last month said it’s starting a new low-fare airline in Bangkok with Thai Airways International Pcl.
Japan Air
ANA set up an office in Hong Kong in 2008 to examine the possibility of starting up a low-cost carrier. It delayed a decision on a new carrier after a global recession led companies to slash travel and tourists cut back on overseas travel.
Japan Airlines, which is restructuring under bankruptcy protection, last month said it’s studying prospects for starting a low-cost carrier. The carrier has agreed on an 872 billion yen turnaround plan that waives 88 percent of unsecured liabilities, cut jobs and sells planes.
ANA predicts it will return to profit this fiscal year as the company reduces its workforce and adds flights. ANA forecasts net income of 5 billion yen in the year started April 1, compared with a loss of 57 billion yen last business year.
ANA’s partner First Eastern is a Hong Kong-based investment group, founded by Chu, with stakes in more than 100 projects in China, including infrastructure and real- estate development, according to the statement.
To contact the reporters on this story: Chris Cooper in Tokyo at ccooper1@bloomberg.net; Kiyotaka Matsuda in Tokyo at kmatsuda@bloomberg.net
