Sun Rises on Jetstar's Low-Cost Japanese Airline, as JAL and Mitsubishi Taxi into Position
By Steve Creedy, The Australian | Aug. 15, 2011
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Jetstar and Japan Airlines are expected to announce within days a deal with Mitsubishi to launch their long-awaited Japanese low-cost carrier by the end of the year.
The new carrier will use the Jetstar brand as well as its operational, reservation and sales systems to begin domestic and international flights by December, according to the Nikkei business daily.
A separate report from Japan said Mitsubishi would be looking for other investors in the start-up to reduce its 33.4 percent stake, while Jetstar and JAL retained their holdings.
Jetstar first offered to help JAL set up a low-cost carrier last year but the Japanese carrier has been slow to take up the offer. The delay led to Malaysia's AirAsia striking a deal with rival All Nippon Airways to set up a competing operation, AirAsia-ANA. ANA also plans to establish a second low-cost carrier called Peach.
The new carrier would be based at Tokyo Narita International Airport, with domestic destinations including Sapporo, Fukuoka and Naha, according to the Sydney-based Centre for Asia Pacific Aviation's reading of the Japanese reports. CAPA said international routes were likely to include South Korea and China.
The deal comes as Jetstar is accelerating its push into north Asia, and particularly China, as part of its wider pan-Asian strategy.
Jetstar is adding routes from Singapore to China and there have been reports from Hong Kong that it is seeking partners with a view to setting up a low-cost carrier there.
The Qantas Group already has strong links to JAL. Both belong to the Oneworld alliance, they codeshare on flights to Australia and JAL helps market the Australian carrier in Japan.
The low penetration of low-cost carriers in the Japanese market, estimated at about 2.7 percent of international flights and 9.1 percent of domestic flights, makes it ripe for the kind of growth seen in other parts of the world.
CAPA said the combination of the Japanese flag carrier and Jetstar's versatile model offered advantages for both sides.
"Working jointly to support each other would alone deliver strong market presence," it said.
"And a joint venture that would offer a lower-risk option for both sides would seem to be a useful solution, and would have considerable upside."
Jetstar, which also has joint ventures in Singapore and Vietnam, is in a race with competitors such as AirAsia and Tiger Airways to set up networks across Asia.
"The JAL joint venture would add another piece to the complex jigsaw that is transforming the Asian airline market," CAPA said. "The potential market growth as these successive ventures are introduced can be measured in terms of hundreds of millions of new passengers."
Jetstar has long recognised the potential for Asian expansion, and the airline now conducts two-thirds of its flying in the region.
The expansion has angered Qantas unions in Australia, which are worried about job security and concerned that Jetstar's growth has been at the cost of the ailing Qantas international operations.
Qantas is due to announce a restructure of those operations next week.
But other airlines have similar ideas, as the Association of Southeast Asian Nations grouping moves towards an open skies policy skies in 2015.
Jetstar faces stiff competition in potential markets from AirAsia, which recently announced an equity swap with Malaysia Airlines that will lead top the former arch-rivals joining forces.
Yet the prizes are huge for those airlines that can gain a first-mover advantage in what CAPA characterises as a complex jigsaw puzzle to transform the booming Asian airline market.