AirAsia and All Nippon Airways (ANA) are reportedly likely to sign an agreement to launch an LCC in Japan, with the two parties reportedly in negotiations regarding the proposed Tokyo Narita-based LCC (Star/Reuters/Asahi Shimbun/The Yomiuri Shimbun/AAP/AFP, 15/16/17-Jul-2011). An announcement is reportedly expected this week. According to the reports, AirAsia will drive operations and hold an equity share in the partnership called AirAsia Japan. The envisioned LCC would reportedly offer domestic services from FY2012 or later, after the number of arrival and departure slots at Tokyo Narita increases. The new airline would reportedly launch international services to destinations in East Asia, such as China and South Korea, at a later date. ANA has established an LCC, Peach Aviation, with a Hong Kong investment company and other investors. Peach Aviation's operational base is Kansai International Airport. Japan Airlines also reportedly plans to soon establish an LCC JV with Jetstar Airways. The speculated ANA JV would be AirAsia's first outside Southeast Asia.
AirAsia may set up AirAsia Japan in JV with ANA: reports
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Singapore Airlines promotes ASEAN-EU/Japan/Korea open skies to gain more USA fifth freedom flights
Linking Asia with North America has been the market cornerstone for Korean Air and Cathay Pacific while producing a growth market for relatively new entrants like ANA and EVA Air. Yet, while northeast Asian airlines have the geography for profitable nonstop North America flying, southeast Asian airlines are challenged in serving the route.
Singapore Airlines feels the need for a significant North American presence to diversify its network and offset pressure from Gulf airlines, which have profoundly weakened SIA in its core Asia-Europe and Australia-Europe markets. Although Singapore Airlines plans to resume nonstop North American flights, these are token services for strategic purposes.
The primary objective has to be securing more fifth freedom rights for one-stop service. Singapore is encouraging the ASEAN bloc to secure open skies with Japan, Korea and the EU since open skies will entail unlimited fifth freedom rights. Korea is unlikely to agree, with Japan hesitant. Fifth freedom liberalisation is a contentious item in the otherwise benign EU-ASEAN negotiations. Countries worry that granting unlimited fifths opens Pandora's box to growth – not just from SIA, but any number of airlines that are quiescent today but could aspire to be powerhouses in the future.
China-Japan aviation: LCCs Peach, Jetstar Japan gain traffic rights, raising overcapacity concerns
Jetstar Japan and Peach Aviation have received air traffic rights for China which, if utilised, would grow the Japanese LCC footprint in China – Japan's largest visitor source market. Spring Japan became the first Japanese LCC to serve China in Feb-2016. The absence of Japanese LCCs in China may seem surprising, but there are regulatory hurdles, market access questions and conservatism at Japanese LCCs. AirAsia Japan, launching in 2017, will likely leverage the group's China experience; it is the largest non-greater China airline group serving China.
The prospect of further growth comes as incumbents cite overcapacity. What was once a profitable market now only produces returns in the peaks. All Nippon Airways, the largest airline between Japan and China, reported lower revenue on the back of "a deterioration in the supply-demand environment". Spring China has told Bloomberg that some competitors "aren't well-prepared", and will be "phased out". Overall Japanese LCC routes and capacity may be small but will be watched by Chinese airlines, ever mindful of the need to find new business models.