INTERVIEW - Japanese discount airline Star Flyer to begin flying next March

"Based on a government survey, there is a basic demand for 2 mln passengers per year for flights between Kitakyushu and Tokyo, so we are very confident," said the company's senior executive director, Yasushi Muto, in an interview with XFN-Asia.

The fare will be 20-30 pct less than that charged on the route by Japan Airlines or All Nippon Airlines, which dominate the domestic air travel market.

Star Flyer will be based in Kitakyushu, 1,000 kilometers southwest of Tokyo and the second-largest city on Kyushu island. To begin with, the carrier plans to fly from its home base at a new international airport to open here next March, using three 144-seat Airbus aircraft.

The airline aims to attract business travellers as well as tourists.

Muto said Star Flyer expects to generate an operating profit of about 400 mln yen for the first year to March 2007.

The airline expects to fill 60 pct of available seats in its first year and carry 750,000 passengers, with ticket sales forecast to double within four years.

From 2006 to 2010, the airline plans to add one or two aircraft per year, and one domestic route.
By 2008 the airline also hopes to begin flying abroad, by adding one foreign destination, possibly either Shanghai, Beijing or Seoul.

But Muto said it would be difficult to expand domestic routes rapidly because of high costs.

"In Japan, the airline industry has been monopolized by existing airlines and (operating) costs will continue to remain high. This is the reason that we cannot stimulate demand and that we find it challenging to expand by linking purely domestic destinations," Muto said.

Muto emphasized: "We aim to operate only on the profitable routes, and thus are not going to discount too much."

Since its founding in 2002, Star Flyer has raised about 1.8 bln yen in seed capital from companies in the Kitakyushu area. Muto said it will have spent 2.2-2.3 bln yen by the time it starts flying.