Fresh from establishing its Peach Aviation joint venture to introduce low-cost flights from Osaska Kansai International, Japanese carrier All Nippon Airways (ANA) has now entered into a partnership with the region’s largest budget operator, AirAsia, to establish a joint venture at Tokyo Narita. The start-up will launch operations from Terminal 2 at Narita in August 2012 and will serve a mix of domestic and international markets.

The new company, AirAsia Japan, will follow the traditional ‘AirAsia’ business model that has already been successful in the Malaysia, Indonesia and Thailand and which will soon expand into the Philippines and Vietnam. Alongside domestic connections the venture will offer non-stop flights into North East Asia and in particular South Korea, Taiwan and China. It aims to bring the Low-Cost Carrier (LCC) model successful throughout the region into Japan and in the process making it more affordable for the average Japanese national to travel both domestically and regionally. “The low-cost airline will also help stimulate greater access to Japan through its affordable fares which in turn will help the economic growth of the country as evidenced in other regions where AirAsia is currently serving,” according to the budget carrier.

Under the terms of the agreement and meeting with Japanese aviation laws on airline ownership, ANA will hold the majority shareholding in the start-up with a 51 per cent stake. AirAsia will hold a 33 per cent voting share and 16 per cent non-voting share through its wholly-owned subsidiary AA International. The airline will operate completely independently from ANA’s other budget venture Peach Aviation and although an agreement has been reached that ANA and AirAsia will not directly compete with the new start-up, there will be no restrictions between the budget operators, albeit Peach Aviation will not be permitted to open a base at Tokyo Narita.

ANA confirms that aside from its discussions to establish Peach Aviation over the past year, it had been seeking opportunities to launch a new low-cost business at Narita and, after analysis, concluded that partnering with an existing carrier was the most efficient and strategically advantageous option.

“By combining AirAsia’s business model and brand with ANA’s depth of knowledge of the Japanese market, we aim to bring new value to our customers, offer diverse and enjoyable travel experiences, and generate new demand,” said Shinichiro Ito, President and Chief Executive Officer, ANA. “We believe that AirAsia Japan will make air travel more accessible and provide a convenient and efficient travel option for a wide range of people.”

Both ANA and AirAsia firmly believe that AirAsia Japan will be a success, claiming “the Japanese market possesses the necessary ingredients for growth such as the population’s strong propensity to travel, its high per capita income coupled with deep and significant internet penetration,” in a formal statement from AirAsia to the Malaysian Stock Exchange.

In Japan, the aviation market is undergoing rapid transformation with developments including the expansion of Open Skies agreements and increased domestic competition from road and rail-based travel. In addition, Narita International Airport in Tokyo has been seeking to increase capacity with the introduction of a new terminal and is expected to attract many low-cost carriers and foreign airlines. However, there is already strong competition in Japan that could put pressure on the start-up’s yields, although the AirAsia business model and its low-cost structure has shown it can sustain this much better than its rivals. Another potential issue for the carrier is the danger of natural disasters

The AirAsia brand is already known in Japan thanks to the flights of its long-haul sister carrier AirAsia X which started serving Tokyo Haneda from Kuala Lumpur earlier this year. The airline’s Chief Executive Officer, Azran Osman Rani, has confirmed that despite the launch of AirAsia Japan, there are no immediate plans to focus on a single Tokyo airport despite the significant connection opportunities between the short- and long-haul ventures.