SYDNEY, Aug 16, 2011 (AFP) - Qantas Airways, Japan Airlines and Mitsubishi Corp. said Tuesday they will launch a new budget airline, Jetstar Japan, by the end of next year, as competition heats up in the low-cost Japanese market.
The airline will be one-third owned by each company and aims to offer fares that are 40 percent below existing domestic prices.
Jetstar Japan flights are set to commence from the end of 2012, by which time Japan Airlines' rival All Nippon Airways will have two ventures up and running -- Peach Aviation and AirAsia Japan with Malaysia's AirAsia.
Qantas chief executive Alan Joyce called it a "historic" step for Jetstar, which is the Australian airline's budget offshoot and also the Asia-Pacific's fastest growing carrier, carrying almost 20 million passengers a year.
"This is a major opportunity in a major market," he said, adding that Qantas had a proven ability to operate low-fare airlines.
"It is, we think, the first joint-venture partnership of its kind between an Australian company and two iconic Japanese brands."
Despite a surging yen and a recent post-earthquake slump in tourism to Japan, the domestic low-cost market is being eyed as a major growth opportunity.
Japan's high fuel taxes and landing fees have made it difficult for airlines to introduce low-cost level fares but this is changing, say analysts, amid more "Open Skies" deals with other nations and future increases of capacity.
Jetstar Japan will initially fly domestically from Tokyo's Narita airport and Osaka, with other destinations under consideration. It will begin operations with three new A320s, each capable of carrying 180 passengers.
Ultimately, it plans to offer short-haul international services to key Asian cities.
The plan is to expand to 24 aircraft within the first few years, using mostly new planes.
Total investment for the new carrier is 12 billion yen (US$1.6 billion).
At a press conference in Tokyo, Jetstar CEO Bruce Buchanan said the carrier would aim for sales of 100 billion yen in the first few years of business.
JAL president Masaru Onishi said the partnership would allow the Japanese airline to competitively serve a larger part of its domestic market, as well as stimulating an economy hit hard by natural disasters.
"It will encourage even more movement of people within the country and also increase the number of visitors from Asia to Japan," he said.
"We anticipate this to stimulate consumer spending and play a role in revitalising the Japanese economy."
Jetstar's Buchanan added that the new venture would also help keep fares low.
"As Jetstar expands into new markets across Asia, it gives us economies of scale to strengthen the low cost advantage right across our network, including within Australia and New Zealand."
As part of rebuilding its international operations, Qantas also plans to set up a new premium airline based in a yet-to-be decided Asian destination, to cash in on the growing wealth in the region.
The joint venture will not be branded under the Qantas name but will leverage the airline's know-how. Eleven A320 aircraft will initially be used, Joyce said.
"We have narrowed down our location options and an announcement will be made when we have completed negotiations," he said, adding that the future in Asia was not all about low-cost airlines.
"Within 20 years, 16 percent of the world's middle class will be in East Asia," he said.
"China may already have the world's fourth largest population of millionaires, and India the twelfth. There are many, many millions of premium travellers in waiting."
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