TOKYO (AP) — All Nippon Airways Co. and Malaysian budget carrier AirAsia are joining forces to create a low-cost airline in Japan serving local and international destinations.
The companies said in a statement Thursday that AirAsia Japan will be the first budget carrier based out of Tokyo's Narita International Airport.
All Nippon Airways, known as ANA, is Japan's biggest airline. It has been seeking to strengthen its foothold in the low-cost market amid growing competition and "rapid transformation" of Japan's aviation sector.
Low-cost carriers generally offer cheaper fares than major airlines in exchange for no-frills flying. To offset lower revenue from ticket sales, they may charge for in-flight food, luggage and seat assignments.
Their popularity has grown in recent years, particularly in Southeast Asia where budget airlines account for more than 30 percent of the market, according to the Centre for Asia Pacific Aviation. But in Japan, they remain a much smaller presence, attracting less than 10 percent of fliers.
That's expected to change in the coming years as more companies vie for a piece of Japan's lucrative travel market.
ANA recently launched Japan's first budget carrier, Peach Aviation Ltd., which will be based out of Kansai Airport in western Japan. Peach is a joint venture between ANA and Hong Kong's First Eastern Investment Group.
Rival Japan Airlines may also make a move into budget aviation. The airline, which is restructuring after filing for bankruptcy last year, is reportedly in partnership talks with Australia's Jetstar Airways.
For AirAsia, the deal represents another step in its goal to become one of the world's largest airlines by 2020. It has expanded rapidly the past few years as lower ticket prices and strong economic growth in Asia stimulated demand for air travel.
"This new joint venture is an important milestone in AirAsia's growth," AirAsia chief executive Tony Fernandes said of his company's first venture outside of Southeast Asia.
ANA will own 67 percent of voting rights in the company with starting capital of 5 billion yen ($63.4 million). AirAsia will hold the remaining 33 percent.
AirAsia Japan aims to begin operations in August 2012.