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Exciting times for Asian airline lovers as Japan Airways (JAL) announces that they will be launching a new low-cost carrier to tap into growing customer demand in the Asia market.

The Asian air market is currently being flooded with new low-cost carrier options and the competition is heating up, from Air Asia X ordering new planes and Norwegian Air expanding more routes to Asia.

It has been revealed that JAL will be investing up to twenty billion yen (up to $200 million USD) into the new, yet un-named airline, with the money to go to buying or renting two wide-bodied 787-8 Dreamliners to begin their fleet. This new airline will be based out of the hub of Tokyo Narita International Airport (NRT).

They are looking for new investor partnerships to join their new company and they plan to reach profitability in the next three years. It is likely with more financing we will see a flurry of aeroplane orders from JAL over the coming months.

Japan’s Domestic Market

It has always been difficult for low-cost carriers to operate domestically in Japan. The country, with a population of 127 million, has the world’s most sophisticated rail network linking almost every corner of the nation. The Shinkansen, or colloquially known as the Bullet Train, can run at speeds of up to 360km/h and has the advantage of taking passengers directly into the town centres (as opposed to airlines that arrive at distant airports outside the city).

Additionally, fully fledged airlines such as JAL and ANA dominate the Japanese skies and by using non-marketing activates lock out competition (denying them access to preferred scheduling, gates, airports, government lobbying and more).

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“Full-service airlines typically have high costs, but in Japan, this is especially so, Japan needs new platforms to capture foreign visitors. They are not like the Japanese who are sticky in wanting to fly a costly Japanese full-service airline.” Will Horton, senior analyst at research consultancy CAPA Center for Aviation

JAL rival ANA is in the process of expanding their new Airline, Peach Airways. Peach was created in 2011 and has 20 Airbus A320’s (with another 13 planes on order), and flies 60 routes throughout Japan domestically and a variety of select seasonal international flights (For example to Hong Kong).

Other competition for the Japan domestic market is coming from Hong Kong’ Express Airline and Singapore’s Scoot, who are looking to aggressively expand north into Korea and Japan.

It is worth mentioning that JAL is already involved as an investor with the Australian firm Jetstar Japan (Owned by Australian flag carrier Qantas) in a partnership agreement. They see this new airline providing a very different role.

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JAL’s new President Yuji Akasaka said that the new Airline was purely short-haul domestic (Jetstar Japan focuses on international routes to/from Japan) and that they had been given the go-ahead and blessing from Jetstar