Friday, December 27, 2013

Japan Approves Spring Air's Low-Cost Venture: Approval Comes Amid Political Tensions Between China and Japan

The Wall Street Journal

By  Joanne Chiu

Dec. 27, 2013 1:46 a.m. ET


HONG KONG—Japan's civil aviation regulator has approved the launch of Spring Airlines Co.'s budget-carrier joint venture in the country, clearing a major hurdle for the Chinese airline as it prepares for a May 2014 launch.

Spring Air's plan to set up a low-cost venture in Japan would give China's biggest budget carrier by revenue more access to the Japanese market, but it comes as political tensions between the nations continue to linger.

The venture couldn't come at a worse time, as the China-Japan territorial spat stifles demand for business and leisure travel between the two countries. Spring Air had planned to start its low-cost venture in Japan last year, but the plan was delayed because of the dispute.

The number of Chinese tourists to Japan fell 21% in the first nine months of this year to 1.3 million, while Japanese visitors to China are down 24% during the same period. On Thursday, a surprise visit by Japanese Prime Minister Shinzo Abe to a shrine linked to the nation's militarist past threatens to further impact diplomatic relations with China and hurt demand for travel between the two countries, say analysts.

Spring Air Japan Co. said Thursday it received approval for the Tokyo-based airline last week, and will launch twice-daily flights between Narita Airport near Tokyo and the cities of Takamatsu and Saga from the end of May. It is also planning flights between Narita and Hiroshima.

While Spring Air hopes to link connecting traffic from China through the Narita hub, it has been unable to secure rights to fly there from its Shanghai base, a route that for years has been dominated by state-owned rival China Eastern Airlines Corp. 

Spring Air in China now operates international services connecting Shanghai with the Japanese cities of Saga in the southwest, Takamatsu in the west and Ibaraki, northeast of the capital, as it awaits rights to fly to Tokyo, underscoring the difficulties the carrier faces as it competes with China's large established airlines.

The airline would also face stiff competition from other budget carriers, such as Jetstar Japan and Peach Aviation.

Spring Air Japan, 33% of which will be owned by the Shanghai-based carrier, said earlier it would add more domestic and international services to China later.

The rest of the new airline will be controlled by a group of Japanese investors in the private-equity, travel and information-technology industries, according to Spring Air, which has declined to disclose further details.

Spring Air Japan hopes to boost its fleet size to around 20 Boeing Co. 737-800 jets, which can each seat 189 passengers, five years after it starts service with three planes, the carrier said earlier.


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