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All Nippon Airways and　First Eastern Investment Group today announced the signing of a Memorandum of Agreement to establish the first Japanese low cost airline. The new airline will operate both international and domestic short-haul routes out of Kansai International Airport, Osaka. The new airline will operate independently from ANA.

The new company will be established in the second half of 2010 with Japanese investors holding a 66.7% stake of which ANA will hold a 39% stake and First Eastern will hold the remaining 33.3% stake, the maximum foreign ownership currently allowed for an airline in Japan. The new company’s air transport operations are expected to commence in the second half of 2011.

Shinichiro Ito, President and CEO of ANA, said, “Under our corporate vision of becoming the number one airline group in Asia, ANA has been steadily working to substantially improve its network between Japan and Asia. Regardless of the intense competition in the air transportation industry, we anticipate an increase in passenger traffic demand in East Asia, and came to the conclusion that a low cost carrier would be the right approach to compete effectively in this market. We are pleased to partner with First Eastern and to work together to establish the first low cost carrier in Japan.”

Victor Chu, Chairman and CEO of First Eastern said, “I am delighted to invest alongside ANA to establish the first low cost carrier in Japan, especially as my family has had strong ties with Japan for over 50 years. First Eastern has been pioneering private equity investments from Hong Kong for over twenty years and we are confident that our unique regional expertise and networks will contribute significantly to the success of our new joint venture with ANA.”

Japan finally will see the arrival of a true low-cost carrier happening. Malaysian’s budget carrier AirAsia Group has said that it plans to launch its first flights serving Japan by the end of the year. The flight will be operated by AirAsia X, the long-distance arm of AirAsia, to serve between Kuala Lumpur’s new Low-Cost Terminal in Kuala Lumpur, Malaysia’s capital and Tokyo Haneda Airport, at a frequency of 3 flights weekly. It hopes to increase the frequency making it a daily service. The Japanese government has already allotted landing and takeoff slots to AirAsia X at Haneda airport, soon to open its International terminal building end of the year.

The aircraft type will be an Airbus A330 aircraft, a mid-size fleet with good fuel efficiency, and commonly used among low-cost carriers. Airfare can go as low as 14,000yen one-way with introductory airfare planning at 2500yen to catch the eyes of the discerning Japanese travellers. In addition, AirAsia will not implement the fuel surcharge to appeal to its customers. Japanese are usually weary of low priced goods and are doubtful if the service offered will be up to the basic. However, for many who has travelled with AirAsia before would know that even as an LCC it is comparable to some full-fledge carriers, and could even fair better in service standards. It has won numerous service awards and received accolades from key travel industries worldwide. AirAsia saw its passenger traffic jump year on year, even overtook asia’s powerhouse, Singapore Airlines, to become the biggest carrier in Southeast Asia.

Just like any other low-cost carriers, complimentary meal service will not be served and meals and beverages will be sold instead. Fees will be charged for bringing any extra luggage exceeding the 7kg allowance for carry-on. And stripping its costs to the bare minimum, reservations can only be made online and thus credit card is required to make a purchase. As such there won’t be phone booking available as it will inflate the running costs.

AirAsia is also planning to introduce flights to New Chitose Airport(CTS) in Sapporo, Kansai International Airport(KIX) in Osaka and Fukuoka International Airport(FUK). Unfortunately, it has left out the newly opened Ibaraki Airport, only opened last month and is trying hard to win airlines to using its airport.

Meanwhile, AirAsia X is also tipped to receive the rights to fly to Seoul and other cities soon. It will officially start flying to Mumbai in May and New Delhi in August.