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Japan Airlines studies setting up budget carrier to lift capacity

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JAL is aiming to get 50 per cent of its revenue from international passengers by 2020, up from 30 per cent last year, says vice-chairman Junko Okawa.

Tokyo

JAPAN Airlines Co is examining setting up a new low-fare carrier to increase capacity and take on rising competition from budget operators in Asia's second-largest economy.

Starting a discount airline is part of the carrier's need to widen its product lineup, vice-chairman Junko Okawa, 63, said in an interview in Singapore on Monday.

It is one of several options the company is exploring, she said, adding that no decision has been taken yet. Known as JAL, the airline is already a shareholder in low-fare carrier Jetstar Japan Co.

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Asia's budget airline revolution has been slow to sweep Japan, a market that JAL and its bigger rival ANA Holdings Inc have dominated for decades. Aided by a tourism boom, low-fare carriers such as AirAsia Bhd, Jetstar Japan and Peach Aviation Ltd have in recent years tried to wean passengers away from legacy operators in a country where the Shinkansen bullet trains offer stiff competition to planes on internal routes.

"JAL has been focusing on premium full service so far, but as the popularity of LCCs spreads far and wide in the region, it is natural for companies like JAL to expand their lineup to low-price," said Kyouko Amemiya, a senior market adviser at SBI Securities Co in Tokyo.

Foreign visitors to Japan rose 19 per cent last year to a record 28.7 million, according to the Japan National Tourism Organization. The tourists were mainly from China, South Korea and Taiwan.

As part of its medium-term plan, Tokyo-based JAL is aiming to get 50 per cent of its revenue from international passengers by 2020, up from 30 per cent last year, Ms Okawa said.

Shares of the airline fell as much as one per cent on Tuesday in Tokyo, extending their losses this year to almost 7 per cent, versus a 2 per cent decline in the Topix index.

After emerging from the shadows of bankruptcy earlier this decade, the government ended its oversight last year, freeing the carrier to set its own expansion plans, revive the business and regain some of the market share ceded to ANA

JAL is beefing up its fleet in preparation for the 2020 Tokyo Summer Olympic Games and is trying to secure more takeoff and landing slots at the city's Haneda airport. BLOOMBERG