The sky’s the limit with Chu-ANA joint venture
Hong Kong-based First Eastern Investment Group Founder Victor Chu and his family are making their first foray into the highly regulated aviation industry in partnership with All Nippon Airways (ANA), Japan’s second-largest carrier, launching a budget airline.
This is the first-ever joint venture in lower cost carriers (LCC) in Japan. Pursuant to Japanese aviation law, foreign investors are not allowed to hold more than one-third of an airline company. As such Victor Chu and his family will take a 33.3% stake in the JV, paying up to JPY5billion ($59.5 million), a number Chu would not confirm. Meanwhile ANA will hold 39% of the JV, and the remainder will be taken up by third-party Japanese investors. The company will operate separately from ANA.
The LCC company, which still has no name, will operate both international and domestic short-haul routes out of Kansai International Airport in Osaka, the second largest city in Japan.
With the Japanese economy and consumers struggling, ANA has apparently been planning for an LCC type of business. Chu told AVCJ that he began discussions with the group about two years ago.
Chu explained, “We are looking for investment opportunities that will be meaningful to Japan because my family has had a close relationship with the country for almost 50 years now.” Chu’s late father studied at Meiji University, one of the top universities in Japan.
Japan has become a favorite destination for cash-rich Chinese travelers. In 2009 the Ministry of Foreign Affairs had issued 386,602 travel visas to Chinese people, up 10.2% from the previous year. The influx of tourists from the mainland has been more pronounced since Japan relaxed visa requirements for PRC travelers.
“With our network, we will be able to bring value to this LCC model, taking it to the next level by appealing to Chinese travelers,” Chu said. But while plans for the airline are international, the focus in the near-term is domestic. “Japanese consumers are value consumers, meaning that they want good quality services [irrespective of the cost]. I believe this model of business could bring traffic back to the region to help revitalize the local economy.”
Currently the group is looking for local and international talents to join the management team. He did not elaborate further, except to conclude, “This is going to be a win-win business for us.”
The new company’s operations are expected to commence in the second half of 2011.
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