Airline News
Vanilla and Spring Japan expand as $18 billion deal to run Osaka’s Kansai completed
November 13th 2015
Narita-based low-cost carrier, Vanilla Air, is considering the introduction of wide body aircraft as one of two options for its long-term expansion. According to consultancy CAPA, the LCC's strategy hinges on growth in the lucrative Southeast Asian market. Read More » The first involved establishment of a second base further south, with Okinawa’s Naha deemed the only plausible option. However, the All Nippon Airways (ANA) subsidiary is reportedly hesitant to choose Naha for fears of cannibalization, given that rival LCC, and fellow ANA protégé, Peach Aviation, has its hub there.
The second option entailed the use of wide body aircraft that would bring Southeast Asian destinations into reach from Narita’s LCC terminal. Vanilla’s management, which is largely comprised of ANA executives, has reportedly been studying this option for 'some time' and could see Vanilla going the way of South Korea's Jin Air. The South Korean carrier began B777-200ER long-haul operations to Guam earlier this year and plans to fly to Hawaii from December, competing with Hawaiian Airlines on the route.
“We are quite confident about competing with Jin Air by offering authentic Hawaiian culture that will make passengers feel their vacation has started the moment they board our flights,” said Hawaiian Airlines president and CEO, Mark Dunkerley.
Malaysia’s AirAsia X is another carrier from this region with its sights set on Honolulu, but its application to the U.S. Department of Transportation (DoT) for Kuala Lumpur-Osaka-Honolulu traffic rights has been pending since April. AirAsia X can expect significant feed on the route from Rakuten, one of the partners in its AirAsia Japan venture and a key distributor of travel packages to Hawaii. Moving forward, Rakuten probably has an incentive to put fewer and fewer passengers on the other three carriers serving the Osaka-Honolulu market, Hawaiian, Delta Air Lines and Japan Airlines (JAL).
Spring Airlines Japan, which is 33% owned by China’s first private LCC, Spring Airlines, and various Japanese investors, has formally set in motion plans to begin international operations in the first quarter of 2016. In its application to Japan’s Civil Aviation Bureau, the LCC said it wanted to start a three times a week Narita-Wuhan service from February 13, followed by four a week Narita-Chongqing flights on February 14, with both routes to be served by B737-800s. Launched in mid-2014, Spring Japan operates three B737-800s from its Narita hub to Hiroshima and Saga in Japan.
In other Japanese aviation news, Orix Corp, a local financial services company, and French construction and engineering firm, Vinci SA, have won the rights to jointly run Osaka’s Kansai International Airport for the next 44 years. The deal is worth $18 billion and is a milestone in the government's efforts to involve private firms in major infrastructure projects.
Orix and Vinci were the only remaining bidders for the contract after other potential buyers were turned off by the airport's one trillion yen ($8 billion) debt burden. The two companies will form a subsidiary to run Kansai, as well as Itami, the smaller domestic airport near downtown Osaka. The new partners will pay the government 2.2 trillion yen over 44 years, although additional cash will only be paid if they make more than 150 billion yen in annual revenue. They hope to turn Kansai into a LCC hub and are planning a fourth terminal after the third terminal is built.
Orix and Vinci will each inject 32 billion yen for 40% holdings in the company, while the remaining equity will be held by more than 20 minority shareholders, including Suntory Holdings and Panasonic Corp.
