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Budget Airline Peach Launches in Japan

Peach Aviation Ltd., backed by All Nippon Airways Co. (9202), began flights in Japan today, becoming the first of three budget carriers to start operations in the country this year.

The debut Peach service took off from Osaka’s Kansai International Airport at 7:17 a.m. today, headed for Sapporo, the company said in an e-mailed statement. The Osaka-based airline is selling tickets for less than a third of the price offered by full-service carriers ANA and Japan Airlines Co.

Peach intends to carry 6 million passengers annually within five years by luring customers from trains and spurring travel demand with cheaper tickets. It will have to contend with Japan’s relatively higher landing fees and fuel taxes, as well as competition from planned low-cost ventures backed by AirAsia Bhd. (AIRA) and Qantas Airways Ltd. (QAN)’s Jetstar.

“The spread of low-cost carriers in Japan is likely to increase the customer base,” said Yoshihisa Akai, head of Japan Aviation Management Research. “Still, I doubt they will be able to slash prices as much as overseas carriers, however much they try.”

Peach, which is owned by ANA and Hong Kong-based First Eastern Investment Group (FEIVGZ), plans to lease 10 Airbus SAS A320 aircraft within its first five years. Its 6 million passenger target is equal to 44 percent of the 13.5 million travelers who used Kansai last year, based on data from the airport, Japan’s second-busiest for international travel.

Budget Fares

The carrier is offering one-way tickets to Sapporo for as little as 4,780 yen ($59) including tax on April 1. JAL and ANA tickets the same day for the almost two-hour trip cost from 16,000 yen. Skymark Airlines Inc. (9204), Japan’s largest budget carrier, offers a limited number of tickets at 780 yen or charges from 8,600 yen. The fares were all published on the carriers’ websites yesterday.

ANA gained 0.8 percent to 251 yen as of 9:20 a.m. in Tokyo trading. It has climbed 17 percent this year, compared with a 16 percent gain for the Nikkei 225 Stock Average.

AirAsia Japan Co., a venture between ANA and AirAsia, is due to start flights from Tokyo’s Narita airport in August. The carrier has predicted 10 million passengers annually in five years.

Jetstar Japan Co., which will begin flights from Narita in July, is targeting 100 billion yen in annual sales within a few years. The carrier, owned by Qantas, JAL and Mitsubishi Corp., plans to have a fleet of 100 planes by the end of the decade.

A total of 84 million passengers flew domestically in Japan in 2010, according to the latest figures available from the transport ministry. The nation’s total air-travel market is worth $62.5 billion annually, according to the International Air Transport Association.

To contact the reporters on this story: Chris Cooper in Tokyo at ccooper1@bloomberg.net; Kiyotaka Matsuda in Tokyo at kmatsuda@bloomberg.net

To contact the editor responsible for this story: Neil Denslow at ndenslow@bloomberg.net

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