Andrew Mollet/TOKYO
Southern Cross has scrapped plans to launch a new airline in Japan, becoming the latest casualty in the country's attempt to open up domestic competition to start-up carriers.
The airline was set up in August 1997 with joint investment by 32 major firms in Okinawa province. It had been looking to begin flights next year between Okinawa's capital, Naha, and Tokyo's Haneda Airport. It says it has backed away from the start-up because the plan "-would involve considerable risks amid intensifying price competition and other uncertainty surrounding the airline industry".
The company's entire board of directors has resigned, but the carrier will not be dissolved, since an unnamed group interested in entering the airline business has reportedly expressed willingness to take it over.
Southern Cross is the second new carrier to go under before a single flight has taken off. In September, Japan Pacific Airlines folded following its inability to raise the necessary ´3 billion ($22.5 million) required for start-up costs.
The one success to date has been Skymark, which inaugurated Boeing 767-300 operations last month. Analysts point out that the carrier has a huge advantage in being controlled by one of the country's largest travel agents, HIS, as well as major telecommunications company Orix. They admit, however, that with only three slots at Haneda, it will be several years before the airline becomes profitable.
"The biggest problem for the start-ups is raising the cash for what is perceived to be a comparatively risky venture during a credit crunch," points out Douglas Hiyashi, airlines analyst at HSBC Securities. "Moreover, now is not the time to go into this line of business: the incumbents have all slashed their prices on domestic routes, and the slot restrictions at key airports such as Haneda and Itami [Osaka] means that it is extremely difficult for the start-ups to gain critical mass."
Although Air Do is expected to begin flights shortly, Hiyashi says: "The strategy start-ups should follow is to put in their licence applications, but hold off initiating flights until at least 2000." Hiyashi is hopeful that by then the economy will have picked up and "-there will be a lot more slots available at Haneda.".
Source: Flight International
