In late June, new entrant Air Do filed for protection from creditors, becoming the first victim of Japan's fast-changing airline market following deregulation in the late 1990s.

The carrier, which ironically was launched late in 1998, in the wake of deregulation, struggled to compete with majors All Nippon Airways (ANA), Japan Airlines (JAL) and Japan Air System (JAS).

The country's "big three" hold most of the slots at Japan's key airports, such as Tokyo's Haneda, where new take-off and landing positions are hard to obtain by. Air Do operates two Boeing 767-300ERs on a single domestic route, between Sapporo and Tokyo.

While Air Do, formally known as Hokkaido International Airlines, has sought protection from creditors, it will continue to operate, as it plans a detailed tie-up with ANA which is expected to lead to a cash injection.

The two have signed a memorandum of understanding allowing for formal talks to begin.

ANA says the carriers are considering harmonising reservations and co-operating on aircraft maintenance, spares inventories, ground handling and cabin attendant training. ANA will also seek government approval to codeshare on Air Do's flights and link frequent-flyer programmes.

Sapporo-based Air Do is heavily in debt. The airline's biggest creditor, the Hokkaido regional government, is also expected to provide cash, conditional on the airline finding a major partner.

The tie-up between ANA and Air Do had been expected. ANA is seeking to expand its domestic base alongside plans by rivals JAL and JAS to merge operations.

These carriers announced plans to join in November, and won government approval in April. They plan to form a joint holding company in October, and combine operations early in 2004.

To better compete with a merged JAL/JAS, ANA has said that it aims to codeshare with more smaller carriers. Earlier this year it launched ANA Connection, under which regional aircraft operators Fair Inc and Nakanihon Airlines are operating limited services on its behalf.

Air Do's failure to survive on its own leaves Skymark Airlines as Japan's main independent carrier. It was the first new entrant in 1998 following deregulation - and while it has also struggled, it is now planning to acquire more 767s to add to its fleet of three and launch international services.

Air Do's failure has not halted start-up efforts by other groups, however. SkyNetAsia is planning to launch later this year. Another company, Lequios Airlines, is also working on launch plans.

Source: Airline Business