Japanese airline All Nippon Airways (ANA) is to launch a new low-cost carrier as demand for travel in Asia surges.

Having secured financial backing from Hong Kong-based private equity firm First Eastern Investment Group (FEIG), the Tokyo-based airline will establish “the first Japanese low-cost airline” in late 2011.

The yet-to-be-named airline will operate independently from ANA, offering both international and domestic short-haul routes from Kansai International Airport, Osaka.

Announcing the decision Shinichiro Ito, president and chief executive of ANA, said: “Regardless of the intense competition in the air transportation industry, we anticipate an increase in passenger traffic demand in east Asia.

“We came to the conclusion a low cost carrier would be the right approach to compete effectively in this market,” he added.

ANA said under the terms of the deal the new company will be 66.7 per cent owned by Japanese investors, with the airline holding a 39 per cent stake.

First Eastern will hold the remaining 33.3 per cent stake, the maximum foreign ownership currently allowed in Japan.

Japanese Aviation

Air travel in Japan has long been tightly protected, but recent government deregulation and expanding airport capacity are both opening the market up to greater competition.

Landing fees and fuel taxes – among the highest in major destinations – are also expected to fall under proposed government reforms.

Also playing a role in the development of the new venture is the bankruptcy of Japan Airlines.

The former flag-carrier is dropping dozens of domestic and international routes as part of a three-year, government-backed restructuring.