Japan's All Nippon Airways and Southeast Asia's largest budget carrier AirAsia on Thursday said they will form a joint venture to establish a low-cost airline that will be based in Tokyo.
AirAsia Japan will be the first low-cost carrier to be based at Tokyo's Narita International Airport when it begins domestic and international operations in August 2012, the companies said.
The Japanese carrier will hold a 67 percent stake in the AirAsia Japan venture in terms of voting rights, with AirAsia holding the remainder.
They cited Japan's aviation market as "undergoing rapid transformation with developments including the expansion of Open Skies agreements and increased domestic competition from road and rail-based travel."
AirAsia Japan will serve the Japanese domestic market from Narita airport as well as South Korea and Taiwan.
Narita, a major international hub is also seeking to increase capacity with the introduction of a new terminal and is expected to attract many low-cost carriers and foreign airlines, amid expectations of increasing competition in Japanese airspace.
Japan's existing cheaper domestic carriers such as Skymark and Air Do have been unable to offer the kind of heavily discounted fares associated with budget airlines in the United States and Europe due to higher operating costs.
AirAsia has other similar joint-ventures in Southeast Asia - in Thailand, Vietnam, the Philippines and Thailand - while its long-haul airline AirAsia X flies to Tokyo's Haneda airport.
"AirAsia Japan will not only boost economic growth between ASEAN and East Asia by providing better access to markets around the region, but also enhance links within travel, trade and tourism," Air Asia CEO Tony Fernandes said in a statement.
ANA holds a 33.4 percent stake in budget carrier Peach, which aims to begin domestic services out of Kansai International Airport in the western Japanese city of Osaka in March 2012.
Shares in AirAsia were up 2.6 percent at 3.5 ringgit in Kuala Lumpur, while ANA shares closed 0.37 percent higher at 271 yen in Tokyo trade ahead of the announcement.