TOKYO -- Japan's Vanilla Air will expand its operations to Southeast Asia, flying longer distances by using Taipei as its second home base.

     The budget airline unit of ANA Holdings currently owns eight Airbus A320 aircraft. Those airplanes fly three domestic routes linking Narita Airport serving Tokyo with Sapporo, Naha and Amami Oshima. They also carry passengers between Narita and Taipei, Kaohsiung in southern Taiwan, and Hong Kong.

     Because the 180-seater is suitable only for flight durations of up to about four hours one-way, the company has been unable to escape from fierce competition with rivals operating similar small aircraft. In an effort to break out, Vanilla Air has decided to begin flying to Southeast Asian destinations from Taipei in October or later.

     Details are yet to be finalized, but the company is considering Singapore, Thailand and Vietnam as possible new destinations. This will be the first time a Japanese low-cost carrier will expand operations using the so-called "beyond rights," which allow an air carrier to offer flights between a second country and a third by using a plane that carried passengers to the second country from its home.

Turnaround

Vanilla Air was established as a joint venture between ANA and Malaysia's AirAsia. But it became a 100% subsidiary of ANA in late 2013 as the duo scrapped their joint-venture agreement. After facing pilot shortages and other challenges, Vanilla Air is looking to turn a profit in fiscal 2015, which ends in March, thanks to the growing number of foreign visitors to Japan and low oil prices. Estimates suggest the budget carrier will end the year with a 90% sales increase to 23 billion yen ($202 million), generating 1.5 billion yen in operating profit, a sharp turnaround from an operating loss of 3.7 billion yen a year earlier.

     Encouraged by the earnings improvement, the company lifted a freeze on equipment procurement in the current fiscal year. It now plans to roughly triple the size of its fleet to 25 airplanes by fiscal 2020, buying and leasing them while making the most of the ANA group's purchasing power to secure good prices.

     With its ninth aircraft due to be delivered in the latter half of April, Vanilla Air will start one daily round trip between Osaka and Taipei. Currently, the carrier offers four round trips between Narita and Taipei and one or two between Narita and Kaohsiung daily.

     Further into the future, Vanilla Air will push into destinations that are missing from the ANA group's operations, such as Guam, Saipan and the Philippine island of Cebu. The airline has set its sights on lifting sales to 71 billion yen by fiscal 2020, up 210% from the amount estimated for fiscal 2015.

(Nikkei)