Japan’s ANA Holdings (ALNPY) announced on March 22, 2018, it will merge its two subsidiary airlines, Peach Aviation and Vanilla Air, by 2020, with the goal to become the leading low-cost carrier (LCC) in Asia as it taps into the growing travel demand in the region.

In an official press release on March 22, 2018, ANA said: “To further build on the respective successes of Peach Aviation Limited (Peach) and Vanilla Air INC. (Vanilla) and position them for future growth, ANA HOLDINGS has announced today the integration of its two subsidiary airlines, Peach and Vanilla.“

The company‘s integrated LCC business, which will retain the Peach brand, is aiming to become Japan’s largest budget carrier. With the new LCC, ANA plans to enter the medium-length international market by the fiscal year starting in April 2020.

“The process of full integration is planned to start in the second half of the FY2018, with the target to be completed by the end of FY2019, with Peach being designated as the basis of the integrated airline,” the official statement reads.

The company says its new budget airline will allow further fleet growth and network expansions from Osaka Kansai Airport (KIX) and Tokyo Narita Airport (NRT). Beyond fiscal year 2020, the airline plans to have more than 50 aircraft operating on more than 50 routes, up from the 35 aircraft today and the 39 routes currently served.

With this move, ANA (All Nippon Airways), Japan’s biggest airline by revenue, is hoping to enhance the competitive edge of its LCC business and stimulate potential demand in Japan as well as from abroad.

ANA has already pledged to double its operating income from its LCC business over the next five years. The company says the new strategy will contribute to increased operational efficiency and reduction of unit costs.

ANA is a major player in the growing LCC market in Japan with the Tokyo-based Vanilla and Osaka-based Peach competing against Jetstar, a joint venture between Japan Airlines and Australia’s Qantas, as well as a newly re-launched AirAsia Japan.

LCCs from other parts of the region, such as Hong Kong Express and Singapore’s Scoot, have been adding flights to Japan. But the country itself, with its two biggest airlines, ANA and JAS, has been lagging behind others in the region in the development of budget airlines, Reuters notes.

In a separate press release on March 22, 2018, it was announced that the two shareholders of Peach – ANA Holdings (ALNPY) and First Eastern Aviation Holdings – reached an agreement by which ANA will acquire shares in the amount of JPY11.3 billion ($107 million). This will boost ANA’s stake in Peach to 77.9 percent from the current 67 percent; Far Eastern Aviation’s shares will fall to 7.0 percent. Vanilla is already fully owned by ANA.