Low-Cost Carriers
Lift off for Japan’s Low-cost carriers
February 1st 2014
Only two years from starting up, Peach Aviation, Japan’s first home-grown low-cost carrier (LCC), said it would be in black for the year to March 31, 2014, according to its CEO, Shinichi Inoue. Read More »
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Peach, a joint venture between All Nippon Airways and Hong Kong investor, First Eastern Investment Group, launched services from Kansai International Airport on March 1, 2012, initially to domestic destinations, Sapporo and Fukuoka and then to Incheon, South Korea a few months later.
Following the launch of scheduled Osaka-Matsuyama flights last month, it has a network of nine domestic and five international destinations. Expansion includes establishing a second hub at Naha, Okinawa. Inoue has his sights on Southeast Asia cities from Naha ‘up to four hours flying time’, including Vietnam and Thailand.
An increase in non-Japanese passenger traffic is expected since the Japanese government has eased visa procedures for non-Japanese South East Asian citizens, Inoue said.
Peach, advised by former Ryanair chairman Patrick Murphy, has developed its own “made in Japan” LCC model by focusing on the Kansai region, which includes Osaka, Kyoto and Kobe. It surpassed the three million passenger mark in September 2013.
As the market grows, there will be at least one newcomer to the LCC market this year. In May, Spring Airlines Japan, part-owned by Chinese carrier, Spring Airlines of Shanghai and Japanese investors including Sky Star Financial Management (31%), will launch flights from Narita to Takamatsu, Saga and Hiroshima in Western Japan. Eventually, Spring Japan will serve international routes between Japanese cities and secondary destinations in China.
The new domestic airline plans a 20 aircraft fleet by 2015 and - exceptionally for Japanese LCCs to date - is using Boeing 737-800s rather than A320s. Spring said at present there are more 737 cockpit crew available in Japan. The Shanghai-based carrier is targeting a load factor of 95% for the first year of their Shanghai (Pudong) – Kansai service route, which will be launched in March.
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Wan Wei, CEO of Spring Group Japan said: “Despite the current relationship issues between the two countries, many Chinese admire Japanese hospitality. We are hoping to capitalize on this latent demand with new routes.”
Spring Air’s services to Takamatsu, Ibaraki and Saga are averaging load factors of around 85% with a passenger mix of 50% Japanese and 50% Chinese. Spring intend to increase frequency on the Shanghai-Takamatsu route from mid-year.
After AirAsia Japan, a joint venture between All Nippon Airways and Malaysia’s AirAsia bit the dust last year, largely due to the incompatibility of the two partners, ANA bought out partner Air Asia. Now the wholly All Nippon Airways’ (ANA) LCC, Vanilla Air took to the skies in December with flights from Narita to Okinawa and Taipei.
The incompatibility included website deficiencies, too-early check-in deadlines and failure to develop links with travel agents, essential in Japan despite the internet era.
Vanilla Air, which was rebuilt from the collapsed shell of the ANA/AirAsia joint venture, AirAsia Japan, has focused on developing its market in the densely populated Kanto region, east of central Tokyo.
Air Asia group chairman, Tony Fernandes, has tweeted he had established links with new Japanese partners and that a new AirAsia Japan would be launched in 2015.
Meanwhile Jetstar Japan, a joint venture between Japan Airlines (JAL) and Qantas Airways, said its Summer schedule would be set at 76 flights a day, the highest daily frequency of any Japanese LCC.
Based in Narita, Jetstar Japan had some operational problems in its first year, notably the Narita 23:00 hours curfew shutdown. There were also maintenance issues, basically administrative, which limited expansion plans until they were rectified. The Narita curfew issue has been largely resolved thanks to a more flexible attitude by the airport authorities.
In November last year, the carrier received an infusion of extra capital from its two investors. It will be profitable in “three to four years from now,” according to Jayne Hrdlicka, the Jetstar group’s chief executive
| 'Although not an LCC in the technical sense, Skymark has succeeded in Japan’s domestic market by offering low fares and minimal service. It is has become the third largest airline in Japan' |
Jetstar’s priorities are to establish a second base at Osaka’s Kansai International airport and the introduction of international services.
The Japan-Australia joint venture has learned that closer cooperation with Japan’s travel trade produces results, notably in tour sales. Jetstar Japan has enhanced its distribution through a tie-up with Lawsons, a nation-wide convenience store chain with more than 10,000 outlets.
In January, Jetstar Japan announced another distribution deal, with the 2,000 strong convenience store chain, Ministop, to sell its tickets.
Dynamic Skymark Airways is launching a new concept of air travel on key domestic trunk routes, using all premium economy seating in its new A330 aircraft.
On January 22 the Japanese transport ministry – Ministry of Land, Infrastructure, Transport and Tourism (MLIT) approved Airbus’s application for certification of the A330-343 series, the first such certification in Japan.
With a mono-class configuration of only 271 seats, Skymark intends to attract business travelers away from the densely seated economy class and limited premium seating offered by JAL and ANA on routes from Tokyo Haneda to Fukuoka, Okinawa (Naha) and Sapporo Chitose. These three routes are among the top ten busiest city pair sectors in the world. Skymark operates many services on these routes.
The A330 premium seat strategy might work. Skymark has achieved some good results, thanks to its aggressive business model, culminating in its listing last year on the first section of the Tokyo Stock Exchange.
Much of the independent airline’s success is due to majority owner and CEO, Shinichi Nishikubo, who has a reputation as a maverick in the regulated environment of Japanese civil aviation.
Skymark also plans to introduce international A380 services with a configuration of 280 premium economy and 114 business class seats. Sceptics have pointed out the airline’s absence of a feeder network, its zero international experience, lack of any alliance partners and some questionable operating sums. Skymark’s configuration will be the lowest of all airlines in the A380 global fleet and there are doubts Skymark will be able to cover operating costs.
The airline has ordered six A380s, with the first due for delivery in August. It is reported the carrier will launch daily round trip Tokyo-New York flights on December 1, pending approval from the Japanese Civil Aviation Board.
The carrier had intended to start its own Frequent Flyer Program (FFP) this year, but has deferred that plan to concentrate on the A380 launch. It also has abandoned plans to revamp its B737 fleet with all premium class seats.
Although it is not an LCC in the technical sense, Skymark has succeeded in Japan’s domestic market by offering low fares and minimal service. It is Japan’s third biggest carrier, with more than 2,400 employees, a fleet of 33 aircraft and a market share of around 6%.
Skymark also plans to start Yonago (on the Japan Sea Coast) to Okinawa, Sapporo (Chitose), Sendai and Tokyo Haneda scheduled services in April.
