Japan LCC overview
THE COMPETITIVE ENVIRONMENT IN JAPAN, THE WORLD'S THIRD LARGEST AVIATION MARKET, has witnessed some notable changes in recent months with some fascinating dynamics at play. Japan’s most exciting growth area is the flurry of LCC activity and new entries in the high-potential sector.
ANA and JAL have jumped on the LCC bandwagon with ANA to have not one but two LCC subsidiary offerings in the form of Peach Aviation and AirAsia Japan by the end of the year and JAL establishing Jetstar Japan with oneworld partner Qantas’ subsidiary Jetstar. These start-ups promise radical change, even if their initial projected fleet sizes are modest. As a majority shareholder in both ...view middle of the document...
Further deregulation of the sector and the market entry of international LCCs is also behind the trend, with the bankruptcy of JAL in 2010 also freeing up much-needed landing slots. The Government now also sees LCCs as a way for the nation to reach its target of 25 million inbound tourists by 2019 (and 30 million in the future), up from less than 10 million at present.
The changes happening in Japan regarding LCC adoption, accompanied as they are by a much more enlightened market access regulatory posture, will inevitably create even more powerful agents for change regionally, including in China, which has been reluctant to allow local establishment of LCCs – even though foreign branded LCCs now operate actively into the Chinese market. The development in this key market also heralds a new era of competition and the prospect of a welcome boost to the country’s recovering tourism industry 12 months after the devastating Mar-2011 earthquake and tsunami.
With the influx of new entrants, it is easy to overlook the incumbents, including Haneda-based Skymark and Hokkaido-based Air Do, which have operated in recent years in the high-cost market. It is not the first time the nation’s flag carriers have been involved in the LCC model. In 2004, ANA launched Air Next, a 100%-owned subsidiary operating from Fukuoka which was subsequently dissolved in 2010 and merged with regional operators Air Central and ANA Network to create ANA Wings. StarFlyer also operates in the market although, like Skymark, its model is not traditionally low-cost.
China’s Spring Airlines also plans to launch a carrier in Japan and is seeking a local partner as foreign investors can hold no more than a one-third stake in a Japanese airline. The group is planning to commence operations in the country in 2013 with five narrowbodies as it looks to gain a foothold in the Japanese travel market.
Base: Tokyo Narita
Launch date: Aug-2012 but could be earlier subject to aircraft availability
Parent: ANA 67%, AirAsia 33% (voting-right share basis). ANA 51%, AirAsia 49% (capital basis)
Capital: JPY5 billion (paid in) with initial capitalisation of JPY1 billion
Existing fleet: Planned initial fleet of five A320 aircraft
Fleet orders: None at present, but the carrier can tap into AirAsia’s large order book
Capacity deployment: n/a
Japan capacity share: n/a
Network: To cover Fukuoka, Sapporo and Naha from Aug-2012 and Busan and Incheon from 01-Oct-2012
CEO: Kazuyuki Iwakata
The formation of AirAsia Japan, announced in Jul-2011, marks the joining of AirAsia, Southeast Asia’s largest LCC, and ANA, Asia’s largest listed carrier and the world’s 10th largest airline by passengers. The carrier, which will be AirAsia’s first venture outside Southeast Asia, is targeting profitability within its first fiscal year of operation and annual sales of JPY150-200 billion in five years from launch (compared with JPY58 billion achieved by Skymark in the year to Mar-2011). The...