All Nippon Airways

Peach to launch Japan's LCC sector with two-tier fare structure and basic ancillary options

2012 will see the rapid entrance of the low-cost model in Japan, a market whose high focus on service had been used as an excuse for why a la carte LCCs could not gain a standing in the country. The country's first LCC to come to market, Peach Aviation, has released its launch fare structure that offer discounts upwards of 58%. Despite fares significantly lower from full-service competitors, its ancillary options are so far basic, leaving room for improvement from established LCC brands AirAsia and Jetstar, who will enter the market in 2012 with their AirAsia Japan and Jetstar Japan subsidiaries.

While Peach's offerings may be underwhelming for those versed in LCC commercial strategy, they will still come as a shock to the Japanese, who have broadly not experienced a home-grown LCC. While Peach will have the first mover advantage in the market, it will also be the first to help the market adjust to LCC pricing strategies, which AirAsia and Jetstar will build on. Peach too can also be expected to expand its offering.

Airlines and airports feeling impact of global economic weakness with continued freight pressures

Airlines and airports are feeling the impact of the current global economic weakness and declining consumer spending in Europe, which is having a noticeable impact on air cargo volumes. Cargo traffic, which generated USD66 billion in revenue in 2010, has declined every month since May-2011, according to IATA upon the release of its Oct-2011 traffic results, with a 4.7% year-on-year reduction in cargo demand in Oct-2011 amid reduced manufacturing confidence and businesses switching to slower modes of transport.

“Cargo is the story of the month. Since mid-year the market has shrunk by almost 5% and this is far greater than the 1% fall in world trade. Air freight is among the first sectors to suffer when businesses confidence declines,” IATA director general and CEO Tony Tyler said. Meanwhile, Boeing CEO Jim McNerney separately stated the company has seen a softening of freight demand in recent months, describing the freight market as a “watch item”.

ANA operating profit weakens in 1HFY2011 with FY2011 revenue outlook downgraded

All Nippon Airways (ANA), Japan’s largest airline group and Asia’s largest publicly listed carrier, reported 11.8% reduction in operating profit to JPY50.1 billion (USD641 million) but a 72% jump in net profitability in 1HFY2011 (six months to 30-Sep-2011) to JPY22.9 billion amid a recovery in demand and a steady increase in business and tourism demand following the 11-Mar-2011 earthquake, tsunami and nuclear disaster. The second quarter also saw strong quarter-on-quarter gains after the past 11-Mar-2011 slump, which saw the carrier report a JPY8.4 billion net loss in the three months to 30-Jun-2011.

Citing concerns about weakness in its own and key global economic markets, stubbornly high oil prices, softening domestic demand and the impact of the strong yen, ANA lowered its full-year sales forecast from an earlier estimate of JPY1.41 trillion to JPY1.40 trillion, which would mark a 3.1% year-on-year revenue increase.

JAL continues low-density 787 configuration trend with plan for 186 seats

Japan Airlines (JAL) will configure its B787-8 in a two-class configuration seating 186 passengers across 42 seats in a 2-2-2 business class configuration and 144 economy class seats in a 2-4-2 economy class configuration. JAL has elected not to feature, at least initially, the first class and premium economy class on its other long-haul aircraft, the B777.

JAL plans to deploy its B787 on a new Tokyo Narita-Boston route from 22-Apr-2012, as well as on existing routes prior to that. JAL's low density option follows a decision from launch customer and operator All Nippon Airways (ANA) to configure its long-haul international B787 fleet with only 158 seats, or 28 fewer seats than JAL.

Both ANA And JAL will have a lower configuration density than Boeing’s "typical" three-class configuration plan of 242 seats, as stipulated in a Mar-2011 Airport Compatibility Brochure for the B787. LOT plans to outfit its B787 with 252 seats, and United 219 seats.

Airlines charging a premium for services from Tokyo Haneda Airport

Airlines are charging a considerable premium on Asian services from Tokyo Haneda compared to the city's former exclusive international gateway, Tokyo Narita, driven by increased demand from business passengers as Haneda opens up to new services. The price gap has widened since Haneda opened its new international terminal and fourth runway in late Oct-2010. The convenience factor (Haneda enjoys greater proximity to downtown Tokyo) is driving pricing, making it a key facility for incumbent airlines All Nippon Airways and Japan Airlines to defend.

Tokyo Haneda, Japan’s busiest airport, Asia’s second busiest (after Beijing), now accounts for 20% of all seats on international services from the Tokyo area. Tokyo Narita has an 80% share and is the world’s 20th largest airport by system ASKs, with a considerably larger proportion of long-haul international services than Haneda.

Asia Pacific airlines dominate widebody fleet deliveries over next 12 months

Seven of the top ten airlines by widebody deliveries scheduled over the next 12 months are in Asia, with only Emirates, Lufthansa and Qatar Airways also in the leading group. ANA heads the list, thanks to its hectic B787 induction schedule, while Cathay Pacific, Air China and China Southern all have 15 or more widebodies on order for delivery over the next 12 months. Malaysia Airlines, Air India and Japan Airlines are also present in the Top 10. Asia Pacific airlines are likely to be in hot demand for airport route developers worldwide in coming months.