Jetstar Japan

ANA – and Japan's transport system – appears oblivious to coming LCC impacts, which will be vast

All Nippon Airways (ANA) has reported a very strong financial result for the past year, despite severe headwinds in the wake of the Mar-2011 tsunami and nuclear disaster. This augurs well for the short term as new Boeing 787s arrive and international partnerships are forged with the carrier's Star Alliance partners.

But in its forward vision there appears very little to suggest management fully comprehends the likely impact the three new LCCs (as well as an expanding Skymark) will have on Japan's domestic and regional short/medium-haul markets. And, in Japan's carefully managed transport system, embracing its world class shinkansen high-speed rail and high quality toll roads, pricing instability is about to disrupt travel behaviour in ways seemingly not apparent to Tokyo's planners.

A quick look at what has happened elsewhere in the world, once truly low-cost airline operations arrive, should be enough to make any observer aware of the potential of adding three new LCCs to Japan's slumbering domestic market in the space of six months. But apparently not in Japan. As has been observed many times in this context: once this egg is scrambled, it does not go back in its shell.

Japan LCC era yet to enter full swing, but route cannibalisation starts

Japan's forthcoming boom in low-cost carriers has yet to enter full swing with AirAsia Japan and Jetstar Japan still to launch, but signs are now emerging of an early and direct affect LCCs will have on legacy carriers.

Japan Airlines (JAL) will suspend its Tokyo Narita-Osaka Kansai service in Jul-2012, the same month JAL-Qantas joint-venture Jetstar Japan will commence operations, including with a daily Tokyo Narita-Osaka Kansai service, increasing to double daily in Aug-2012.

AirAsia Japan plans launch with domestic and Korean flights

Japan's aviation scene, which had few significant movements over the past decade, will be turned on its head in just five months, encompassing the time three new low-cost carriers will enter the market, the latest of which is AirAsia Japan. Preliminary schedules show AirAsia Japan and Jetstar Japan, both based at Tokyo Narita, will compete head on from Tokyo to Fukuoka, Okinawa and Sapporo. The market, which has grown accustomed to the presence of two main carriers and a handful of smaller ones with little movement in fares, will be inundated with new and aggressive competition offering typical LCC fare stimulation. Adjustment time will be brief as AirAsia Japan within two months is due to enter short-haul international markets.

Yet despite the compactness of LCC activity, preliminary nuances in strategy are emerging between the carriers. Jetstar is favouring domestic flights, partially replicating its extensive domestic operations in Australia and New Zealand whereas AirAsia has a greater regional emphasis, reflecting its experience in Indonesia, Malaysia and Thailand. Peach is more conservative but building both a domestic and international network. 

Jetstar Japan plans more aggressive launch than competitor Peach, reflecting Japanese LCC market

The launch schedule of Jetstar Japan, the LCC to commence services on 03-Jul-2012, is more aggressive than the Mar-2012 launch of competitor Peach, reflecting not only a market that will see tremendous and competitive growth in a very short period of time, but also the greater freedom enjoyed by the country's second wave of LCCs like Jetstar Japan.

While Jetstar in its first week will operate up to six daily return flights, one less than Peach launched with, the carrier will quickly ramp up operations, ending its first two months with 14 daily flights, more than the 11 daily flights Peach will have at the end of its first 3.5 months.

Jetstar Japan's launch will see four more of the world's 20 most populous routes have competition from LCCs, leaving only three routes served exclusively by full-service carriers in a reminder of greatly shifting tides. While LCC presence in China is the next objective, so too is domination: the world's most populous route is already controlled by LCCs. 

Jetstar Japan receives AOC and plans for 3-Jul-2012 launch as Narita to build new low-cost terminal

Jetstar Japan, a low cost airline joint venture between Qantas subsidiary Jetstar and Japan Airlines, received its Air Operator’s Certificate on 06-Apr-2012 from Japan’s regulatory authority the Ministry of Land, Infrastructure and Transport (MLIT). The AOC will ensure Jetstar can achieve its recently announced launch of 03-Jul-2012, significantly ahead of the Dec-2012 launch date given when the carrier was announced last year. Next Jetstar Japan will commence proving flights and start ticket sales.

Jetstar Japan is one of three new LCCs to commence operating this year in Japan. All Nippon Airways’ LCC subsidiary, Peach, commenced operations on 01-Mar-2012 between Osaka Kansai and Sapporo New Chitose Airport. ANA also has another JV subsidiary, AirAsia Japan, due to commence operating in Aug-2012.

Meanwhile Narita Airport has announced it will build a dedicated LCC terminal, presumably to offer a more attractive proposition to the new industry. Although the airport previously discussed a LCC terminal, it offered no firm commitments or details. The new LCC terminal is expected to open in 2015 with other facilities available in the interim for both domestic and international flights.

The start of a new era in Japan and wider North Asia region as LCC Peach Aviation launches

Just a few years ago, the North Asia aviation industry stood out because of the rigidity of its regulatory regimes. But much has changed in the past couple of years. A combination of traffic growth, new entry and accompanying liberalising trends is reshaping what is potentially a massive intra-regional market. 01-Mar-2012 marked another landmark date in this change, with Peach Aviation launching operations with a flight from its Osaka Kansai base to Sapporo New Chitose, an event Peach Aviation CEO Shinichi Inoue said “opens a new era of the Japanese airline industry”. With two more low-cost airline subsidiaries preparing to launch services later this year and home-grown low-cost operator Skymark planning to spread its wings internationally, Japan is standing out as the key driver of change in the North Asian aviation market.

The start of domestic operations at Peach, which labels itself as the first “genuine LCC” in Japan despite Skymark’s presence in the market, is likely to intensify competition in the aviation and rail sector within Japan. Its entry, even after only one day, is having an impact, triggering fare reductions and route launches by Skymark on key Peach routes.