Fukuoka Airport

Peach reports strong first month of LCC operations, but at expense of declining ANA traffic

Peach Aviation, the first of a new wave of low-cost carriers to enter Japan, has reported a solid first month of operations, carrying in Mar-2012 approximately 67,000 passengers across three routes with a load factor of 83%, above initial projections.

This traffic, however, has come at the expense of parent company All Nippon Airways (ANA), which saw year-on-year traffic and load factor declines above the system average. The negative story at the mainline operation is the same when measured against traffic in Mar-2010. While Peach is young and ANA's other LCC, AirAsia Japan, is yet to launch, the presence of traffic cannibalisation is evident. While this is not unexpected and ANA has planned for it, the level of cannibalisation appears to be above ANA's projections. It is a sign of the changing North Asia market, and a worry for ANA, which holds by far the largest share of domestic Japanese capacity – and plans domestic growth in coming years.

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. 

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.

The world's top ten routes are in Asia Pacific

The world's busiest air route is...Tokyo Haneda-Sapporo Chitose. Indeed the top ten are all in the Asia Pacific region, which reflects its rise as the world's pre-eminent aviation market. Many of Asia's leading route pairs are in the established markets of Japan and Australia. But it is also interesting that among the airports represented as end points in the top 10 routes, ten of the airports fail to rank in the world's Top 30 airports. Though Sapporo has an enormous seat offer to Haneda, it has far less impact elsewhere.

Jetstar-JAL LCC, "Jetstar Japan" to commence service by Dec-2012

Japan Airlines Corp, Jetstar Airways and Mitsubishi Corp confirmed plans to establish a LCC JV in the Japan market by Dec-2012. Jetstar Japan will be Japan's third new LCC announced this year, following hard off the heels of All Nippon Airways' announcement last month that it plans to establish a JV with leading low cost airline AirAsia, AirAsia Japan, in addition to its previously announced LCC, Peach. The JAL JV would add another piece to the complex jigsaw that is now transforming the Asian airline market. The potential market growth as these successive ventures are introduced can be measured in the hundreds of millions of new passengers. Removal of highly restrictive regulatory conditions and the scale of opportunities as new city pair market options emerge mean literally that the sky is the limit for growth upsides.