Tokyo Narita Airport

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.

Despite 1Q loss, Delta is bullish on profitability as it strengthens hubs and cuts Atlantic capacity

Delta Air Lines intends to improve this year on the USD1.2 billion profit it posted in 2011 despite recording a pre-tax USD36 million loss 1Q2012. The carrier believes strong demand and revenue trends will continue throughout 2012, allowing it to recoup increases in fuel expenditure that rose USD250 million during the first three months of 2012.

The pre-tax loss was a USD355 million year-on-year improvement of Delta’s 1Q2011 results, driven by a strong revenue performance despite headlines of a spreading recession in Europe and the uncertain ripple effects of the continent’s economic woes. Factoring in USD136 million in special items, including the favourable settlement of fuel hedges and a USD39 million gain from the settlement of its airport slot swap with US Airways, Delta recorded a USD163 million profit. Its net loss excluding those items was USD39 million.

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.

Air New Zealand hones in on long-haul restructure as first half profit falls

Air New Zealand is nearing a conclusion of a restructure of its loss-making long-haul network. At the peak of losses in the six months to 30-Jun-2011, the operation lost in excess of NZD1 million (USD833,700) a week. While the losses were exacerbated by high fuel prices and weakened demand from the Feb-2011 Christchurch earthquake and the Mar-2011 Japanese earthquake and tsunami, ANZ has seen the entrance of price-aggressive long-haul carriers that give reason to strategically enhance its position across all markets.

CEO Rob Fyfe has said no long-haul market has been significantly positive or negative, unlike with Qantas’ Aug-2011 restructure in which losses had been heavy in Europe and Asia. Adjustments to the long-haul network, some already implemented with others to be announced in coming weeks, comprise adjusting frequency and capacity to existing and new routes, working with partners, bolstering ancillary revenue and evaluating aircraft capacity as well as fare and product structure.

Australia-Japan open skies agreement fails to gain traction in shrinking market

There is unlikely to be any short-term change to Australia-Japan air services following an open skies agreement between the two countries that gives Australian carriers access to Tokyo Haneda airport and fifth-freedom traffic rights. Qantas serves Tokyo Narita and has been given nonviable midnight slots at Haneda, and furthermore its low-cost arm Jetstar – the largest operator in the market – is establishing a subsidiary at Narita. The liberalisation comes as the Australia-Japan market continues to shrink, with traffic down 56% from its 2005 peak, making Japan Australia’s largest shrinking market.

The Australian government announced with great fanfare the open skies agreement with Japan, proclaiming it “landmark”. Japan last month concluded an open skies agreement with Canada and is working on a similar agreement with Taiwan.

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.