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LCCs help Japanese domestic market grow for first time in six years, but market situation still dire

Analysis

The introduction of three low-cost carriers to Japan in 2012 - Peach, Jetstar Japan and AirAsia Japan - may still be fragile with Jetstar Japan curtailing growth and AirAsia Japan losing its founding partner, but the three are showing meaningful improvements to the Japanese economy. In the 12 months to 31-Mar-2013, their passenger traffic has given the Japanese domestic air market, the world's third largest, a needed bump by helping it grow for the first time since 2006.

But the situation is still dire. 2012 was only the third year of growth since 2002, and passenger numbers in 2012 are the same as they were in 1997. No other major market in the world - and high-growth Asia especially - has seen such abysmal performance. International traffic fared only slightly better, with 2012 traffic around only 1999 levels. And despite innovation and new best practices, load factors in the domestic market are at the same low 60% figure of two decades ago. Incumbents have signalled they must change. LCCs may force it.

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