Jetstar Japan announced (25-Mar-2013) it transported its one millionth passenger on 22-Mar-2013. The carrier reported passenger numbers have been growing steadily since it launched operations on 03-Jul-2013. During 2013 summer, the carrier plans to increase frequencies to Fukuoka, Oita and Okinawa. Jetstar Japan also last week announced plans to expand its domestic network with Tokyo Narita-Matsuyama service from Jun-2013. [more – original PR – Japanese]
Jetstar Japan handles one millionth pax since launch
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China-Japan: Peach, Jetstar Japan & China United the latest LCCs to enter Asia's 3rd largest market
Japan-China is the third largest international country pair in Northeast and Southeast Asia. The market has expanded due to Chinese outbound visitor growth, with Chinese visitor numbers doubling from 2.4 million in 2014 to 5.0 million in 2015, and 9M2016 shows a further 30% expansion. LCCs account for approximately 10% of the market, and there are an expected three further LCC entrants in the Japan-China market: Peach Aviation, Jetstar Japan and China United Airlines. Their entry, however, comes after the major boom: eight airlines have entered the market since 2014.
The impact of the additional LCCs will be minimal in network size: Peach's four weekly Osaka-Shanghai flights are in addition to an existing 117 weekly flights. Over the long term there are strong opportunities for LCCs (as evidenced by the first mover Spring Airlines), but in the near future the greatest impact from additional LCCs will be in reminding Chinese full service airlines of alternative business models and their own need to reform. To a Chinese airline a Japanese LCC is almost paradoxical: an airline trying to be low cost in a high cost country with low population growth. Yet the relative success of Japanese LCCs provides a case study – and also market challenges.
China-Japan aviation: LCCs Peach, Jetstar Japan gain traffic rights, raising overcapacity concerns
Jetstar Japan and Peach Aviation have received air traffic rights for China which, if utilised, would grow the Japanese LCC footprint in China – Japan's largest visitor source market. Spring Japan became the first Japanese LCC to serve China in Feb-2016. The absence of Japanese LCCs in China may seem surprising, but there are regulatory hurdles, market access questions and conservatism at Japanese LCCs. AirAsia Japan, launching in 2017, will likely leverage the group's China experience; it is the largest non-greater China airline group serving China.
The prospect of further growth comes as incumbents cite overcapacity. What was once a profitable market now only produces returns in the peaks. All Nippon Airways, the largest airline between Japan and China, reported lower revenue on the back of "a deterioration in the supply-demand environment". Spring China has told Bloomberg that some competitors "aren't well-prepared", and will be "phased out". Overall Japanese LCC routes and capacity may be small but will be watched by Chinese airlines, ever mindful of the need to find new business models.