113 total articles
13 total articles
AirAsia Japan and Jetstar Japan are about six months old now and already there is significant change at the fledging carriers: AirAsia Japan has switched CEOs after sagging performance while Jetstar Japan will reduce its second base at Osaka Kansai, the home of Peach Aviation, Japan's first new LCC, which launched in Mar-2012 - suggesting Peach has efficiently maintained its presence in Japan's second-largest metropolitan area.
Peach launched with services to a number of secondary cities whereas AirAsia and Jetstar entered only trunk routes. But now Jetstar will launch some secondary city routes of its own, suggesting an evolving route network strategy as well as responding to the market with agility, which airlines – especially in Japan – do not typically have strength in.
Finally, Jetstar looks as if it will steal AirAsia's thunder by opening a base in Nagoya, Japan's third-largest metropolitan area. AirAsia since nearly its launch has talked of a Nagoya base, making it likely Asia's two leading LCC groups will continue to battle head on in Japan.
For years it was said that Japan, despite high air fares and inefficient incumbent airlines, would never be a breeding ground for low-cost carriers. Excuses were many – airport taxes were too high, there were no low-cost terminals – but the last resort claim for why LCCs would not work in Japan was that the Japanese people, used to pampering in their service-oriented society, would never accept the core principles of LCCs.
With breathtaking speed the Japanese government and companies broke down barriers to support LCCs, three of which launched in 2012. They could do everything but change public attitude about LCCs. Yet it turned out the Japanese public did not need the open-heart surgery many thought would be required. Japan's air market has been devolving on service, closing the gap between full-service incumbents and LCC start-ups. The LCCs are also not the bare-bones, service-adverse airlines many stereotyped.
This poses a challenge to how full-service carriers can maintain a yield premium, which received a bleak reminder with Skymark pulling off routes in response to LCCs entering. The Japanese experience also offers a lesson to other markets, like South Korea, Taiwan and Hong Kong, where some claim the population will not ever accept the concept of a LCC.
References to "the Southwest model" or "the Ryanair model" can be a common refrain in the low-cost carrier industry, but no two LCCs are identical. Indeed, there are a number of models that have seen success. So it comes as no surprise that Japan's nascent LCC industry is diverging, with this year's three new entrants – AirAsia Japan, Jetstar Japan and Peach – showing their future more clearly now that their operations are bedding down.
The divergence is not the result of differentiation in an over-competitive market; there is still plenty of untapped demand in Japan. Rather the nuances at the three new LCCs are reflective of different shareholders and market positions. There are different outlooks on domestic-international balances but most commonly the distinctions go to the heart of industry discourse on hybridising, adding services to tap new markets and increase yields. Jetstar Japan is set to be the most hybrid, followed by AirAsia and then Peach.
Spring Airlines, China's largest and most successful low-cost carrier, will follow in the footsteps of AirAsia, Jetstar and Tiger Airways in establishing a pan-Asian strategy to have subsidiaires outside its home market. The first will be in Japan. While Japan already has local AirAsia and Jetstar subsidiaries and Spring's strategy may appear to be merely copying other carriers' strategies, Spring's strategy is guided by other objectives.
Airlines in mainland China are heavily regulated and direct competition is limited. Establishing a foreign subsidiary, however, will give Spring more transparent regulatory frameworks to work with in order to serve international Chinese routes. The foreign bases also allow flights to third countries. With China to become the largest market for LCCs, Spring has the potential to capitalise internationally on its local awareness as well as offer access to China's domestic network, which remains something of a holy grail for AirAsia and Jetstar. But Spring will face the challenges of sophisticated IT and ancillary revenue, which AirAsia and Jetstar have a large start on.
The 01-Aug-2012 launch of AirAsia Japan, a joint-venture between Malaysia's AirAsia and Japan's All Nippon Airways (ANA) represents more than simply another step in the LCC revolution in Japan. The phenomenon is also rapidly spilling over to neighbouring countries.
Almost as transformational will be the long-term affect on ANA of having exposure to the AirAsia group, a marriage of two of aviation's lucrative talents: the at times far-sighted talent of ANA and the implementation agility of AirAsia. Although starting small, AirAsia CEO Tony Fernandes sniffs a very big upside and it will be no surprise to see new routes and new aircraft added at a faster rate than published.
That results in AirAsia giving a much-needed internationalisation push to ANA, marking the overdue start of a new competitive era for North Asia's legacy carriers. Similar regional relationships are emerging between China Eastern and Jetstar, as well as China Southern with Air France-KLM.
Jetstar Japan became on 03-Jul-2012 the second low-cost carrier to launch domestic services in Japan this year, ushering in a new era not only for Japan but wider North Asia, where progressive policies and support for LCCs have been few.
Coupled with a flurry of recent open skies agreements, Japan’s influence on North Asia will grow as Jetstar Japan targets the launch of international flights from 1H2013 to countries including China, the Philippines, South Korea and Taiwan.
Jetstar Japan will be the last of the new LCCs to launch international services, with Peach having commenced international services in May-2012, two months after its domestic launch, and All Nippon Airways JV AirAsia Japan planning international flights from Oct-2012, two months after its Aug-2012 domestic launch. As the carriers, and Jetstar Japan in particular, grow internationally, the region will change at a greater rate than some incumbent airlines and countries have the bandwidth to support.