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Jetstar Japan is a joint venture between Qantas Airways, Japan Airlines and Mitsubishi Corporation. The carrier operates from its hub at Tokyo Narita International Airport, with a secondary base at Osaka Kansai. The LCC operates domestic services to cities including Fukuoka, Okinawa and Sapporo. Jetstar Japan's fleet of Airbus A320 aircraft are sourced from affiliate Qantas Airways.
Location of Jetstar Japan main hub (Tokyo Narita Airport)
LCCs will continue to evolve into hybrids of the original core model. CAPA and OAG consider Jetstar Japan fits the LCC profile and it is included in our reporting on this basis. Please note: when reporting for an airline is changed from or to LCC the historical data is not affected and it can lead to a distortion in the current reported data. Contact us if you have any queries.
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AirAsia will re-enter Japan in 2015 more experienced about partnership and Japan market needs. The first AirAsia Japan has been a good learning trajectory and the lessons learned from working with majority owner All Nippon Airways have translated to a new partnership profile that avoids a Japan airline JV. AirAsia Japan Mk II – the country’s fifth LCC since 2012 – will have four local investors, with none holding a majority share – and who are more likely to be happy to go along with AirAsia’s low cost philosophy.
One investor, web travel giant Rakuten, establishes the intriguing scenario of entrepreneurs at AirAsia Japan and Skymark trying to take on the ANA and JAL establishment in Asia’s second-largest domestic market where fares are absurdly out of kilter with global practice. Hybrid and LCC penetration was approximately 19% in FY2013, but the new LCCs – with truly low cost bases – still had only a 13% share. There is room still for major change.
AirAsia Japan will re-enter probably to be based at Nagoya, which has no LCC competition (for now) and no curfew, unlike its former base of Tokyo Narita. AirAsia Japan will also be painfully aware of the importance of near-perfect punctuality in Japan and user-friendly website design, where it stumbled the first time around. It will follow a relatively modest time frame for establishment this time too, recognsing the quirky processes – formal and informal – that plague Japan's aviation administration. AirAsia and ANA (with Vanilla) are each reattempting an LCC. If allowed its head, the new AirAsia Japan holds considerable promise.
Jetstar Japan has finally opened its second base at Osaka Kansai, becoming the first Japanese LCC to have a second base. First mooted in mid-2012 for an Oct-2012 launch, Jetstar Japan has had to delay the base primarily for falling on the bad side of Japan's regulator over not following its internal maintenance procedures. Jetstar Japan has been flying to and from Osaka Kansai but had been unable to establish a maintenance and engineering base that would allow for more flexible operations.
Jetstar Japan is growing Osaka Kansai capacity by 53% but only by adding services on its existing four routes. All four destinations – Fukuoka, Naha, Sapporo and Tokyo Narita – have service from Kansai-based Peach. Peach will have a larger presence in all of those markets except Tokyo Narita. Peach also serves other domestic destinations from Kansai and has an international network; Jetstar Japan is only domestic and is Japan's fourth-largest domestic carrier.
The Kansai base is critical to boosting Jetstar Japan's utilisation, which has significantly lagged its main LCC competitor Peach.
The new wave of low-cost carriers in Japan are entering their third year of operations, with Peach Aviation passing the milestone in Mar-2014 and Jetstar Japan doing so in Jul-2014. Along with AirAsia Japan (launched in Aug-2012 and re-launched in Dec-2013 as Vanilla Air) and a number of preceding LCCs, they are not only delivering on Japan's objective to raise passenger figures but are seeing LCCs become a serious force in Japan. In the last nine months of 2013 LCCs carried 17% of passengers in Japan's domestic market while for the first three months of 2014 they offer 24% – nearly one quarter – of available seat capacity, according to OAG.
The three new LCCs – Peach, Jetstar and Vanilla – carried 6% of traffic. While depressed from the AirAsia/Vanilla switch, it marks a start for the first carriers to eliminate all frills, unlike predecessors such as Skymark, which alone carried 7% of traffic. The adoption to LCCs in Japan is slow, and there were some early painful lessons, but growth is near-guaranteed. Jetstar Japan added nearly as many seats as JAL while Peach added nearly as many seats as ANA. Meanwhile ANA and JAL project long-term decreases in Japan's domestic market. Further, Jun-2014 sees the launch of Spring Airlines Japan with domestic flights and in the future international services, mainly to China. This is the first (but will not be the last) international JV for China's Spring Airlines. AirAsia is also looking to re-enter. However, five new LCCs plus three existing mean excessive market fragmentation.
Although it may challenge the epithet that airlines never die in Japan, consolidation is in order. But more importantly, until prevailing legacy attitudes are redirected towards supporting economic expansion goals, LCCs will continue to labour under unnecessary handicaps.
Whisper it quietly, but Japan's low-cost carriers appear to be cannibalising traffic at All Nippon Airways and Japan Airlines. ANA and JAL carried 19% fewer passengers between Osaka and Sapporo in 2012 than 2010 despite the overall market growing 20%. This goes against the story all parties tell that LCCs are only increasing, not cannibalising, volumes. The cannibalisation is confined, so far, but there are signs of concern. ANA and JAL saw reduced traffic in 2012 on overlapping LCC routes despite overall 2012 traffic being the strongest in nearly five years.
ANA and JAL are responding differently to LCCs. The nuances reflect their wider outlook – and fears. JAL is more aggressively cutting capacity on overlapping LCC routes while ANA is sometimes growing. In the medium-term, JAL expects to cut overall domestic capacity in line with the country's shrinking nature while ANA plans growth. JAL's cuts have been rewarded with higher load factors while ANA's growth has seen lower load factors, but all load factors need improvement.
All Nippon Airways chose the name "Vanilla Air" for its LCC in part for Vanilla Air's popularity, simplicity and inoffensive connotation. Those characteristics will be the initial theme for Vanilla Air's route network, as the carrier largely sticks to the network created by AirAsia Japan, the JV that will end operations in Oct-2013 before re-branding to Vanilla Air in Nov-2013.
Vanilla Air's initial route network from its Tokyo Narita hub will include Okinawa, Sapporo, Seoul Incheon and Taipei Taoyuan. Vanilla intends to later launch services to beach markets like Guam and Saipan. ANA ended Guam services in 2009 and has not served Saipan in recent history.
A later phase could see Vanilla Air serve Indonesia and other points within eight hours' flying, which will presumably require an aircraft other than the A320 Vanilla plans to launch with. Vanilla has flagged that A330 operations could be a possibility in the future. This raises concern as Vanilla Air will already be challenged to achieve a strict cost base and have efficient operations. With plans to offer free checked luggage to all passengers, Vanilla Air may be morphing from a low-cost carrier to a hybrid leisure carrier. But, unless a clear vision is specified from the start, erosion of low cost objectives will be inevitable.
Jetstar Japan has secured its position as the largest of the low-cost carriers that launched in Japan in 2012. But this size has come at a price. Jetstar Japan perhaps under-estimated the limitations posed by its home base Tokyo Narita's curfew.
While Jetstar Japan's punctuality has been in line with global averages, Japanese legacy carriers have created expectations in the market with extraordinarily high on-time performance and low cancellation rates. While that makes ANA and JAL super reliable, it also inflates their cost base. But the market, in an all too typical tale, has demanded the the same reliability but with the lower fares. Another growing pain was issues over safety procedures, leading it to voluntarily put a hold on growth.
But now Jetstar Japan has adjusted to its market and is looking forward, as CEO Miyuki Suzuki told CAPA's recent LCCs and New Age Airlines Summit in Seoul. An Osaka Kansai base and international operations have been put on hold. Jetstar Japan has been handed a considerable opportunity by the situation at AirAsia Japan, also based at Narita. AirAsia Japan will suspend operations in Nov-2013 and re-launch in Dec-2013 as Vanilla Air, bringing to ANA not just a new name but new strategy as Vanilla, like half-sister Peach Aviation, places more emphasis on international flights than on domestic. That leaves the new LCC domestic market to Jetstar Japan. Its next competitor, Skymark, will be distracted in 2014 as it takes A330s and A380s, moving away from being an LCC to more of a hybrid operation.
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