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.