LCCs in North Asia: low average LCC penetration disguises achievements and intense competition

Northeast Asia is often thought of as a laggard for LCC development. After all, 11% of seats within the region are operated by LCCs compared with 56% in Southeast Asia and 40% in Western Europe. But attendees at CAPA's LCCs in North Asia summit at Tokyo Narita (7/8-Jun-2016) heard how these figures disguise significant inroads in certain markets: LCCs account for 40% of domestic Korea capacity, 38% of Japan-Korea and 30% of Taipei Taoyuan-Osaka Kansai.

CEOs from LCCs in Japan, Korea, mainland China, Hong Kong and Taiwan attested to their opportunities but also the challenges. Restrictive slots and traffic rights were a common theme and so too were protectionism, a slowly evolving regulator, and airspace constraints. Northeast Asian LCCs exclusively make up the U-Fly Alliance, while Northeast, Southeast and Australian LCCs are members of the Value Alliance. Southeast Asia is characterised by joint venture airlines operating with a single brand while Northeast Asia has more independent airlines.

LCCs gaining market share in the domestic China market will have the greatest impact on the region's overall share. Asia's airlines have varying strategies to access China growth. By deploying LCCs, Singapore Airlines serves more Chinese destinations than Cathay Pacific.