LCCs to hold one-fifth domestic market share in Japan by Oct-2012 and possibly 50% by end of decade

The previously unfathomable scenario of a strong role for low-cost carriers in Japan is quickly becoming reality following government liberalisation. LCCs in Oct-2012 will account for the largest percentage yet of available seats in Japan's domestic market with a 19% share, or nearly one-fifth. Based on current capacity forecasts, CAPA expects that LCCs could account for half of all domestic seats in Japan by the end of the decade. This represents rapid growth in a market that had single digit LCC penetration rates for the last decade.

These seismic changes will not be absorbed without significant ramifications to the incumbents. All Nippon Airways (ANA) and Japan Airlines (JAL) are planning to reduce their domestic capacity, but only by a fraction. Skymark, the largest LCC in Japan, may position itself upwards as a hybrid carrier to combat its higher operating cost and also to better feed its forthcoming long-haul flights. Some of the remaining incumbents, largely high-cost but low-fare carriers, may pursue alignment or consolidation with others.