LCCs reach 10% market share in domestic Japan. Partnerships become likely - but complex

LCCs are making ground in the world's fifth largest domestic market: Japan, which is also Asia's third largest domestic market after China and Indonesia.

The current wave of LCCs was launched in 2012 and today they hold 10% market share in Japan, where sceptics long said LCCs could not work, or be profitable. Now LCCs soon are likely to surpass Japan's "New Age" airlines, which launched in the 2000s but have plateaued.

Further LCC growth can be unlocked, but consolidation - or at least some form of cooperation - is increasingly a topic. There are four LCCs, with a fifth on the way. The LCCs once only operated from their home bases, but increasingly are overlapping.

Peach will likely retain its position as its sister ANA LCC Vanilla Air transitions to a medium/long haul platform for ANA to experiment with. Jetstar Japan and Spring Japan could leverage each other's domestic Japan and Japan-China strength. AirAsia Japan, waiting to launch, will seek scale on its own.