Peach Aviation investor First Eastern Investment's chairman Victor Chu reportedly stated he wanted to open up mainland China routes from Kansai International Airport with Peach Aviation within three to five years (South China Morning Post/NNA Asia, 05/06-Aug-2011). He said the routes to China would include Beijing, Dalian and Shanghai. Mr Chu said that while Peach is a short-haul LCC, the newly created AirAsia Japan by ANA and AirAsia is a short and medium-route LCC and stressed that Peach had quite different features from AirAsia Japan. He however stated that he is concerned that AirAsia was opposing Peach entrance to Tokyo Narita International Airport at where AirAsia Japan will establish its base. He also commented that AirAsia Japan’s staff cost would be higher due to the labour issue, which did not affect Peach. He also stressed the advantage of Peach by saying it has a strong support from Kansai International Airport where it is based. Peach’s investors are ANA (33.4%) and FEI (33.3%) plus other Japanese investors (33.3%).
Peach Aviation investor wants China mainland routes
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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.
AirAsia exploring future opportunities in Northeast Asia: Chinese affiliate enticing, but difficult
AirAsia is doubling down its focus on North Asia with a regional office in Hong Kong overseen by former AirAsia executive Kathleen Tan, who is widely credited for AirAsia's strong Chinese relations and growth in China: AirAsia is the largest non-greater China airline company in the country. Across North Asia the opportunities are large, but the challenges equally big. A China-based AirAsia affiliate would appear to be a long term ambition.
More immediately, AirAsia is regaining a local Northeast Asia presence with the launch of AirAsia Japan Mk II in 2017. Although delayed from initial 2015 start-up projections, AirAsia Japan gives the group relevance in a large domestic market and significantly growing short haul international market.
Elsewhere in Northeast Asia the opportunities are mixed. Korea and Hong Kong are becoming saturated and remain protectionist. Macau and Taiwan are unlikely to be big enough to support a local AirAsia unit.