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New LCC Market starting in Japan
Japan’s airline industry is set for a major transformation in 2012 with the debut of three low-cost carriers, as airline executives bet that there is enough demand to match the sudden emergence of a competitive LCC market.
Japan is a late arrival on the low-cost scene compared to other mature airline markets. It has had only a few locally based carriers—most notably Skymark Airlines—offering low-cost service, but now both Japan Airlines (JAL) and All Nippon Airways (ANA) are setting up joint-venture LCCs.
ANA is one of the partners launching Peach Aviation in March, and is also teaming with Malaysia-based AirAsia to debut AirAsia Japan in August. JAL will introduce Jetstar Japan by the end of 2012 in partnership with Qantas subsidiary Jetstar. The main battleground will be Tokyo Narita International Airport, where AirAsia Japan will go head-to-head with Jetstar Japan as well as new service from Skymark.
The Jetstar and AirAsia branded LCCs are drawing heavily on their overseas partners’ expertise in low-cost operations. JAL will not participate actively in setting up Jetstar Japan’s business model or in its operations, says JAL President Masaru Onishi. The business plan will be determined more by the Jetstar Group. JAL was not involved in selecting the CEO of the Japanese startup, who is from outside the airline industry.
While ANA is also relying on its overseas partner’s low-cost savvy, AirAsia Japan CEO Kazuyuki Iwakata is an ANA veteran, and about 20 other ANA employees have been seconded to get the carrier started. However, Iwakata notes that recruiting from outside ANA has now begun.
Iwakata says that while help from ANA specialists is required to set up the LCC, it is vital that the full-service culture is not transferred from ANA. “The most important thing for us is the LCC culture, and we’re learning a lot about that from AirAsia,” he says.
The three new LCCs will each begin with just a handful of aircraft, but have ambitious growth plans. AirAsia Japan, for example, plans to have four Airbus A320s by the end of 2012, and expects the fleet to increase to 30 in 2016. This will include A330s from 2013 for medium- and long-haul international flights.
AirAsia Japan’s goal is to be carrying more than 10 million passengers annually within five years. Iwakata says this is an achievable target, as the “Japanese LCC market potential is huge.”
