The growing number of low-cost carriers in Asia in recent years is putting pressure on Japan to reform its commercial aviation system.
Two South Korean LCCs have expanded their routes to include service to and from Japan this year, following similar moves by Chinese and Malaysian low-fare airlines last year. Another South Korean LCC is set to start service to Japan in mid-July. Clearly, Asian LCC operators are striving to secure significant shares of the Japanese airline market.
The booming LCC business is the tide of the times everywhere in the world. For instance, LCC passengers account for 30 percent to 40 percent of air travellers in the United States and Europe. The LCC industry is also one of the most rapidly expanding businesses in Asia.
LCC airlines have employed every possible means to reduce their operational costs. Their cost-cutting measures include using a single model of small aircraft to minimize maintenance time and shorten airport stays. Money saved through such steps makes it possible to lower fares.
Last year, a Chinese LCC drew a great deal of public attention with its extremely low fares, including 4,000 yen tickets on its Shanghai-Ibaraki route.
One important factor behind the popularity of LCCs is that such airlines are required to abide by safety standards comparable to those followed by major carriers.
LCCs are viewed with disdain by some Japanese who place greater importance on quality service than on fares, a factor that may explain why domestic airlines are operating at high costs and their high fares are generally accepted.
However, it should be noted that the growth of LCCs could rejuvenate Japan’s airline industry if the fact that their entry into the market offers more options for consumers is taken into consideration.
Peach Aviation ― a new LCC funded by All Nippon Airways and other entities ― is preparing to go into service as Japan’s first LCC next spring. Meanwhile, Japan Airlines is considering joining hands with an Australian carrier to enter the LCC market. We find it commendable that domestic airlines are finally trying to compete with Asian LCCs.
Peach has come out with an unusual business strategy that could change the popular image of airlines. For example, the new LCC is planning to adopt an aircraft model with an unconventional design on its fuselage and casual uniforms for its crew members.
Peach will be headquartered at Kansai Airport, from which it will begin serving routes to and from Sapporo and Fukuoka in March, and Incheon, South Korea, in May. The new LCC carrier hopes to target young people as its main customers by setting their fares at about half of those charged by major airlines.
There has been a rapid decline in the number of foreign visitors to Japan due to the ongoing nuclear crisis. However, there is great demand in Asian countries for flight services to foreign destinations as their economies continue to grow.
Taking advantage of its Asian neighbors’ economic vitality is certain to give fresh impetus to Japan’s efforts to reinvigorate its own economy. Given this, the government must encourage the domestic LCC business and improve its preparedness to serve low-fare airlines. Doing so will be essential in reworking the government’s post-quake growth strategy.
Another important issue is the degree to which a major carrier should be involved in operations at an LCC in which it has stake. One foreign LCC has failed as a result of excessive interference in its business administration by a major airline.
With this in mind, Peach needs to limit ANA’s presence as much as possible in its business operation while also securing the safety of its flight services. This must be complemented by efforts to attract customers through its own fee system and flight routes.
Expanding the LCC business requires the support of government offices in charge of civil aviation. We hope the government will provide the LCC industry with various forms of support, including an increase in the number of arrival and departure slots. Assistance measures should also include efforts to ensure airport and navigation service fees, as well as landing fees and aircraft fuel taxes, are set at lower levels.
The operator of Kansai Airport has improved its business through a reduction in its landing fees and other forms of preferential treatment for airlines. A terminal exclusively for LCCs will also be built at the Kansai facility.
Asian hub airports are competing to see which one can draw the most LCCs to their facilities. Japan must not fall behind in this race.