It might only be a little over a year ago since Japan suffered the worst natural disaster in its recent history, but today the country seems to be on the road to recovery and the aviation industry looks set for a year of unprecedented change and expansion.
Having tested the B787 Dreamliner on domestic flights, flag carrier All Nippon Airlines (ANA) is now pioneering its first long-haul commercial routes, with services to Asia and Europe followed by the US, while Japan Airlines will launch its first B787 service to Boston this month.
But it is in the realm of low-cost travel that some of the biggest changes are set to occur in 2012 with the entry of three new budget carriers into the market – Peach Aviation, AirAsia Japan and Jetstar Japan – heralding a new era of competition and the prospect of a welcome boost to the country’s recovering tourism industry.
It all began on March 1 with Peach Aviation launching its first service from Kansai Airport to Sapporo. Operating a fleet of A320s, the carrier has since built on this with services to Nagasaki on March 25 and Kagoshima on April 1, which it will follow with flights to Seoul and Taiwan later in the year.
As a majority shareholder in both AirAsia Japan and Peach, ANA is taking a lead role in these ventures, as ANA’s president and CEO, Shinichiro Ito, believes the time is now ripe to launch a series of new products into the market.
“Japan’s aviation industry is now entering a period of rapid change,” says Ito. “For some time, ANA has been considering carefully what action needs to be taken at this stage. One of our responses has been to invest in Peach and to establish AirAsia Japan”.
There are several compelling reasons why the carrier is taking this decision now. Not only does Peach stand to benefit from the first ready-made, low-cost terminal in Japan which is being completed at Kansai, but the changing demographics of the country also present opportunities that simply could not be missed.
“Over the next three years, the number of international slots in the Toyko metropolitan area will expand and we expect to see further deregulation of the airline industry and the market entry of various new low-cost carriers and overseas airlines, including some overseas LCCs,” he explains. “Furthermore, as Japan’s population falls and the proportion of elderly people increases, we will see increased competition not only with other airlines, but also with railways and long-distance buses.”
But while the entry of three new LCCs into the Japanese market is unprecedented – this is not the first time ANA, or Japan, has experimented with the no-frills model. In 2004, ANA launched budget carrier Air Next, a 100%-owned subsidiary that operated routes from Fukuoka Airport. Six years later it dissolved Air Next and merged it with its other regional operators – Air Central and ANA Network – to create its regional spin off ANA Wings.
Industry commentators believe that while the LCC is not new to the market, the regulatory and market conditions most certainly are. “Low-cost carriers are not new within the Japanese airline industry. Air Do (Hokkaido-based) and Skymark (Haneda-based) have both been around since the 1990s and have been allowed to co-exist with the JAL and ANA duopoly,” says Wayne Macpherson, Regional Director for North Asia/Japan for Eagle Aviation Consulting.
“A target of 25 million inbound tourists has been set for 2019, with an ultimate target of 30 million, from the present base of eight to nine million. To facilitate growth, the government is working on a number of fronts, including the adoption in many instances of an open skies approach to air service negotiation and ultimately competition on inbound tourism visa regulations,” he adds.
One of the leading drivers for the recent growth of LCCs in Japan appears to be down to the Ministry of Land, Infrastructure, Transport and Tourism (MLIT), Japan’s civil aviation regulator, changing its stance from “on paper” to active deregulation in an attempt to counter the economic impact of recent events,” explains Macpherson.
2012 is also going to be a big year for the B787 in Japan. Following successful trials on scheduled services to Okayama, Hiroshima, Itami, Yamaguchi-Ube and Matsuyama in 2011, ANA launched its first international B787 service from Haneda to Beijing on January 14, followed by Frankfurt on January 21 – a route which Ito admits “would have been impossible without the B787”.
“As the B787 is a highly fuel efficient, medium sized, long-haul aircraft, it presents increased opportunities for new routes to medium-sized cities that would not previously have been viable,” says Ito. “We have seen very high passenger load factors on domestic flights with 95% occupancy, compared to an average for domestic routes of 65%, on B787 flights during the first month it came into service. We have had over 100,000 passengers travel on the B787 since its launch.”
ANA is basing much of its domestic and international expansion on the delivery timetable for the long-haul jet, which will see 20 B787s arrive by the end of 2012. This will allow the Japanese flag carrier to deploy the Dreamliner on at least three additional domestic routes in the later half of 2012 from Haneda to Fukuoka, Kumamoto and Kagoshima.
Of course, ANA’s route development plans do not just revolve solely around the B787, and the airline is also planning a major expansion of its network in 2012. On March 25, ANA resumed suspended services from Chubu to Shanghai, operating daily B737-700 flights until October, while on its existing Narita and Kansai to Beijing routes, ANA is increasing capacity by replacing its A320s and B737s with B767-300ERs.
Negotiations are also taking place to increase the number of flights allowed on the Narita–Beijing and Narita–Shanghai Hongqiao routes. On domestic routes, ANA will start new services between Haneda, Iwakuni and Niigata and reopen its Kansai–Ishigaki, Fukuoka–Sendai, Sapporo–Rishiri and Fukuoka–Miyazaki flights. Elsewhere, ANA is expanding services from Haneda to Hakodate and Komatsu, Itami to Fukuoka, Sendai, Niigata and Oita, by one flight a day.
Much of ANA’s network expansion this year will take place at Toyko Haneda, which has benefited from the completion of a new 2,500m runway and new $1.3 billion international terminal, as part of efforts to shift some of the capital’s international traffic away from congested Narita and handle greater demand.
But while this and a further project to build a 75,000sqm extension to Haneda’s international terminal, which will raise its capacity to 12.5mppa by constructing eight aircraft stands later in 2012, are welcomed by Ito, he remains frustrated that work to improve the facility has not gone further.
“The internalisation of Haneda Airport overall has been successful and the passenger demand to fly from there is very high. But the airport’s capacity, including departure and landing slots, as well as the size of the terminal, is not enough to cover the full demand from airlines. The government is planning to add 30,000 more slots by 2014, but it will also need to enhance its services to compete with other strong airports in Asia, such as Hong Kong, Singapore and Incheon,” Ito warns.
So could the arrival of the new aircraft allow ANA to resume some of its abandoned routes to Australia, Delhi or Milan? Ito is tight-lipped on the airline’s plans but rules nothing out: “We are open to all possibilities. As the B787 presents increased opportunities and more chances to open new routes, if the market shows decent demand, we will take a serious look at it.”
This story appears in the latest issue of Routes News. A copy of the latest issue of the world air service development magazine is available to all delegates at Routes Asia.
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