Japan Airlines takes its international low-cost expansion into long-haul markets, but are we on the verge of domestic LCC consolidation?

This week Japan Airlines (JAL) has confirmed its expansion into the low cost long haul market with the confirmation that it will establish a new subsidiary business to launch medium- and long-haul flights. It aims to tap into a growing market for budget air travel in Asia and will serve a network across Asia and into Europe and the Americas from Narita International Airport.

The as-yet unnamed venture will be formally launched in the coming months and will begin operations in 2020 using two Boeing 787-8 Dreamliners. JAL says it will invest  between JPY10-20 billion in the start-up with the aim of reaching profitability within three years from the launch.

After first coming on to the scene in 2012, Japanese LCCs have steadily increased their share of the market, and now carry one in ten domestic passengers – a significant achievement when viewed in the context of infrastructure constraints and the stickiness of Japanese consumers to the full service incumbents.

The country’s LCCs may be seeking greener pastures in international markets but overlapping operations and the recent addition of a fifth LCC in the form of AirAsia Japan has brought up various consolidation scenarios and questions of whether the local market is saturated.

This raises some clear questions…

  • Is there a need for rationalisation in the domestic market and what form could this take?
  • What are the potential partnership opportunities between Japan’s LCCs?
  • What does ANA in particular need to do to differentiate between the two LCCs it owns, Peach and Vanilla?

This will be one of the topic areas discussed at the forthcoming CAPA- Centre for Aviation LCCs in North Asia event which makes a return to Seoul, South Korea for its 2018 edition on 11-Jun-2018 and 12-Jun-2018.

Understanding aviation markets is CAPA’s great strength and passion and this year’s agenda includes a variety of topics sure to generate interest.  Japan: international growth – and consolidation? will be the opening panel of the afternoon session of the Seoul forum on 11-Jun-2018.

It’s hardly a secret that the airline industry is facing myriad challenges, notably in the marketing and distribution areas, as companies with personalised data, and the analytics and artificial intelligence to go with it, become greater threats to the stability of the traditional airline model.

Despite lacking the seat penetration rate of peers in other markets, with about 11% of seats within North Asia operated by LCCs compared with 56% in Southeast Asia and 40% in Western Europe, LCCs are beginning to flourish in this region. The LCC model may now be well understood here, but the operating environment is increasingly complex, competitive and interconnected. Long haul low cost, full service airlines adding LCC subsidiaries, and many other developments are high on the agenda.

This high-level aviation event, hosted at The Grand Hilton Seoul, around 15 minutes from downtown Seoul, is a forum for debate and discussion of strategic issues facing the LCC industry in North Asia.

FIND OUT MORE… visit the CAPA LCCs in North Asia 2018 homepage to find out more about this not-to-be-missed opportunity to discuss relevant issues impacting the aviation sector and learn meaningful insights from your industry peers.