Low-cost carriers are carving out an increasing portion of
the market in Japan, though legacy carriers still maintain a more dominant
position there than in much of the rest of the world. In Northeast Asia, LCCs account
for just 13 percent of market share, CAPA North Asia and Middle East senior
analyst Will Horton said at the Association of Corporate Travel Executives
conference in Tokyo. While that's two percentage points higher than a year ago,
it remains well below other regions. LCCs have 51 percent of market share in
Southwest Asia, 44 percent in Western Europe and 33 percent in North America,
for example.
Even so, LCCs in Northeast Asia have grown their available
seats at a greater percentage than full-service carriers year over year, Horton
said. On a few select routes, such as Japan-Korea, they account for nearly half
the market share, according to CAPA.
Within Japan, LCCs remain a new concept thanks to
regulations and the culture's traditional scorn for the idea of
"budget" or "cheap." That began to change in 2012 with entrants
like Jetstar, Peach, Spring and Vanilla Air. All except Spring are owned at
some level by either ANA or Japan Airlines. Those LCCs have built capacity over
the past few years as ANA's and JAL's have remained flat. LCCs now represent
about 10 percent of airline capacity in Japan, Horton said.
LCCs are attracting business travelers, as well. Jetstar
chairman and representative director Masaru Kataoka said the carrier was
surprised to discover that 20 percent of their passengers were traveling on
business, according to a survey. As such, the carrier, which has grown to 21
aircraft over its first five years and expects to reach 28 by 2019, developed a
FlexiBiz bundle for business travelers, which includes premium seat selection,
extra carry-on baggage and flexibility with changes. "We didn't expect such
a large amount of passengers, so we decided to develop this kind of
environment," he said. "Although we are an LCC, we believe we have an
opportunity to grow this segment."
JAL VP and head of global sales Steve Smith said that while
Japan LCCs remain in their "infancy," he expects them to become a
growing force in Japan the way they have in Southeast Asia. "There's no
way to stop the disruption of LCCs; it's just a question of how you are going
to manage it," Smith said. "It's almost like a brand-new market
because they've got a lot of people who are doing business in Japan that are in
the small business category. That's a market we really all have not touched as
good as we can."
Tech companies with cost-focused travel policies have been
the most natural clientele for Japanese LCCs, while investment banking firms,
media and pharmaceutical companies remain resistant to their use for business
travel, he added.
Of course, their penetration into the corporate travel market
also will depend on how easy it is to book LCCs through corporate travel
channels. IBM Asia/Pacific airline lead Takahide Tanaka said his company
supports use of LCCs so long as they meet its safety requirements. However, India
is the only market in the region with which IBM is working closely with such
carriers.
Walmart
director of global travel in Asia Robert Alvey faced a similar challenge: "It
comes back to safety and security, where we have travelers booking through the
TMC to capture that data. The way it is distributed and the way agencies
provide that content to corporate travelers is very different in Japan."