• SHARE

Despite the emergence of budget airlines that pose a threat to major carriers around the globe, Japanese startup carriers are still struggling to take off, with some already in rehabilitation.

If the Japanese entrants are to succeed, a Canadian aviation expert believes they should put more emphasis on cultivating regional-oriented markets rather than try to compete head-on with the established airlines.

“The primary mission of low-cost carriers is to provide low fares” and serve an untapped market to stimulate new demand, said Tae Oum, a transportation professor at the University of British Columbia and president of the Air Transport Research Society.

Oum was in Tokyo for three months through the end of February to conduct research as a visiting professor at the faculty of economy at the University of Tokyo.

During a recent interview, Oum discussed the differences in approaches between low-cost carriers abroad and startup airlines in Japan.

The world’s leading budget carriers, including Southwest and Jet Blue of the U.S. and Ryanair of Ireland, have made their mark by flying to underutilized secondary airports and appealing to travelers with low fares and unique services.

The emergence of low-cost carriers abroad drastically boosted passenger traffic, but most of the increase came from creating new demand rather than taking customers away from established carriers, he said.

In contrast, Japanese startups Skymark Airlines Co., Hokkaido International Airlines Co., commonly known as Air Do, and Skynet Asia Airways Co. all entered with low fares to serve the profitable trunk routes already dominated by Japan Airlines Corp. and All Nippon Airways Co., Oum pointed out.

Skymark first took to the air in September 1998, flying between Tokyo’s Haneda airport and Fukuoka airport. It was followed by Air Do, which launched a Haneda-Sapporo route in December 1998, and Skynet, which started flying between Haneda and Miyazaki Prefecture. Air Do went bankrupt in 2002, followed by Skynet in 2004. Both are in rehabilitation.

Haneda has the highest passenger volume in Japan, and flights in and out of the airport are cash cows. But given its limited capacity, airlines have been fighting like cats and dogs for the finite number of slots.

Oum said the problem is the excessive centralization of passengers at Haneda and lack of a secondary airport in the Kanto region, which makes it difficult for new carriers to differentiate themselves from the big boys.

Meanwhile, Oum pointed out two other factors that are hindering the success of the startup carriers: policy support from authorities and infrastructure support.

While praising the recent decision by the transport ministry to give startups preference by allocating more slots at Haneda, Oum said the authorities were too slow to act to prevent predatory pricing by existing carriers to force out newcomers.

To counter the low fares offered by Skymark and Air Do, shortly after their launch in 1998, JAL and ANA drastically lowered fares to the same levels for those routes. But it took four years — soon after Skynet’s entry — for the Fair Trade Commission to point out the established carriers’ predatory pricing.

“New carriers are financially weak and will not be able to survive long,” and the first two or three months are vital if they are confronted by such predatory tactics, Oum said.

As for infrastructure support, maintenance is a prominent example. Startup airlines here have no option but to rely on major carriers for the maintenance of their aircraft, which leaves them at a great disadvantage. Abroad, many independent maintenance handlers are available.

But even with the improved environment, Oum said the success of the startup carriers is up to whether they can find their own business model.

“No matter what amount of (outside) support you get, it (means nothing) if you don’t have the right strategy.”

In a time of both misinformation and too much information, quality journalism is more crucial than ever.
By subscribing, you can help us get the story right.

SUBSCRIBE NOW

PHOTO GALLERY (CLICK TO ENLARGE)