OSAKA – With the airline industry struggling amid the coronavirus pandemic, the situation is particularly worrisome for low-cost airlines, which rely on high seat occupancy and aircraft operating rates.
As they resume more flights that have been grounded since February, some are using their aircraft for cargo transportation and others are trying to balance infection prevention with profitability until social distancing rules can be safely eased and air traffic demand returns to pre-pandemic levels.
But some aviation industry experts say that low-cost carriers will likely need to start devising new business strategies instead of just weathering the storm by hoping that demand will eventually come back.
Peach Aviation Ltd., a group company of ANA Holdings Inc., plans to resume services on all of its domestic routes by June 19 after having drastically reduced its schedule, while Jetstar Japan Co., a budget carrier affiliated with Japan Airlines Co., is also restoring flights in stages following extensive cancellations.
The two carriers are both asking passengers to wear face masks and suspending all in-flight sales, but elsewhere they are taking a slightly different approach to preventing virus infections among passengers.
Jetstar will not take reservations for middle seats, the same preventive measure taken by Japan Airlines, though its officials say the arrangement is "a temporary response" that will be impossible to sustain unless it gives up the low-cost business model and raises fares.
Peach Aviation is not taking special measures for customer spacing, saying its aircraft have sophisticated ventilation systems, though industry officials say it will still be hard to make profits with the current level of air travel demand.
Jetstar Japan and Peach Aviation are not facing dire financial troubles as their parent firms Japan Airlines and ANA say they have enough funding to deal with the current crisis, but they still face a long road to full service resumption.
"The seat occupancy rate which low-cost carriers need to make a profit is considered to be between 70 and 80 percent," said Yasuhito Tsuchiya, a senior analyst at Mitsubishi UFJ Morgan Stanley Securities Co.
In June, the number of domestic flights Jetstar Japan plans to operate will be only 10 percent of the pre-pandemic level, while that of Peach Aviation will be just above 30 percent, according to the airlines.
Tsuchiya said that a possible path for budget airlines' survival is to more closely coordinate services with their parent companies by opening up routes not covered by the big carriers.
"They have to depart from the low-price-first strategy and offer more value to passengers, such as improved quality of services … though such a business shift is very tough in this situation," he added.
Earlier this month, Zipair Tokyo Inc., a wholly owned budget carrier unit of Japan Airline Co., made its maiden flight, carrying cargo, instead of passengers, from Narita Airport to Bangkok via a Boeing 787 jet.
"Low-cost airlines have to survive through measures including turning part of their services to cargo flights for a while," said Tomohiko Nakamura, a professor at Kobe International University well-versed in the aviation business.
"It will take a long time for demand (for passenger flights) to recover to levels before the pandemic. Low-cost flights could well become a thing of the past."
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