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Wednesday, Oct. 10, 2012

Era of low-cost flying finally generating lift

Despite sacrifices, no-frills carriers find fans, at least for the short haul


NARITA, Chiba Pref. — Japanese have a reputation for loving expensive things like overpriced real estate, gourmet melons and, among the many, French and Italian luxury brands. But the nation is finally discovering the joy of flying cheap, with the arrival this year of three low-cost carriers.

The takeoff of AirAsia Japan, Peach Aviation and Jetstar Japan could change lifestyles. No longer will air travel be mostly confined to business trips and fancy once-in-a-lifetime vacations to places such as Hawaii.

Flying is suddenly growing more casual, including for weekend dining, visits with friends, even day trips. Ticket prices are plunging by about half, to ¥16,000 trips to the island of Okinawa or a ¥5,000 hop to Seoul.

The airlines are not only out to woo Japanese away from regular leisure activities such as going to Disneyland or watching a movie. They are also out to convince the notoriously workaholic Japanese not to work so hard.

They may revitalize Japan's ¥3 trillion aviation market — already the world's third-largest, comprising about 5.5 percent of global traffic and 11 percent of industry revenues — that critics say is untapped for its tremendous potential.

Helping to drive the change is the expansion of the two Tokyo airports, Haneda and Narita, which opened up more landing slots.

Graduate student Chie Kodama, 22, recently used Jetstar for an urban-planning research trip to Okinawa, and was surprised at how the planes were "normal," like any other airline's.

"And it is so cheap you forgive any shortcomings," she said.

As with other low-cost carriers around the world, fliers get charged for meals and extra luggage. Efficiency is critical and so the airlines use online advertising and reservations, fit more seats into each jet, and take off quickly after landing.

Booking early is a must for the best deals, and refunds and schedule changes are not allowed. The gates are typically at the farthest end of airports. Flights are sometimes delayed. The wait feels longer as LCC users have to check in extra early.

Masato Yamaguchi, 22, said his friends had to run like mad when their AirAsia flight back to Tokyo from Okinawa was delayed, and they barely had time to catch the last bus.

As he noted: What would be the point of having to pay several thousand yen for a cab home, if they had endured the cramped space of a low-cost carrier to pinch pennies?

"There was no way to cross your legs," Yamaguchi grumbled. "You wouldn't want to use it if you're going someplace far away."

Still, the carriers are doing well, so far.

During the Bon holidays in mid-August, domestic flights at Peach were 94 percent filled, those at AirAsia were at 91 percent and at Jetstar, 89 percent. The companies are hoping to do as well for the yearend and New Year's holidays.

"It's not that the meals on standard fares were ever free. The charge was just part of the ticket price," Kazuyuki Iwakata, president of AirAsia Japan, said. "With us, people pay only for what they need."

As a marketing ploy, Air- Asia Japan, which started operations in August, offered tickets for just ¥5 to the first 10,000 people. As might be expected, they sold out very quickly.

During the go-go "bubble years" of the late 1980s and early 1990s, Japanese were especially seen as finicky consumers who delighted in ¥3,000 cups of fancy coffee and snatched up ¥500,000 designer bags.

Such spending has lost some of its glamor as Japanese become less status-conscious, perhaps poorer and looking for discounts. Such shifts in consumer tastes are underlined in the popularity, for instance, of Fast Retailing Co.'s no-nonsense Uniqlo clothing chain, which is also opening shops in the United States.

Geoffrey Tudor, analyst with Japan Aviation Management Research, said low-cost carriers are introducing the fun of flying to young people and retirees. They are also popular with families who live apart to juggle work assignments and children's education needs — a practice so widespread a special phrase has been coined to describe it, "tanshin funin."

Jetstar Japan Chief Executive Miyuki Suzuki said a tenth of those who use her carrier are first-time fliers.

"We aim to grow the piece of the pie," she said recently. "People can travel more for less and have many more experiences."

Jetstar Japan is a third owned by Australia's Qantas Airways Ltd. and a third owned by Japan Airlines Co., which is making a soaring comeback, thanks to a ¥350 billion government bailout from bankruptcy two years ago and generous tax breaks that continue for several years. Mitsubishi Corp. and Century Tokyo Leasing Corp. are its other shareholders, with 16.7 percent each.

AirAsia Japan is 49 percent owned by AirAsia, a Malaysian low-cost carrier founded in 1993, whose motto is "Now everyone can fly," and 51 percent by All Nippon Airways Co., JAL's rival.

ANA is also a 38.7 percent investor in Peach, a joint venture with Hong Kong investment group, First Eastern Aviation Holdings. Peach offers flights out of Kansai International Airport in Osaka.

AirAsia Japan offers flights out of Narita to Sapporo, Fukuoka and Okinawa, and plans to start them to Seoul and Busan, South Korea, later this year. Plans for flights to the Philippines and Guam are in the works as well.

While expanding Haneda has given a boost to the airline travel market, officials say more needs to be done. Landing fees at Japanese airports are among the highest in the world, endangering Tokyo's role as an Asian hub.

Tony Tyler, director and chief executive of the International Air Transport Association, said all carriers need to lower costs if they hope to survive, but he is upbeat about Japanese LCCs.

"In many parts of the world, the low-fare sector has tapped into demand from new market sectors. So they have grown the market, rather than cannibalized it," he said.

Also sold on low-cost carriers was Hirotaka Yamamoto, 22, who goes to college in Tokyo but hails from Hokkaido. He surprised his parents over the summer by going home, thanks to the ¥24,000 round-trip fare on Jetstar, less than half of what he paid in the past.

"They were surprised to see me and so happy," he said. "I hope the tickets keep getting even cheaper."

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