Opening Remarks
Makoto Washizu
President, Japan International Transport Institute
鷲頭 誠 国際問題研究所 所長
２０１１年10月11日 JITI設立20周年記念セミナー

Topics of Today’s Seminary Present situation and prospect of the Aviation market ,including those in Asia and Japan, in which LCCs are
growing rapidlyy The impact of the LCC’s expansion on tourism (especiallyon inbound tourism)

Before starting these speeches…
… brief overview of the present situation of LCCs
２０１１年10月11日 JITI設立20周年記念セミナー

2LCC’s business modely Increased asset utilization (flying the aircraft more hoursper day)y Differentiated product(far more seats inside the aircraft
and /or a ‘no frills’ or ancillary revenue driven servicemodel)y A primarily direct selling modely Greater labor productivity

２０１１年10月11日 JITI設立20周年記念セミナー

3

LCC’s business model
Key Features of LCC and Legacy Carriers

FeatureLow Cost Carrier

Legacy Carrier

Cost baseLow costs (US 4-6 cents/ASK), highproductivity

High costs(US 12+ cents/ASK), lower
productivity

Air fares

Relatively few fare classes, simple farerules

Wide range of fare classes, numerous andcomplex restrictions

NetworkSimple point-to-point network; little or noconnectivity

Hub-and-spoke network with convenientconnections

AircraftNewer aircraft of one type, high utilization
rates

Range of aircraft types and ages, lower
utilization rates

Frequencies

Limited frequencies, flights often at off-peak Numerous frequencies at peak times
times

Employees

Individual employment agreements,performance incentives, flexible terms andconditions

ProductSingle class. No lounges or loyalty
Economy and premium class(es). Fare
programs. Inflight meals, entertainment and includes inflight meals, entertainment andamenities. Loyalty programs and access toamenities on a pay-for-use basis
lounges

Unionised workforce, restrictive terms andconditions, higher labour costs

２０１１年10月11日 JITI設立20周年記念セミナー

4Global growth of LCCs
Global LCC Capacity as a proportion of Total Capacity

Source: IATA SRS Analyser, CAPA Analysis

２０１１年10月11日 JITI設立20周年記念セミナー

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LCC’s growth in Asia‐Pacific region• The growth of LCCs in the Asia‐Pacific market has been

rapid.(The proportion of LCC’s capacity in Asia market hasbeen 16 time in this 10 years.)Asia‐Pacific LCC capacity as a proportion of total capacity

Source: IATA SRS Analyser, CAPA Analysis

２０１１年10月11日 JITI設立20周年記念セミナー

6Effects of LCC’s expansion(1)1. Decline of air fare level through competition
2. Provide travel opportunities to a broader range ofconsumers, thereby increase tourism
3. Open up city pairs that were not previously serviced
by legacy carriers

bring benefit to consumers, local economiesand (or) regional airports
２０１１年10月11日 JITI設立20周年記念セミナー

7Effects of LCC’s expansion (2)y Singapore – Kuala Lumpur case¾ LCC entered into the market and the flight fare was

reduced drastically ‐‐‐ from 400S$ to 100S$.
（The number of tourists increased 34% in 2009.）

y US domestic routes case
¾ A study by Northeastern University showed that the fares

where Southwest serves a route are 46% lower than oncomparable routes Southwest does not serve.

２０１１年10月11日 JITI設立20周年記念セミナー

8Effects of LCC’s expansion (3)Source of German LCC passengers (2004)
Other

4%

Shift from legacy

37%

59%
Newpassengers

42%

9%
3%
5%

Otherwise
would nothave
travelled
Otherwise
travelled by car
Otherwisetravelled by rail
Other

Source: EuroMed Transport Aviation Project, “The Business of Low Cost Carriers andTheir Impact on the Industry” TNS Infratest; Monitor Group Analysis, Hapag Lloyd

２０１１年10月11日 JITI設立20周年記念セミナー

9z Inbound tourism to Japan was heavily damaged
due to the Tohoku Earthquake.
The number of the overseas visitors to Japan-36.1%

2010
2011-62.5%-50.4%-36.0%-72.7%

Mar 12 ～31

AprilMay

JunJUL

Source:Japan Tourism Agency

zThe countermeasure for the recovery of inboundtourism to Japan is sincerely welcomed.
２０１１年10月11日 JITI設立20周年記念セミナー

LCCs growth in Japan
LCCs operating overseas to/from Japan(as of Aug.2011)

CountryAirline

Operating route (to/in Japan)

Japan

Peach Aviation

Kansai=Shin Chitose,Fukuoka,Incheon（planned)

Air Asia Japan

Not announced

Jetstar Japan

Not announced

Jeju Air

Kansai=Incheon,Gimpo, Jeju,
Kitakyushu=Incheon, Chubu=Gimpo

Air Busan

Fukuoka,Kansai,Narita=Busan

Jin Air

Shin Chitose=Incheon

Eastar Jet

Shin Chitose, Narita=Incheon

Singapore

Jetstar Asia

Kansai=Taipei=Singapore

Malaysia

Air Asia X

Haneda=Kuala Lumpur, Kansai=Kuala Lumpur(planned)

the PhilippineｓCebu Pacific Air

Kansai=Manila

Australia

Jetstar Airways

Narita=Gold Coast, Cairns, Kansai=Gold Coast,
Cairns‐Kansai‐Cairns‐Sydney,Sydney‐Cairns‐Kansai‐Cairns

China

Spring Airlines

Shanghai=Ibaraki, Takamatsu

Korea※Programmed charter２０１１年10月11日 JITI設立20周年記念セミナー

11Today’s speakers
y Dr.Kenneth Button
Professor, School of Public Policy, George Mason University“The Present and Future of the World Aviation Market”

y Mr.Bruce BuchananCEO, JETSTAR group“The Future of the Asian Aviation Market”

y Mr.Shinichi Inoue
CEO, Peach Aviation“The Vision of Japanese LCC”

y Dr.Tadanori Hara
Associate Dean & Associate Professor,
Rosen College of Hospitality Management, University of Central Florida“The Impact of the Expansion of LCCs on Inbound Tourism”
２０１１年10月11日 JITI設立20周年記念セミナー

12The seminar starts NOW.
２０１１年10月11日 JITI設立20周年記念セミナー

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