Monday, April 23, 2012

Jetstar to intensify aviation battle

(Apr. 23, 2012)

 With Jetstar Japan launching services this summer, competition among it and the nation's two other low-cost carriers and major airlines is likely to be intense.

Jetstar Japan, backed by Japan Airlines and Qantas Airways, announced Tuesday six routes and corresponding fares for flights out of Narita and other airports, which will begin in July and August.

At a press conference in Tokyo, Jetstar Group Chief Executive Officer Bruce Buchanan declared that the new budget carrier's low fares would start a revolution.

Jetstar Japan will operate four flights using Narita Airport as its hub, and two flights originating at Kansai Airport. One-way fares from Narita to New Chitose Airport near Sapporo will range from 4,590 yen to 16,990 yen, while those between Narita and Fukuoka airports will sell for 5,590 yen to 18,990 yen. Both flights are set to go into service on July 3.

Soon after, on July 9, Jetstar will start flights from Narita to Naha and Kansai airports with one-way fares priced from 6,990 yen to 22,990 yen and 3,990 yen to 15,990 yen, respectively.

Jetstar Japan will face competition from two other domestic low-cost carriers: Peach Aviation and AirAsia Japan. Both carriers are backed by All Nippon Airways and other airlines. To avoid competing with each other, Peach, which began operations on March 1, uses Kansai Airport as its hub and AirAsia Japan, which will start services in August, will mainly use Narita.

Among its six planned domestic flights, Jetstar will compete with the two budget carriers on five routes. The Narita-Kansai route will be exclusive to the company. Jetstar decided to launch these services because great demand is anticipated in the market.

As for fares, Jetstar has set lower prices than its rival Peach. Jetstar will launch flights between Kansai and New Chitose airports on Aug. 24, and fares will start from 4,590 yen, slightly lower than Peach's 4,780 yen. For flights between Kansai and Fukuoka airports, prices will start from 3,590 yen, compared with Peach's 3,780 yen.

Peach had a successful launch, with an average occupancy rate of its flights at 83 percent for one month following its start of operations, exceeding the original target of 75 to 80 percent. Both Peach and Jetstar expect that budget carriers' presence in the aviation market will increase demand for air travel.

Regarding Jetstar's flight routes and lower fares, Peach is going to keep a close eye on the situation. "We expected [Jetstar would offer tickets at] lower prices," a Peach spokesperson said. "We are not considering lowering ticket prices to compete with Jetstar."

However, competition for passengers may develop into fierce price-cutting wars in the future.

'Lower prices to boost demand'

"Lowering fares will boost demand for air travel among customers," Jetstar Japan Chief Executive Officer Miyuki Suzuki said in an interview with The Yomiuri Shimbun on Tuesday.

Asked about why Jetstar will operate flights where it must compete with two other budget airlines, Suzuki said, "We are not trying to fight over passengers with budget competitors."

Jetstar has revealed its strategy to offer fares that are 10 percent lower than those of the competition.

"This strategy shows our confidence that we'll never lose out in a price comparison with other carriers. We promise to offer passengers the best deal," Suzuki said.

As for safety measures, Suzuki said: "It's an issue that cannot be compromised. Safety is more important than cost-cutting."

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