FLYING FOR LESS:
Competition Heats Up in Domestic Airline Market
February 5, 1999
With the September 1998 inauguration of Skymark Airlines, competition in Japan's airline market entered a new stage. (Kyodo)
Competition among Japan's domestic airlines is picking up the pace, spurred on by the late 1998 entry of new players in the airline market into two profitable routes. Japan's three major domestic airlines have offered discounts to stave off this new competition, but their fares are still substantially higher than those offered by the newcomers, who are already considering expanding service to new routes--a move that will likely intensify this price war even more. Competition in the airline industry is even spreading from fares to such bonus perks as mileage points.
Two New Airlines Spur Competition
At present, both airlines make three round trips per day on their routes. This is much fewer than the 10 round-trip flights per day each flown by the larger airlines, but the two newcomers are finding their low fares to be more effective than they had anticipated. Both Skymark and Air Do are boasting off-peak seat occupancy rates above 80%, substantially higher than the 60% to 70% reported by the top domestic airlines. The low prices that are filling these airlines' seats were made possible by slashing onboard drinks and other services. But their bare-bones approach to customer service does not seem to be affecting their attractiveness in the market. As one housewife explains, "I'm just happy to get away from the overly high-class atmosphere on regular airlines--and the high prices that come along with it."
In an attempt to counter these low fares, Japan Airlines announced huge discounts on its Tokyo-Sapporo and Tokyo-Fukuoka routes just prior to Air Do's start of operations. The discounts, which will start on March 1, 1999, are offered only for round-trip tickets and are given for reservations made up to one day prior to departure, provided that the flight is within one hour of a scheduled same-route flight of either Skymark or Air Do. Flights between Tokyo and Fukuoka are half the normal fare, and flights between Tokyo and Sapporo are 32% lower. All Nippon Airlines and Japan Air Systems, too, have begun making moves in response to the pressure from the industry newcomers, reducing some fares by half and looking for other ways to remain competitive.
Competition for Perks as Well
In addition to fares, competition has increased for perks as well. A good example of this is mileage service. Passengers can accumulate mileage points for the distance flown with an airline; they can then trade in their mileage points for free tickets or upgrades from economy to first class. In the past this service had been limited to international flights, but in April 1997 all three major Japanese airlines began offering it for domestic flights as well.
Recently, it has become possible to accumulate mileage points without ever stepping onto an airplane: Airlines have begun to form tie-ups with other companies, offering mileage points for those who buy these companies' products and services. These tie-ups were originally limited to such industries as hotels, golf courses, and international telephone companies, but starting in summer 1998 airlines began to form tie-ups with all sorts of companies. At present, it is possible to obtain mileage points by rebuilding one's home, moving, or even holding a wedding ceremony.
Skymark intends to open Osaka-Fukuoka and Osaka-Sapporo routes in spring 1999. Likewise, Air Do has announced its intention to expand its service. If new entries into the domestic airline market continue in this way, competition for fares and bonus perks is certain to intensify further. This increased competition will demand even more efficiency and belt-tightening from Japan's airline industry.
Edited by Japan Echo Inc. based on domestic Japanese news sources. Articles presented here are offered for reference purposes and do not necessarily represent the policy or views of the Japanese Government.