Thursday, 11 October 2012

Airline price war hits intl routes / Competition expected to intensify among domestic, other Asian LCCs

AirAsia President Kazuyuki Iwakata, third from right, announces a one-way airfare for the Narita-Incheon route on Wednesday in Shibuya Ward, Tokyo.

An airline price war, which has been taking place mainly on domestic routes, has begun intensifying on international routes as AirAsia Japan, a low cost carrier (LCC) backed by All Nippon Airways, has announced routes between Narita Airport and Incheon and Busan in South Korea beginning Oct. 28.

For example, Peach Aviation, an LCC based at Kansai Airport, launched flights between Kansai and Incheon airports in May and has since added other routes.

AirAsia announced its first international flights Wednesday, stating that the lowest price for a one-way ticket on the Narita-Incheon route will be 6,980 yen, less than half the price charged by major airlines.

Additionally, the airline began selling 4,000 special discount one-way tickets for 980 yen each to commemorate the launch.

"People used to think of international flights as too expensive. We hope passengers will fly international routes as much as they do domestic ones," AirAsia President Kazuyuki Iwakata said at a Wednesday press conference.

AirAsia will also launch a Narita-Busan route in late November. The company plans to increase the number of its hubs to include Chubu Airport, Sendai Airport and Naha Airport, according to AirAsia officials. In addition, the company has been studying extending routes to China, Taiwan, Guam and the Philippines, keeping with its policy of expanding to international routes with growth potential.

Among three domestic LCCs, Peach has already commissioned Kansai-Incheon and Kansai-Hong Kong routes. It will begin a Kansai-Taipei route Tuesday.

Jetstar Japan is also scheduled to begin international routes including those to China, Hong Kong, Taiwan and South Korea.

As South Korean LCCs, including Eastar Air, have increased flights to Japan, competition between Japanese and South Korean LCCs is likely.

LCCs target short international routes, rather than domestic routes, as there is a high potential for growth on them, said Masaharu Hirokane, an analyst at Nomura Securities Co.

The main battlefields will be short routes within four hours for one-way flights, industry sources said.

However, international LCCs need to address several issues.

As LCCs have small fleets, departure times tend to be delayed.

International routes also carry the risk of sudden declines in demand due to international problems, such as strained Japan-China relations, and exchange rate fluctuations.

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Airline price war hits intl routes / Competition expected to intensify among ...
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An airline price war, which has been taking place mainly on domestic routes, has begun intensifying on international routes as AirAsia Japan, a low cost carrier (LCC) backed by All Nippon Airways, has announced routes between Narita Airport and Incheon ...
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