Japanese LCCs To Align, Enter Southeast Asia

 - March 13, 2018, 9:41 AM

Japanese low cost carrier (LCC) Peach Aviation has entered discussions with sister airline Vanilla Air to align their operations. Japan’s All Nippon Airways owns 67 percent of Peach Aviation’s shares and fully owns Vanilla Air, and the parent company announced in its new five-year growth plan in February that the LCCs will work closely “to entrench their profitability base.”

“We are starting talks now on how to integrate operations in a better way, and increase effectiveness and efficiency,” said Peach Aviation executive advisor Patrick Murphy. “It makes no sense to compete head to head.”

The Northeast Asian domestic and international LCC markets grew a respective 10 percent and 14 percent in 2016, and expectations for further growth have prompted the relaunch of Air Asia Japan, which resumed flying with new equity partners out of Nagoya in October 2017 after a four-year hiatus.

Peach Aviation told AIN that it has seen more inbound passengers from Asia. Outbound Japanese passengers have stagnated at some 17 million annually during the last decade.

Separately, ANA announced that its two LCCs will move into the medium-haul markets of Asia and Southeast Asia by 2020. Peach currently flies to Bangkok via Okinawa, but aims to operate from its hub in Osaka instead. Murphy said that flying from Osaka, which does not impose a curfew, has allowed Peach Aviation to keep its utilization rates and profits high.

“Japan is six to seven hours away from many of the southern Asian cities such as Jakarta, Singapore, and Manila,” said Murphy. “It is within range of the Airbus 321LR, our preferred choice, as it is compatible with our current A320 fleet.”

The airline appears undeterred by the recent setbacks involving both engine choices for the Airbus A320neo. Peach Aviation has placed a firm order for 10 A320neos, the first of which it expects to arrive in the first quarter of 2019. It has not announced an engine selection, however.