Peter Harbison

*The menu

Global issues affecting aviation

The Asia Pacific LCC market

profile

LCCs in Japan

The impact of LCCs for Japan

*Global issues affecting

aviation

#1 Unprecedented global economic uncertainty (ie it

is not all bad – but could be…)

China is driving the region’s economy and

Europe/N America will be slow for at least two years

Possibly 3-4 years of substantial global slowdown;

air freight data point to at least several months of

reduced growth, even for Asia

*Global issues affecting

aviation

#2

Fuel prices will rise significantly by 2021, affecting

airline profiles. This will mean higher yields in the

interim (= slower growth), until more efficient aircraft

and alternative sources are available (currently much

more expensive)

Environmental pressures to accelerate new

fuels, but also to hinder airline growth globally

Industry competition will intensify, with large

casualties likely = changing airline scenery

Chinese airlines will become much more dominant

internationally

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The future hubs will be in Asia/Middle

East

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Lion Air – more than 350 Boeing MAX

and -900s

AirAsia/AirAsia X - up to 300 A320s

include neos

IndiGo – 225 Airbus neos and others

Cebu Pacific – 54 A320s, neos and A330s

Jetstar – 62 A320s (and several 787s)

Tiger – 61 A320s

More than 1,000 orders from LCCs alone

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*What makes an LCC?

Culture, attitude, innovation

Deregulation

Seating density

Aircraft utilisation(these 2 alone can reduce legacy costs by 40%)

Reduced distribution/marketing costs

Unbundled pricing

Pressure on external costs, eg

airport charges

ground handling

*LCCs make everything easier

Like user-friendly websites - legacy

airlines in Asia, nurtured on agency

relationships and high yielding

passengers, have been slow to deliver

Consequently, online ticket sales in Japan

have lagged most other countries

With over 100 million internet users and

the highest GDP per capita of any large

nation, the %age should be much higher

LCCs will change all that…..

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*Peach vs ANA #1

Peach price - KIX-CTS rtn – JPY12,000

Time taken 4 minutes

ANA price – Osaka ITM-CTS rtn - JPY80,000

Time taken 20 minutes…..

Any difference in product?

Small difference in ownership?

*Peach vs ANA #2

Peach price - KIX-HKG rtn – USD406

ANA price – Osaka ITM-HKG rtn – USD850

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*The LCC impact in Japan

Much, much bigger than anyone expects!!

Airlines, Trains, Toll roads - competition

Regional centres - tourism

Regional councils - airports

*The LCC impact in Japan

New entry, prices and frequency will:

drive changes in travel behaviour

more services to regional airports

more frequent short trips

new travellers

force legacy airlines to restructure

undermine balance of pricing between

airlines, shinkansen and toll roads

Help move away from Tokyo-focus

Low cost airline thinking will

produce innovations across all sectors

*The LCC impact in Japan

There are around 95 airports in Japan

Most are loss-making

With new entrant airlines and

deregulation, their owners have the chance

to attract airlines to serve their airport

This also offers the possibility to stimulate

regional economic growth – at a time when

the regions desperately need it

a great new opportunity for the hospitality

industry!

“LCCs in

North Asia”

Macau, 4,5,6 September

Venetian Hotel

Peter Harbison

Change

is

in

the

air…