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Business Trends

Asia's budget airlines rush to open routes beyond Tokyo and Osaka

Thai carrier NokScoot latest to meet greater demand for more Japan destinations

NokScoot Deputy CEO Giam Ming Toh, second from right, announces the opening of a new route from Kansai International Airport to Bangkok on Aug. 22 in Tokyo. (Photo by Ken Kobayashi)

TOKYO -- Asia's discount airlines are expanding their service to Japan as the number of overseas tourists in the country rises sharply. Medium-haul flights from elsewhere in Asia are reaching beyond big cities such as Tokyo and Osaka to regional airports as the tourism boom spreads in Japan.

Competition with Japanese discount and full-service carriers is intensifying as airlines look to gain market share through better connections.

Bangkok-based low-cost carrier NokScoot plans to begin service within the next 12 months to either Hokkaido in northern Japan or Fukuoka in the west, NokScoot's Deputy CEO Giam Ming Toh told the Nikkei Asian Review on Aug. 22.

The airline held a news conference the same day in Tokyo to announce the opening of service between Osaka and Bangkok on Oct. 29. This is its second route to Japan, following flights between Bangkok and Narita Airport, near Tokyo, which began in June. NokScoot will fly 415-seat Boeing 777-200s jets four times a week between Osaka and the Thai capital, offering a limited-time fare of 8,900 yen ($81) one way.

After the announcement, Toh expressed interest in opening more regional routes, as "Japan is becoming one of the most preferable countries to visit for Thais, with the visa exemption scheme since 2013, and repeaters [who] are willing to visit cities other than Tokyo or Osaka." The company is adding a narrow-body aircraft jet to its fleet in the fourth quarter of 2018, said Toh, "enabling us to land at smaller scale regional airports, including Fukuoka."

Other Asian budget airlines are also flying to Japan's regional airports. The Philippines' Cebu Air has flights connecting Manila and Cebu to destinations in Japan such as Narita, Osaka, Nagoya and Fukuoka. The airline set up a Japan office in May, as it looks to add the northern city of Sapporo to its list of destinations using Airbus A321 Neo jets, which it expects to take delivery of toward the end of the year.

AirAsia X, the long-haul unit of AirAsia, has service between Sapporo and Kuala Lumpur. In April, it began flying to Sapporo from Bangkok. The airline also seeks to start service from the Malaysian capital to Fukuoka.

Much smaller Japanese airports are hosting overseas budget airlines as well. On Aug. 1, Tigerair Taiwan began service between the island and Iwate Hanamaki Airport in northern Japan, the first regularly scheduled international service to the airport since it was built in 1964. South Korea's Jeju Air has flights to seven cities in Japan, including Matsuyama in the western prefecture of Ehime.

Last year, 27 smaller regional Japanese airports, excluding seven major airports, received a total of 1.45 million foreign tourists, up 34% on the year. This growth is closely connected to increasing flows of travelers from abroad, most of whom come from Asian countries. More than 20 million overseas tourists have visited Japan so far this year, topping that mark a month earlier than in 2017.

According to the Japan Tourism Agency's "White Paper on Tourism in Japan 2017" published in June, growth in the number of tourists staying outside the largest cities of Tokyo, Osaka, Nagoya exceeded that of the big metropolitan areas, with the share people staying in regional destinations topping 40% for the first time.

Japanese government policy has also fueled the rise in international air traffic. Heavy congestion at Tokyo's Haneda Airport and a drive to revitalize smaller cities led the Ministry of Land, Infrastructure, Transport and Tourism to promote regional airports to overseas discount airlines. The ministry has decided to add runways at airports in Okinawa and Fukuoka, and has expanded flight slots in Sapporo. Discounted landing fees for international flights at 32 regional airports have also benefited airlines.

The growth of international flights is spurring competition. If an airline's long-haul business does not rely on point-to-point traffic, "it works best if it can aggregate and distribute local traffic. Connectivity is important," said Peter Harbison, executive chairman of the CAPA Center for Aviation, a market research specialist.

AirAsia CEO Tony Fernandes told Nikkei last week that "long-haul flights survive only if our network of short-haul [flights] secures connectivity." The airline is looking to develop routes within Japan from Nagoya, where its Japan subsidiary is based.

The flip side of the new international routes popping up is that they tend to disappear quickly as well. AirAsia will halt its Narita-Jakarta service at the end of September. That route was only opened in May, but full-service airlines dominate the route, which is popular with business travelers.

"Low-cost carriers need passenger load factor of at least 80% to maintain profitability, whereas 70% is enough for major full-service airlines," said Kotaro Toriumi, an aviation analyst. "It is inevitable for [discount airlines] to stop flights if they have poor occupancy rates."

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