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Japan-Update

Osaka-area airports enjoy revenue lift under private hands

Foreign tourists, fee overhauls help operator in first year

Under new management, Kansai Airport has seen a solid gain in foreign passengers.

OSAKA -- The new private manager of two big airports in western Japan increased operating revenue by 3% in fiscal 2016, taking advantage of the growing number of foreign tourists.

Kansai Airports, a consortium that counts Japanese leasing company Orix and French operator Vinci Airports as top shareholders, said Wednesday that it generated 180.2 billion yen ($1.63 billion) in operating revenue for the year ended in March. Net profit totaled 16.9 billion yen.

The company took over operation of Kansai Airport and Osaka International Airport in April 2016 as the pilot case for the privatization of large-scale airports in Japan. Both airports are based in the Osaka area.

"We were able to quickly catch the wave of foreign visitors to Japan," CEO Yoshiyuki Yamaya told reporters Wednesday.

Kansai, which refers to the western Japanese region centering on Osaka, attracts many Asian tourists because flights are about one hour shorter than those to Tokyo, and the area hosts Kyoto and other sightseeing spots. Foreign passengers on international flights at Kansai Airport jumped 13% to a record 12.41 million in fiscal 2016, outpacing the 11% growth at Narita Airport, which serves the Tokyo area.

But the passenger record comes from more than the growth of foreign tourists. Kansai Airports debuted a program in April that waives landing fees for one year for new medium- to long-haul international services. The number of flights by low-cost carriers is projected to increase 4% year-on-year to 378 a week this summer. And the company is rolling out a sliding fee system designed to maximize revenue by changing the price based on demand.

One of Vinci Airports' contributions is the removal of walls between duty-free shops at Kansai Airport.

The consortium also benefited from the expertise of Vinci Airports. A walk-through style of duty-free shopping was introduced at Kansai Airport's terminal 2 building, exposing more people to a wider variety of products. Duty-free sales rose roughly 20% in March.

The company plans to invest 96.1 billion yen in the next five years in projects such as renovating Osaka International Airport. Kansai Airports is negotiating with Kobe's municipal government to manage Kobe Airport.

Though Kansai Airports enjoyed a smooth ride in its initial year, the 37.3 billion yen annual payment through 2060 for the rights to operate the two Osaka-area airports is no small burden.

"To stabilize its business, [Kansai Airports] should increase the number of flights to and from Europe and the U.S. and end its overreliance on Asian flights," said Munenori Nomura, professor at Kwansei Gakuin University's School of Economics.

(Nikkei)

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