Japan Airlines eyes a bigger slice of budget market

Courtesy Reuters

It is taking Japan Airlines (JAL) a long time to launch a budget subsidiary, but it’s never too late if the budget market continues to grow. One may say that the Japanese carrier is treading with extreme caution, and even if the economic arguments are no stronger now than before, there can be no better reason than the Tokyo Olympics in 2020 for the belated introduction.

At home, rival All Nippon Airways (ANA) has been operating two budget carriers, namely Peach and Vanilla (which was the rebirth of a failed joint venture with AirAsia), and has plans to merge the two carriers in preparation for medium-haul international flights.

Foreign low-cost competitors include AirAsia, Singapore Airlines’ Scoot and Hong Kong Express. And, of course, there is Jetstar, the budget arm of Qantas, in which JAL has a minority share. It is therefore not exactly correct to say that the Japanese national carrier has not tapped into the budget market earlier, though not in as big a way as the others.

The yet-to-be-named budget carrier, to be based at Narita International Airport, will commence operations with two jets in mid-2020, offering medium and long-haul flights to Asia, Europe and the Americas. It will operate to some of the destinations already served by JAL.

The timing cannot be coincidental, as this is when ANA is expanding the operations of Peach into the international market. Until then, JAL seems quite content that the competition is limited to the domestic market, but with Peach offering another option for loyal Japanese travellers besides others to fly beyond and into Japan at lower fares, it cannot be taken lightly.

The budget market in Asia is a growing business. JAL director Masaru Onishi said the airline will cater to a broad group of Japanese and foreign passengers, and will take a more experimental approach to its product than the full-service parent carrier. There will be a mix of budget and premium options for meals and seats. The airline aims to be profitable within three years.

JAL may be Johnny-come-lately, but it has ambitious plans for its budget offspring. The competition is set to intensify, not just with compatriot ANA but also with other foreign carriers.

Everyone likes vanilla, but do they really?

Courtesy Bloomberg

Courtesy Bloomberg

Following the breakup of AirAsia Japan between partners All Nippon Airways (ANA) and AirAsia, with the latter acquiring the stake of the latter, ANA has renamed the budget carrier. It is now Vanilla Air.

Vanilla Air president Tomonori Ishii explained the choice of the name as follows: “We chose vanilla as our brand name because it is popular and loved by everyone in the world.”

Vanilla Air as a new airline will commence operations in late December, targeting travellers heading for resort destinations. There was speculation that it might merge with ANA’s other budget carrier – Peach Aviation – based in Kansai, but it looked like Vanilla will continue on its own operating out of Narita. Whereas in the past year its predecessor was focused on domestic destinations within Japan, Mr Ishii said Vanilla Air aims to fly beyond Japan to other resort destinations in Asia. He said: “”We will begin with short-distance services but want to expand the range to mid- and long-distances in line with ANA’s branding strategy.”

Vanilla Air will start with two airplanes and increase the number to 10 by 2015.

Will the renewed branding help Vanilla Air turn round the loss of its predecessor in its inaugural and only year of operations to the tune of 3.5 billion yen (US$40 million)? The erstwhile partners had blamed the split on differences in strategy management, with ANA suggesting that AirAsia did not understand the profile of the Japanese market. Time will tell if the shift from online marketing – which is the mainstay of the AirAsia strategy – to working more with travel agents will boost the new airline’s bottom-line. However, Air Vanilla is not ditching online selling altogether; it will introduce a new online system that will appeal to the Japanese market, underscoring the importance of local knowledge.

It is a clear indication from what Mr Ishii had said that Vanilla Air will align itself with the ANA ethos, suggesting a stronger involvement of the parent airline which was perhaps restricted by the shared responsibility of two partner airlines with different backgrounds. The conflict that led to the breakup, with AirAsia chief Tony Fernandes declaring that he would not want to ever again work in partnership with another airline, told the familiar tale of how there can only be one boss. That, however, does not explain how AirAsia Japan’s rival Jetstar Japan – a joint-venture between Qantas and Japan Airlines – could outperform the former.

Is it therefore any wonder why a name like AirAsia Japan did not work, since it was not wholly owned by the Malaysia-based airline?

Mr Ishii thought Vanilla Air was “a very cute name”. It does not matter if some people outside Japan also thought of vanilla as being bland and boring, and in need of dressing. Maybe that is an appropriate appellation for a budget carrier, one without frills. But what matters more is that the Japanese people like it, as they are ever so fond of “cute” things from Hello Kitty to “boyfriend pillows”. Kawaii, they say.