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Tuesday, June 14, 2011
New budget carrier Peach hopes to fly high, charge low
By MIZUHO AOKI
Despite the huge impact the ongoing nuclear crisis is having on the nation's travel and aviation industries, the head of Japan's newest budget carrier said it is sticking to plans it made before March 11, including extremely low fares and black ink three years after its takeoff.
"We will not change our plan. . . . What's important is to continue doing what we have to do to achieve our business model, offer low fares and start operations (as planned)," Shinichi Inoue, CEO of Peach Aviation Ltd., said in a recent interview with The Japan Times.
Inoue said the keys to achieving the goal are cutting costs and serving the Asia's travel needs.
"We want to create a new category in Japan's aviation industry — not just a simple copy of existing low-cost carriers. We want to make a new Japanese LCC model by featuring Japanese elements," said Inoue, a 53-year-old former All Nippon Airways general manager.
In late May, the new carrier announced at news conferences in Osaka and in Tokyo that it would call itself Peach. The name was chosen because it invokes a youthful, fresh and energetic image, Inoue explained.
On Monday, the carrier announced that it has taken on Patrick Murphy, former chairman of Ryanair, as its corporate adviser. He helped his former employer transition from a full-service regional airline into an LCC.
Together with the carrier's pink and purple aircraft paint scheme, the carrier plans to establish a "cute and cool" brand image to attract female travelers, Inoue said.
"If we can successfully feature (such an image), I believe we can differentiate (Peach Aviation) from other LCCs," Inoue stressed.
Peach Aviation was founded in February with a total investment of some ¥30 million from ANA and Hong Kong's First Investment Group. Innovation Network Corp. of Japan joined the group in March. Now ANA holds 33.4 percent, and First Eastern and INCJ 33.3 percent each in the startup's shares.
Based at Kansai International Airport in Osaka Prefecture, the carrier expects to start flights to Fukuoka and Sapporo next March. Next May, it plans to start flights to Seoul, making it Japan's first budget airline to fly overseas.
Peach plans a fleet of 10 Airbus A320-200s by the end of 2013, but Inoue did not reveal routes mulled for future expansion. He only said the carrier will focus on medium- and short-haul flights of up to four hours from Kansai airport.
Although Peach hopes to carry some 6 million passengers five years after it starts operating, competition with other Asian discount airlines may make this goal unreachable.
According to the transport ministry, currently eight foreign budget carriers serve Japan, including Malaysia's AirAsia X and South Korea's Air Busan. The number is expected to increase because the ministry, as part of a national growth strategy released in May 2010, plans to expand the LCC market in Japan.
To prevail amid such cutthroat competition, Peach will make every effort to offer the lowest fares. Although Inoue declined to reveal how low fares may go, according to media reports they are likely to be around half that offered by full-service carriers.
Cost-cutting will be based on established LCC practices, including negligible in-flight services, more seating capacity and tickets mainly sold over the Internet, Inoue explained.
Asked about the ongoing crisis at the Fukushima No. 1 power plant that has made many foreign travelers steer clear of Japan, Inoue calmly called the event an unavoidable risk for the overall aviation industry.
"If you look at 10 years from 2000, there was 9/11 in 2001, SARS in 2003 and the financial crisis in 2009. . . . When SARS broke out, there were times when ANA planes carried more cabin attendants than passengers," Inoue said.
"We cannot predict how long (the nuclear crisis) will last. . . . So what we have to do now is keep focused on our goal of achieving a business model that offers low fares."
Peach Aviation currently has some 60 employees, including about 10 foreigners. The number is expected to increase to 200 by the start of flight services next March.
The carrier plans to start recruiting cabin crews this summer, but hasn't determined what course of action to take in terms of hiring pilots, Inoue said.
"To be honest, every day is trial and error. Things are not moving forward in a straight line, they're zig-zagging. So it's meaningless to say something flashy at this stage. We want to compete with what we have to offer," Inoue said.