When Japan's All Nippon Airways launched daily flights from Osaka's newly opened Kansai airport to Seoul, South Korea in September 1994, the move was far more strategic than commercial.
ANA already flew to the Korean capital from Tokyo/Narita and decided to switch its services to Osaka due to the shortage of slots at Tokyo's primary international gateway, according to senior director network management Kazuhisa Shin. 'This was in line with ANA's intention to develop a primarily Asian hub in Osaka, while keeping ANA's slots at Narita for longer range routes. Transferring Seoul to Kansai allowed us to increase flight frequencies on long-range routes from Narita,' he explains.
Still, there was little possibility of commercial failure. Korea has for several years been one of Japan's strongest air transport markets.
In 1995 Korea was the second biggest destination for Japanese outbound travellers after the US, with some 1.5 million passengers a year travelling to Seoul and other Korean destinations. Since Korea abolished visas for Japanese travellers in 1993 the annual growth rate has exceeded 10 per cent.
However, Shin points out that 19 Japanese cities have services to Seoul, amounting to more than 70,000 seats a week. The result is fierce competition and low yields. The wide-ranging bilateral between Japan and Korea allows point-to-point services between an array of centres in both countries and dilutes the potential for attracting passengers from elsewhere in Japan to a Kansai hub.
ANA's competitors are Japan Air Lines, Korean Airlines and Asiana, with the two Korean operators dominating in terms of available capacity. ANA operates daily B767 services (1,428 seats weekly) and JAL daily DC-10 flights (1,610). But KAL has a triple-daily service with B747s and A300s (5,662 seats) while Asiana flies daily services involving six B747s and one B767 (2,660).
ANA began with daily services and has no current plans to increase frequency. Shin says the airline's flights carried just under 44,000 passengers on the route in the first half of fiscal 1995, giving it a market share of around 10 per cent. Korean carriers have an advantage because they hub in Seoul with a lot of their traffic from Kansai connecting to onward international and domestic flights, which ANA can't operate, he adds.
'Our average load factor is about 60 per cent. However our business class traffic is much higher, reflecting the strong business ties that exist between Osaka and Seoul. There are a lot of Korean residents in Japan, particularly in Osaka, and this supports both VFR and business traffic,' explains Shin.
While Korea is a good Japanese outbound market for both tourism and business, ANA has been looking to encourage growth at the opposite end by offering a range of package tours to different parts of Japan and even beyond.
In winter, the carrier has been marketing ski tours to Hokkaido and says this has proven successful. It is also pushing Okinawa as a summer resort destination, a campaign expected to bring in 7,000 Koreans during a six-month period. Last year it also marketed flights from Seoul, through Osaka, to the resorts of Guam in Micronesia. ANA's brand was already well established in the Korean market because it previously flew to Seoul from Narita.
Shin says ANA has been sensitive to cultural issues. 'We print menus and airport information in Korean, Japanese and English. Cabin announcements are also in Korean, English and Japanese and, for the latter, we have trained and qualified cabin attendants to perform the service.'
One future problem for ANA at Kansai lies in the very reason it moved Seoul flights there in the first place: congestion. Just 22 months after opening, slots are in short supply. With a second runway not due for completion until 2007 this is likely to cause the carrier difficulty if and when it wants to increase schedules to Seoul.
Tom Ballantyne
Source: Airline Business
