David Knibb BRISBANE

Skymark Airlines and Hokkaido International Airlines (Air Do), Japan's domestic start-ups, are taking a beating as a result of fare cuts by Japan's major airlines. In a full-blown fare war leading into Japan's summer season, falling ticket prices are bringing down the newcomers' load factors.

Skymark first felt the effects in April after the majors started price cutting. Since then, its loads have plunged from about 80% to 30%. On the Osaka-Sapporo route, launched in April, loads have averaged only 10%. Air Do has seen its loads drop from 83% in March to 45% in June. Yoshitaka Takemura, Air Do's general manager for corporate planning, says the airline is at a "very severe stage."

So far, Japan's antitrust authorities have found no evidence of predatory pricing in the majors' fare slashing. The big carriers insist they are only matching prices offered by their new rivals.

Antitrust officials seem more concerned that the majors may refuse to perform maintenance, or overcharge for the service, as a means of thwarting start-ups' growth.

The new carriers have spurred a drive towards more competition and lower fares in Japan's domestic skies. Japan Airlines (JAL) launched its own low-cost subsidiary, JAL Express, or JEX, a year ago. All Nippon Airways (ANA) plans to shift one-fifth of its domestic flights to Air Nippon.

The latest JAL, ANA and Japan Air System are to form a joint venture to operate Tokyo-Osaka every 30min to compete with the bullet train.

Source: Airline Business