ad info




TIME Asia
TIME Asia Home
Current Issue
Magazine Archive
Asia Buzz
Travel Watch
Web Features
  Entertainment
  Photo Essays

Subscribe to TIME
Customer Services
About Us
Write to TIME Asia

TIME.com
TIME Canada
TIME Europe
TIME Pacific
TIME Digital
Asiaweek
Latest CNN News

Young China
Olympics 2000
On The Road

 ASIAWEEK.COM
 CNN.COM
  east asia
  southeast asia
  south asia
  central asia
  australasia
 BUSINESS
 SPORTS
 SHOWBIZ
 ASIA WEATHER
 ASIA TRAVEL


Other News
From TIME Asia

Culture on Demand: Black is Beautiful
The American Express black card is the ultimate status symbol

Asia Buzz: Should the Net Be Free?
Web heads want it all -- for nothing

JAPAN: Failed Revolution
Prime Minister Yoshiro Mori clings to power as dissidents in his party finally decide not to back a no-confidence motion

Cover: Endgame?
After Florida's controversial ballot recount, Bush holds a 537-vote lead in the state, which could give him the election

TIME Digest
FORTUNE.com
FORTUNE China
MONEY.com

TIME Asia Services
Subscribe
Subscribe to TIME! Get up to 3 MONTHS FREE!

Bookmark TIME
TIME Media Kit
Recent awards

TIME Asia Asiaweek Asia Now TIME Asia story

TRAVEL WATCH: AUGUST 9, 1999 VOL. 154 NO. 5


Illustration for TIME by Harry Harrison

All's Fare in the Air: The War for Japan's Flyers

By SHIRLEY BRADY

    ALSO IN TIME
Kvetch Report
Japanese officials are addressing travelers' concerns about safe flying, with the Ministry of Transport due to publish its first airline report card in October

Detour
Tokyo Bay now has an even cooler selling point: Palette Town, the city's largest theme park and shopping area

It's not easy being cheap. Just ask Hideo Sawada, the 48-year-old chairman of Skymark Airlines. When his discount carrier (Japan's first new airline in 35 years) unveiled the first of its two planes last August, the journalists and onlookers assembled at Tokyo's Haneda Airport were puzzled by the large question mark on the fuselage of the Boeing 767-300. The question would not be answered until the low-budget service took off in September: the aircraft was emblazoned with an advertisement for DirecTV, its inflight entertainment service. Sawada's second steely steed was unleashed in April with an ad for Microsoft slapped on its side.

Sawada honed such cheeky cost-cutting measures while building his H.I.S. discount travel agency business. From a one-room office in Tokyo Sawada's company has taken off like a rocket, mushrooming into 173 branches worldwide and racking up sales of $1.4 billion last year. But he did not just want to hawk cheap tickets. The entrepreneur was eager to take on the overpriced and over-regulated airlines getting rich from his success in selling seats on their planes. But he knew it wouldn't be easy. "An airline is a very difficult business to start up in Japan," says Sawada.

No kidding. Japan's major carriers--Japan Airlines, All Nippon Airways and Japan Air System--have long enjoyed a cozy existence, carving the country's aviation business among them and keeping fares in line with each other's. In 1996, Japan's Ministry of Transport permitted the Big Three to adjust their fares by as much as 25% from recommended levels, raising hopes that ticket prices would come down to earth. Instead, the high-flying troika raised their domestic prices, citing competition from Northwest and United Airlines on international routes and the world's highest airport charges at home. Within months, Japan's domestic air ticket prices were three times higher than comparable U.S. fares.

Sawada entered the fray in late 1996, when new slots opened up in the wake of a five-year airports expansion plan. Inspired by small U.S. carriers, the novice airline mogul slashed his overhead by reducing turnaround times and skipping inflight amenities like reading materials and moist towelettes. He hired freelance or retired workers and leased planes, contracting their upkeep to All Nippon Airways. Cabin crew duties included between-flights cleaning and, in a Virgin-like touch, posing in swimsuits for a promotional book. Sawada sells directly to the public by taking seat reservations on the phone, a ticketless system in which customers then pay for and pick up a paper slip seat confirmation at more than 30,000 convenience stores in Japan or upon check-in at the airport. His no-frills tactics let Skymark launch in November with Tokyo-Fukuoka flights for only $114 each way--half what his competitors charged.

The upstart carrier got some company in December, when Hokkaido International Airlines, or Air Do, inaugurated service between Tokyo and Sapporo for $133 one-way, or 35% less than what the Big Three were charging for the world's busiest sky route. Despite initial safety concerns about the two debutantes (both of which passed government scrutiny and spot checks), passengers began migrating to the new airline. Each flew more than 85% full over Christmas.

It didn't take long for the majors to fight back. When JAL matched Skymark's fare on the Fukuoka route in March, ANA and JAS followed suit; by June, all three were offering the same or cheaper prices on the routes flown by Skymark and Air Do. JAL and ANA had other tricks under their wings, including plans to form their own low-cost domestic carriers and offering joint promotions like the "Welcome to Japan" airpass (a bargain $104 per flight for up to five domestic destinations). The larger airlines have also been reminding travelers that they offer more flights and options than the newcomers.

The price-undercutting has subsided since Skymark increased its Tokyo-Fukuoka fare to $135 on July 1, a move prompted by the need to "focus on our management," says Sawada. "Our first mission [to launch] was accomplished. It was very tough, tougher than I had thought." So what's a little guy to do next? Japan's maverick travel discounter plans to launch overseas charter flights. Meanwhile, next year brings full airline deregulation to Japan, along with more airport slots and new discount carriers. Expect more air-raising adventures in the months ahead.

With reporting by Sachiko Sakamaki/Tokyo

Travel Watch Archive
ASIANOW Travel Home

AsiaNow


   LATEST HEADLINES:

WASHINGTON
U.S. secretary of state says China should be 'tolerant'

MANILA
Philippine government denies Estrada's claim to presidency

ALLAHABAD
Faith, madness, magic mix at sacred Hindu festival

COLOMBO
Land mine explosion kills 11 Sri Lankan soldiers

TOKYO
Japan claims StarLink found in U.S. corn sample

BANGKOK
Thai party announces first coalition partner



TIME:

COVER: President Joseph Estrada gives in to the chanting crowds on the streets of Manila and agrees to make room for his Vice President

THAILAND: Twin teenage warriors turn themselves in to Bangkok officials

CHINA: Despite official vilification, hip Chinese dig Lamaist culture

PHOTO ESSAY: Estrada Calls Snap Election

WEB-ONLY INTERVIEW: Jimmy Lai on feeling lucky -- and why he's committed to the island state



ASIAWEEK:

COVER: The DoCoMo generation - Japan's leading mobile phone company goes global

Bandwidth Boom: Racing to wire - how underseas cable systems may yet fall short

TAIWAN: Party intrigues add to Chen Shui-bian's woes

JAPAN: Japan's ruling party crushes a rebel at a cost

SINGAPORE: Singaporeans need to have more babies. But success breeds selfishness


Launch CNN's Desktop Ticker and get the latest news, delivered right on your desktop!

Today on CNN
 Search

Back to the top   © 2000 Time Inc. All Rights Reserved.
Terms under which this service is provided to you.
Read our privacy guidelines.