The cascade of crises in Japan was threatening to cause major disruptions to the country’s aviation market from the outset over a week ago but with the ongoing radiation leak taking centre stage in the global media the traffic is now all one way – out of the north island. Japan represents a US$62.5 billion aviation market, which equates to 10% of global airline industry revenues, so it is time we took note of what is going on.
Japan’s $19 billion domestic air travel market, with 83 million passengers a year, is suffering disruption but discarding flights to the north east, the market is remarkably stable with traffic flow losses on routes going north compensated in spades on flights leaving the north east of the county. This flow will of course not last and domestic market vulnerability to recent events will start to show clearly in the next few days and weeks. The long-term outlook for the Japanese domestic market, given the fact that these crises are going to run for some time to come, is worrying to say the least.
Meanwhile international carriers are being hit hard as some scramble to reroute flights. At the moment Osaka and Nagoya in the South are taking large numbers of additional flights as the Tokyo region is avoided. Cathay Pacific has seen masses of empty seats on flights from Hong Kong to Tokyo and airlines from Emirates to SAS have seen huge numbers of cancellations. But with many airlines continuing as normal in and out of the Tokyo area it is the case that some carriers are being hit much harder than others because Japan was at the centre of expansion plans. Airlines had planned to increase US / Japan flights by 10.2% next month compared with April 2010, according to Barclays Capital. American Airlines (AA) and Delta were due to have the biggest percentage increases. Both airlines had just started flights to Tokyo Haneda airport earlier this year and now their plans are in doubt as traffic slows to a crawl and might stay that way for many weeks or months. AA, Delta, Hawaiian are going to have their ambitions clipped by the disaster in Japan. Results for this quarter should show that fare increases in the US domestic market have offset much of the loss associated to Japan; even so forecasts will be amended down.
As this happens, news stories are surfacing about passengers being charged huge fare hikes to get flights out of Japan. This news is going to reflect terribly on airlines even though the guilty parties in most investigated cases seem to be travel agencies selling tickets at a huge mark-up. Some airlines should think themselves lucky that Libya has taken centre stage in the news and given them a let off on this toxic PR story.