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ACCJ EVENT REPORT | AIRLINES

January 2014

Blue-sky Thinking
CEO reveals reason Jetstar Japan has shot to success in under two years

Custom Media

In her own words, Miyuki Suzuki does not fit the presumed larger-than-life profile of start-up executives.

The chief executive officer of Jetstar Japan, Suzuki brings to the table a fresh vision and out-of-the-box thinking.

She addressed ACCJ members and guests at the Roppongi Hills Club on December 5, detailing some of the reasons behind Jetstar’s rise to profitability in Japan.

Jetstar has a network comprising 16 countries and 60 destinations, with even more cities planned for next year. In Japan, the airline serves nine destinations with 13 routes, using 17 Airbus A320 planes.

As of December, Jetstar Japan predicted that it would have served 3 million passengers, and is one of the fastest growing airlines in the nation.

The Japanese arm of the Australian-based carrier was launched in 2012, what Suzuki calls “the year of the LCC [low-cost carrier].”

Budget airlines are still relatively new in the Japanese market, where customers are seen to be very exacting with their air travel demands, especially in regard to quality and punctuality.

This year, Jetstar Japan recorded a 90 percent on-time rate, surpassing even All Nippon Airways which, together with Japan Airlines (JAL), consistently ranks as one of the best on-time performers worldwide.

Jetstar Japan’s success also hinges on several successful partnerships, including one with JAL. Although considered a competitor in the wider airline market, the airlines are aligned in their thinking and goals, Suzuki said.

Passengers on either airline can use their frequent flyer miles on the other, and the companies have a code-sharing agreement in place.

This sort of cooperation is seen as novel in the industry, though Suzuki said Jetstar Japan has achieved many such “firsts.” They are the first airline to develop a relationship with the Japan National Tourism Organization as well as with other travel agencies.

This was important, she said, as customers here still like the experience of physically visiting travel desks to speak with agents.

In addition, Jetstar Japan has begun accepting bookings at convenience stores, through a partnership with Lawson, Inc. This was yet another customer-focused initiative, as Suzuki recognized there is a substantial potential market comprising customers without credit cards. Purchases made at Lawson outlets can be paid in cash.

Along with safety, efficiency is a top priority for the low-cost carrier. A high utilization rate for aircraft is essential to covering costs, and this pertains to both filling the seats on board and keeping Jetstar planes in the air, Suzuki emphasized. Short turnaround times are paramount, with 30 minutes the ideal period, she added.

Simplicity and standardization are also key. This is the reason the airline operates the same type of plane on all its routes, and most flights have single-class cabins.

Targeting leisure travelers on domestic routes, Jetstar Japan’s model bases ticket prices on purely the cost of a seat on a plane.

However, Suzuki said, fares barely cover operational costs. Revenue from “ancillary services” such as food and drinks, baggage fees, and other add-ons are the main profit centers for the business, and staff need to be creative in upselling these extras.

From a consumer’s perspective, this unbundled approach allows for maximum customization on flights, she said.

To achieve low costs, Jetstar Japan spends very little on marketing, and instead focuses on eye-catching promotions. Many people may be surprised that a substantial portion of the budget goes to information technology. Investment in IT innovations helps control staffing levels over the long term, Suzuki explained.

While 2012 may have been the year of the LCC, 2013 was the year of expansion, she concluded, saying the airline sees great potential in the Japanese market in spite of the industry’s infrastructure challenges.