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Assessing the impact of the deregulation of fare filing in Japan

October 02, 2008 |

As airlines plan to build a more profit-focused network capable of producing profits even in the face of factors such as rising fuel costs or slowing demand, the distribution side of an airline's business in Japan is bound to evolve too.

The expansion of Haneda Airport (HND) for international services and the availability of additional slots at both Narita International Airport (NRT) and HND are considered to be vital developments for the aviation business in Japan.

An airline group like Japan Airlines is planning to speed up both the renewal of its fleet as well as the implementation of its premium customer-oriented strategy.

As airlines plan to build a more profit-focused network capable of producing profits even in the face of factors such as rising fuel costs or slowing demand, it is being felt that the distribution side of an airline's business, too, is bound to evolve.

"The next two years are going to mark a very important development phase for distribution (business) in Japan," said James Woodrow, general manager, Cathay Pacific Japan.

Woodrow acknowledges that the deregulation of fare filing has already started changing the scene. "It challenges the traditional model. Now airlines, if they wish, can sell and offer direct to big and even smaller retailers countrywide."

Japan has already witnessed the entry of Expedia. Earlier this year, the local version of Dohop.com Flight Planner, a flight search engine, was also launched.

On the progress made by the online travel agencies and meta search engines in Japan, Woodrow said, "The deregulation of fare filing has accelerated the market to move more towards the Individual FIT market. Unlike the traditional two standard fare seasons with fixed products and fares, airlines are throwing more and more promotional products at different times. These online travel agent and meta search engines will benefit by having a wider range of air only general saleable products."

The growth of the Internet means that any traveler - regardless of whether they are in business mode, leisure mode, long haul, short haul, price sensitive or not - will be using the Internet at any or all points in the ticket purchase and distribution process. So is it critical for an airline to make sure that the image and perceptions it projects through all their channels is consistent?

On this, he said, "I think this is up for debate. One would argue that those who buy online have got very different purchasing behaviours. May be worth communicating in a different manner. But it is argued that regardless of any channel, image and perceptions are driven through brand consistency and market communication consistency. In the end, they drive product preferences and affect choices, so being consistent on perception (about the brand) and sustaining an image should still be the key. I think the bottom line is that at least on the product offering side, it has to be ensured that all the products are availiable for sales and selection online and the fulfillment of it is easy and quick."

When asked whether the GDSs in this region are working on keeping travel content on a single point of sale, he said, "GDSs are trying, but it is not an easy task. It is getting so complex that putting all information in one place/system is difficult enough. However, we have to look from the customer's point of view. GDS is keeping travel content/inventory on a single POS, but it is not visible to the consumer, it remains at the agency level only. There is still marketing communication, which needs to be done. Travel related information is still fragmented and yet we are to see an intergated solution where the travel information that the customers want and the fulfillment of all those items are in the same place or at the same site. We now can do air + hotel + a bit of options, but still far from all and intergrated."

On the GDS vs resources needed to implement and manage direct-connect relationships, he said there is not doubt that GDS segment fees are not cheap, especially in the current economical environment that airlines are working in.

"They are costly for a reason due to the legacy systems that need heavy manpower to maintain. It is getting more and more complex as we try to load more functions and needs of modern day customers on an old system. The issue is whether a new kid on the block will come out with a much smarter and cheaper web-base or a new IT base system that can do the same thing at a cheaper rate. If direct-connectivity platforms can be built cheaply and someone will able to tie all these direct platforms into one big cheap single point multi-direct platform, it will give the current GDSs a big run of their money and investment."

James Woodrow, general manager, Cathay Pacific Japan is scheduled to speak during EyeforTravel's inaugural Travel Distribution Japan 2008 Conference scheduled to take place in Tokyo (on 29-30 October).

Related Link: EyeforTravel's Travel Distribution Japan 2008 Conference

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