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Skymark Airlines: Elevating Japan's travel experience with affordable luxury

Interview - December 20, 2023

Discover Skymark Airlines' unique positioning between national carriers and low-cost airlines, offering travelers affordability without compromising comfort, and their ambitious vision for the future of Japanese air travel.

HAYAO HORA, REPRESENTATIVE DIRECTOR, SENIOR MANAGING DIRECTOR AND EXECUTIVE OFFICER OF SKYMARK AIRLINES INC.
HAYAO HORA | REPRESENTATIVE DIRECTOR, SENIOR MANAGING DIRECTOR AND EXECUTIVE OFFICER OF SKYMARK AIRLINES INC.

In 2019, overseas arrivals to Japan saw a record high of 31.8 million people. Although this dropped to 250,000 due to COVID-19, Japan still ranked number one on the World Economic Forum, Travel and Tourism Development Index. The government also maintains a target to receive 60 million visitors annually by the year 2030. Furthermore, the first half of 2023 has already seen 10 million visitors welcomed into the country. As a Skymark Airlines CEO, what makes Japan a prime tourism destination?

In the past, Japan seemed remote, nestled far east from the other countries, making it challenging for travelers to reach the Land of the Rising Sun. However, over time, significant advancements in transportation have made Japan easily accessible. This nation boasts a rich blend of culture, stunning natural landscapes, culinary excellence and a renowned reputation for safety and hospitality. These are the treasures that foreign visitors can enjoy when they come to explore.

Japan's presence on the global stage dates back to early explorers like Marco Polo describing Japan as “Zipangu”, and gained recognition as a phenomenon known as “Japonisme” in 19th century France.

In recent years, the world has embraced Japanese manga, with famous sites like the Enoshima railroad crossing becoming tourist hotspots, especially for fans of Slam Dunk. Driven by their interests and hobbies related to Japan, many people want to delve deeper into what the country is all about. As a result, Japan has become an alluring destination, with a noticeable influx of foreign tourists at iconic spots like Shibuya Scramble Crossing.

Yet, it is essential to acknowledge the bureaucratic hurdles that remain before Japan can be truly accessible to all. In 2008, Japan established an agency dedicated to promoting tourism. Their mission is to facilitate inbound tourism, ensuring comfortable accommodation and convenient transportation for visitors. Japan's government is actively contributing to this effort by increasing incentives and promoting the nation to overseas countries.

Before 2008, Japan was encouraging outbound tourism, collaborating with logistics and transportation companies to enable Japanese people to explore the world.

 

When it comes to tourists who visited Japan prior to the COVID-19 pandemic, 70% came from China, South Korea, Taiwan and Hong Kong. When we interviewed the president of Nishitetsu, Mr. Hayashida stressed the importance of diversifying Japan's tourism base by attracting more tourists from Western nations such as the United States and Australia, as they are more likely to spend more time and money within the country. Do you agree that diversification of the tourism base is important post-COVID? How are you attracting Western tourists to your airline?

It is apparent that diversifying our tourism base is imperative, especially considering that a significant 70% of tourists visiting Japan originate from neighboring countries such as China, South Korea, Taiwan, and Hong Kong before COVID. This uneven statistic necessitates action to broaden our reach beyond these regions. Proximity plays a crucial role in this scenario, as the accessibility and variety of travel options via low-cost carriers and full-service providers make it notably easier, faster, and more affordable for Asian tourists to journey to Japan in comparison to those travelling from Europe or the US. Due to these, our tourism base isn't as diversified as we would want it to be.    

Another significant factor contributing to this phenomenon is the cultural aspect. Given the adaptation of Chinese characters in various languages, including Japanese, travellers from Taiwan, Korea, and Hong Kong often find a sense of familiarity in the signage and posters around Japan. In contrast, the relative unfamiliarity of these elements may pose a challenge for Western tourists, hindering their experience in Japan. This linguistic and cultural gap represents another area where we aim to improve our appeal to a more diverse audience.

Recent figures indicate a gradual diversification of our tourism base, indicating that 10% of our visitors are Americans, which we attribute, in part, to the historical depreciation of the Japanese yen. This depreciation has stirred significant interest, making Japan a more financially attractive destination for international tourists. As an airline company, we have observed firsthand how the weakened yen has enticed more tourists to consider Japan as a travel destination.

Tourists from Western countries tend to make longer stays and subsequently bolster the economic benefits. From the airline’s perspective, this leads to an increase in Passenger Revenue per seat mile (PRASM), crucial to the profit. This Western travelers tendency, of course, not only benefits the national budget but also offers substantial opportunities for various businesses in Japan.

Also, from the aspect of private diplomacy, the interaction between people from various countries is highly welcomed.

Furthermore, the increase in the number of visitors to Japan from diverse countries is important in terms of risk management.

 

Skymark is an airline with approximately 150 flights per day, making it the third-largest domestic airline in Japan. However, we know this market is also very competitive. You have national carriers like ANA and JAL, but you also have low-cost airlines such as StarFlyer, Solaseed and AirDo. How do you differentiate yourself from your competitors, and what unique experiences can you offer to tourists who use your flights?

We do not quite fit the low-cost carrier (LCC) segment. Rather, we position ourselves between national carriers like ANA and JAL and LCCs such as Jetstar, Peach, and Spring Japan. Other carriers like StarFlyer, Solaseed, and AirDo are associated with ANA, placing them closer to full-service providers than low-cost airlines.

By having a base in Haneda, our main competitors are not only other airlines; it is a rather unconventional perspective, but also we often find ourselves competing with JR's Shinkansen. For instance, while the Shinkansen connects cities like Shinagawa and Yokohama, some passengers opt for our airline over the high-speed rail. Most LCCs have their primary base at Narita Airport, which may be less convenient to access but can offer savings. LCCs are chiefly about cost-cutting. In contrast, our company is based at Haneda Airport, where a substantial 60% of all flights originate.

Even when compared to local carriers, we offer several advantages. Our prices are notably cheaper, usually falling within the range of 60% to 70% of the full-service fares. Another key distinction from LCCs is our transparency. Low-cost carriers often have hidden fees that pop up as customers proceed with their ticket purchase, like charges for baggage exceeding or extra costs for check-in luggage. Ultimately, this lack of transparency can make them more expensive than our offerings.

Our price policy is transparent and flexible, displaying all services included in the ticket price. This approach resonates particularly well with elder Japanese travelers in Japan. We generously include a 20-kilogram baggage allowance in our ticket prices. Customers appreciate the convenience of not having to compare various options before selecting the most cost-effective airline. In essence, we offer the best of both worlds when compared to national full-service carriers and LCCs.

In addition, our pricing policy significantly sets us apart, as we provide cost-effective options without compromising the level of hospitality and service. In-flight snacks (chocoloate) & beverages are complimentary and included in the ticket price. The quality of service and the warmth of our hospitality mirror what larger carriers offer.

The commendations we have received from our customers for our combination of reasonable-cost and high-quality flights have made us the best customer-satisfaction airline in Japan. We pride ourselves on delivering the best possible service.

We have been highly praised among the transportation companies, and we have been recognized as the top airline for on-time performance and customer satisfaction in 2022, even surpassing the Shinkansen. The positive feedback from our passengers serves as a testament to the reputation we have built throughout the years, setting us apart from other companies.

 

You announced your winter flight schedule for 2023, and you will be flying 23 different routes to 12 different destinations, including Sapporo, Fukuoka and Naha as just some examples. Do you have any favorite regions or locations that you would recommend to visitors who use your airline?

Shimojishima, located within the Miyako Islands in Okinawa, is a truly remarkable destination that I would recommend. Our company initiated flights to this stunning Island in October 2020. Initially, we anticipated the competition with ANA and JAL which was thought to become a hefty competition, given their existing flights between Haneda and Miyako Islands. However, it turned out to be a catalyst for healthy competition between our two-three companies, leading to a 1.7-fold increase in the number of visitors to Miyako Islands compared to the pre-COVID period. This has not only generated significant economic benefits for the region but has also played a key role in the revitalization of the area. We are actively engaged in promoting Shimojishima as a tourist destination. While Okinawa has long been a popular choice for many foreign tourists, we have recently observed a surge in visitors to this region.



Even though 2019 was a record year, 47% of tourists went to Tokyo, while half of the nation’s prefectures saw 1% or less of these visitors. Last year, the government considered that tourism was key to regional redevelopment, particularly revitalizing local economies, which have been withered due to Japan's demographic decline. What else can be done to attract more visitors to these regional locations?

While many travellers opt for the traditional Golden Route itinerary in Japan, recent trends indicate a shift in preferences. We are witnessing a surge in interest in local tourism. Before even setting foot in Japan, tourists are exploring hidden gems beyond the conventional Golden Route. They are actively seeking alternatives and crafting itineraries to uncover unique places and experiences, often going beyond the recommendations of travel agencies.

However, it is important to acknowledge that the infrastructure in Japan is not yet fully prepared to cater to all visiting foreigners. Digitalization is still a work in progress, and many local areas and tourist organizations lag in adopting new technologies for smart travelling. This occasionally creates challenges for travellers. This needs to change, and local agencies should be equipped with systems that facilitate efficient handling.

While we do not have specific numbers to share, we have noticed an influx of foreign travelers using our airline, approximately 3% to 4%, to access destinations like Kobe or Fukuoka from Haneda Airport. This trend highlights the growing preference among foreigners for choosing Skymark Airlines to reach local destinations beyond Tokyo and other well-known spots.

 

The price of JR Rail Pass, a popular way to travel in Japan for tourists, is expected to increase soon. Are you expecting a more influx to your type of transport, airlines,  following that price hike? Do you think fewer foreigners will use the JR Rail Pass?

Frankly, we are not taking a special action like JR to actively target foreign customers. Instead, we are finding smart travelers who take matters into their own hands by going online to compare prices for both flights and bullet trains. This information is readily available in Japanese, and many are discovering that we offer significantly more affordable options compared to other airlines and bullet trains. Moreover, our flights often provide a faster and more comfortable means of reaching their desired destinations. The competitive prices and enhanced experience make us a preferred choice for many smart travelers. Unfortunately, we currently do not offer a seasonal pass for foreigners, similar to the JR Rail Pass.

 

To cater to inbound tourists, ANA Holdings is expected to launch its low-cost flights to Southeast Asia through its AirJapan carrier in 2024. They expect international passengers to make up 70% of its pre-pandemic level by 2026. Though you are a domestic airline, you have had experiences with charter flights to South Korea. Is starting international routes to the Asian region in the near future an area of interest for Skymark?

We do not have any definite plans of opening international flights in the near future, particularly not until 2027. However, we do acknowledge the need to address this aspect. National carriers like ANA and JAL are expanding in this direction. JAL has introduced Zipair, and ANA is set to launch AirJapan next year, which will enable them to explore new overseas routes as they expand their international operations. Actually, Zipair is playing a pivotal role in attracting a significant number of American tourists and Southeast Asian tourists to Japan.

Although we do not have a specific strategy in place to open new routes to international destinations, I do recognize the necessity to take action after 2027. The coming three to four years are poised to be crucial in our decision-making, and we are committed to extensive preparation. It is possible that we may open several international routes, most likely departing from Haneda or another suitable location. While we may not have defined the exact routes or points of departure at this moment, the need to take action is clear.

 

Complementing your airline service, Skymark also has Skypak Tours as part of its group, where you provide tour products on all routes operated by your airlines. Can you give us an overview of some of the package deals you have been able to offer travellers as a result of this? Are you also looking to partner with overseas tourism agencies as a way to keep promoting your airline to overseas visitors?

Skypak Tours is not part of our group. The specific Travel agency introduced packages under the brand name, Skypak Tours, for marketing reasons. The agency took the initiative, and we only provide relocation and transportation services.

We would like to see more economic and marketing cooperation with various travel agencies. We can create a win-win situation and establish a partnership, between us as a providing company and travel agencies.

The success of these travel packages not only benefits the agencies but also aligns with our interests. Our approach involves working closely with these agencies to develop a business-oriented strategy and introduce additional services to enhance the overall travel experience, instead of a financial capital merge. While our involvement is essential, the primary responsibility for the success of these initiatives lies with the travel companies themselves. It's a cooperative strategy that aims to leverage our respective strengths for the benefit of all parties involved.

 

If we were to return on the last day of your presidency and have this interview all over again, do you have a certain goal or personal ambition that you would like to have achieved?

The Japanese airline market has undergone a consolidation and reorganization during the COVID period. As a result, all but Skymark, including LCCs, are now either ANA or JAL Group. We are the only airline that is neither affiliated with ANA or JAL nor has a code-share agreement between them.

We want to emphasize that while ANA has made some capital investments, we remain an independent company. Our financial relationship with ANA is in place, but we operate as a distinct and autonomous entity with our own managerial policies and strategies. This autonomy is central to our identity in the market, and we strive to set ourselves apart from other companies.

Our niche position, as neither a national full-service carrier nor a pure LCC, offers distinct advantages. While we may not compete directly in the traditional sense, our focus is on enhancing our network, establishing a solid foundation, and delivering exceptional service and experiences to our customers, which remains a core part of our long-term strategy.

On a personal note, my ambition is to further differentiate our company and enhance our competitiveness. We are a unique airline with attractive pricing policies, a commitment to passenger comfort, and other noteworthy qualities. Our objective is to reinforce our presence and provide an even higher standard of service to our valued customers.

As we look ahead, we intend to make a significant impact in the industry within the next three to four years, reaching new heights and achieving our corporate goals as an airline company.


Interview conducted by Karune Walker & Paul Mannion

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