(Title) Implications obtained through the survey regarding overseas travel by LCC in Japan market Author: Supervisor: Shoji Nomura Graduate School of Economic Science, Saitama University e-mail: nomura.shoji@gmail.com Phone: +81-3-6220-1022 (The current stage of doctrate research: later) Kazuo Usui Professor of Marketing, Doctor of Commerce Graduate School of Economic Science, Saitama University Visiting Professor, The University of Edinburgh Conceptual domain: Porter s five forces analysis is applied as the framework of this study. Analysis of Bargaining power of customer of these forces, has been conducted to monitor market at the initial stage of this study. This paper discuss on the findings of the preliminary survey to identify traveler s preference to select airlines for overseas travel from the market s point of view. Methodology: Multivariate statistics analysis is applied. This study collected necessary datas by online survey to identify the general image of Low Cost Carrier (LCC) for overseas travelers who departed within (one) 1 year. In addition, in-depth interview for actual user of LCC was conducted to monitor their preference for LCC, particularly focusing on change of image for LCC, in comparison between before travel experience and after travel experience. Findings: The survey for general travelers via internet shows that respondents prefers to buy tickets based on airline brand image, high standard in-flight services and frequent flyer mileage points. Meanwhile, survey by interview for actually experienced traveler of LCC shows that respondents prefers cheap air ticket priority. Also, they give emphasis on the importance of transparency of airline information ( why cheap ticket price can be offered. Price of chargeable item or so. ).
1.Introduction In recent years, Low Cost Carrier (LCC) has globally expanded its market share by offering low fares to attract high price sensitive travelers. According to a study on aviation industry, the share of LCC within Asia-Pacific area will reach 25 % in 2012. For international routes in Japan, Australia s had become the first LCC operator to fly to Kansai (Osaka) airport in 2007, followed by Chubu (Nagoya) airport. Total seat capacity share of LCC remains at low as approximately 3% of international routes ex-japan. However Three (3) LCCs, Japan, Peach Aviation and Air Asia Japan were finally established in 2011, and plans to inaugurate in 2012, including international routes. My research question of doctoral thesis is the reason why LCC has not existed in Japan so far despite significant growth abroad. Identifying hindrance for LCC s growth in Japan is the aim of this study, and this paper will discuss the result of preliminary survey to identify passengers needs/preference for LCC from market point of view. Under these circumstances, I have conducted survey for travelers by internet and interview aiming to identify overseas traveler s preference for use of LCC in Japan market. Section 2 describes result of survey conducted through internet, which is for general overseas travelers. Section 3 is rather qualitative survey through face-to-face interviews for actual users of LCC, and analyzes the travelers preference for air travel. Finally, the conclusion will shown in Section 4. This is a preliminary survey to identify travelers needs/preferences for LCC. Simultaneously investigation on various issues from other point of view such as government regulation, airport issues, sales distribution characteristics etc., continues in addition to this survey. 2.Findings from the online survey This is to identify traveler s preference for LCC. Respondents are overseas travelers who traveled in one year regardless LCC users or not. Survey through internet had been conducted in July 2010. This is to monitor general preference of overseas traveler as of July 2010 before the commencement of operations by newly established JCC commences its operation in 2012. ( please refer detailed specifications as attached) Preferred airline Japanese legacy carriers obtained high scores for preferred airline, as 76.5 % for All Nippon Airways and 59.5 % for Japan Airlines. Among foreign carriers, Singapore airlines won best position as 3rd in the rank. However, LCC () was at 28th position with 1.4%. Meanwhile, for the question of airline do not want to use, Korean airline was top with 32.6 %, followed by China airlines (23.9%), Japan Airlines (19.1%), Aeroflot Russia (15.8%). Also, airlines of United States and Mainland China were positioned at high rank, such as Delta, United, China Eastern, Air China etc. LCC,, was at 25th position (1.5 %). Reason for choosing airline (Over 30 % points) Top reason for choosing airline was because of National Flag carrier (48.5%). Mileage points of Frequent Flyer can be accumulated(43.5%). High quality service by cabin attendants (42.5 %). Japanese language can be used (no language barrier) (32.7%). Meanwhile, only 9% is concerned about the price. How to gather information of the Airline Internet is a useful tool for collecting airline information. Check reviews of airline of internet
(59.1%) was highest. Refer web page of applicable airline(30.2%). Ask the impression of actual users in friends/acquaintances (28.5%), Read guide books (13.1%). Image of LCC The top was Little compensation when accident happens (41.7%). Poor quality of inflight services (38.9%), Aircraft equipment is old (37.9%), Lower flight frequency (32.1%). Answers of poor impression ranked at higher position. On the other hand, positive image such as safe operation is conducted, brand-new aircraft is used etc., were at low position. Generally, negative image was predominant. Awareness of LCCs This survey is to identify the airline preference for overseas travel. In Japan, Skymark Airlines is regarded as budget airline (Skymark was not recognized as LCC for a long time. In summer 2011, CEO of the airline emphasized it will go into the business model of LCC when they commence the operation from/to Narita airport. This is due to possible competition against newly established LCC, such as Japan, Air Asia Japan etc., established in Year 2011. ) and 25 % of the total respondent answered that they have experience to use Skymark within Japan domestic routes. Travel experience of other LCC was extremely low. Awareness of LCC was generally at good level. The top was Skymark (90 %), followed by (70%), Air Asia (40 %), Southwest Airlines (35%). Findings are summed up as follows : 1. The average numbers of overseas travel of this survey was 19.7 times, which is around 20 times. 2. By prior experience of overseas travel, the tendency for the proportion of individual travel arrangements( only purchased air ticket and arranged Air ticket and others separately ) is increasing with the amount of prior travel experience continued unchanged, and it is 42.3% for those having made at least 20 trips. 3. LCC () is just at 28th (1.4%) position for the item of preferable airline to use. Simultaneously, Airline which do not want to use was at low position as 1.5 %. Image of LCC might be weak,. 4. For the question of Reason to choose airline, National flag carrier, Mileage points, Good in-flight services etc. were over 40%. Lower air fare as LCC s advantage remained at low as 9.1%. Therefore, cost is not important for Japanese consumers. 5. Image of LCC was rather negative. Small amount of compensation in case of accident, Poor in-flight services, Using aged aircraft, less flight frequencies was Top 4 seasons, and opinion of positive image was extremely few. Despite 70 % of the respondents aware as LCC. This might be due to promotional campaign. No concrete image of LCC is well developed at the time of survey. It could be due to insufficient travel experience by LCC, media exposures and user s reviews. Above findings represent current circumstances in Japan market. This could be regarded as benchmark for comparison to image for LCC of actual uses. 3. Results of interviews for actual LCC users The in-depth interview session with actual LCC traveler was conducted. Aim of this interview is to identify their preference to repeat to use LCC, change of LCC image between prior to use and
after the event. Prior travel experience varies from 5 times to 90 times. Average travel experience is 33 times, who could be regarded as heavy users. This is rather qualitative approach. Travel arrangements All respondents answered that they arranged the travel to fly with LCC by internet. If they have queries, they make phone call to reservation section. They purchase tickets when the unknown points were clarified. 2 of the respondent were not satisfied with call center service level (need to wait for operator for long time ) due to congestion of call line. A respondent pointed out the inconvenience to consult with travel agent. He was unsatisfied with the poor knowledge of agent s staff. No appropriate information was advised for his specific requirements, such as dress code of a boutique hotel facility and information of booking cancellation conditions. Also, other respondent complained on the method of payment. Some travel agents refused to settle via credit card. He prefers to direct purchase to airline avoiding such inconvenient intermediaries. Other traveler used to purchase package tours several years ago. He traveled without companion, and the one person participation case requires good amount of additional charge such as single room supplements or so. This traveler currently arrange air ticket, hotel accommodation and other travel parts via internet (supplier s web, and online travel agents like Expedia), eliminating involvement of travel agents which he perceived as obstacles. Images of LCC Half of the respondents have positive image of LCC. They watched on TV advertisement of. Two respondents have the image of LCC offers cheap air fare. Some said We do not anticipate good service of LCC due to cheap air fare. We just save money from air transport, and will use money after arrival at destination to enjoy more. Preferred airline and airline do not want to use Every respondents used internet (mainly travel review sites of SNS), and friends/acquaintances are the source of airline information. Prior to fly LCC, image in advance was not generally good. Every respondent had negative image prior to the departure. Most of the information is obtained through user s review of SNS and friends, such as inadequate in-flight services, low punctuality etc. Impression of LCC after the experience Generally good. All the respondents indicated positive opinion for LCC, particularly for in-flight services and amenity level. Minimum requirements of air travel, such as clean seat, toilet, drinking water etc., were well provided. They are happy to use LCC in the future, if the LCC offers cheap air fare. Summary of the interview survey for actual LCC user are as follows : 1. Respondents for the interview had significant prior travel experiences. Average prior experience of overseas travel of this survey was 33 times (5 times to 90 times). 2. All respondents buy LCC tickets through internet. Some perceived that travel agents do not provide appropriate services to customers, and no longer required to arrange travel of simple itinerary. 3. Half of respondents had positive impression for LCC (particularly ) by promotional campaign through medias. All of the respondents would like to purchase ticket of LCC for next travel if it offers cheap fare. 4. Cheap air fare was the top priority.
5. Majority of the respondents expressed the importance of transparency of information disclosure of LCC. This gives trustworthiness to repeat to purchase tickets of LCC. 4. Conclusion It could be considered that general frequent travelers think highly of reliability, loyalty and comfortableness such as national-flag carrier, mileage points program, appreciation of service quality etc., meanwhile actual user of LCC gives priority to cheap price. They had negative opinion against LCC prior to travel. However, they indicate positive impression once they used it, also showed very high probability to use in the future, if a cheap fare is offered. According to JTB Report (Year 2011 edition), individually arranged travel is popular and its share is 62.3 % for frequent travelers with experience of 20 times or more. Also popular method of their travel arrangement is through internet (64.2%), and this is far higher ratio than of by travel agents shop (10.9%) or other methods (24.9%). Their behavior of travel arrangement is consistent to LCC s business strategies. In short, beginner of travel might purchase pre-arranged travel produced by travel agent, and LCC could be suitable for travelers with many experiences. This survey was only to identify traveler s preference for LCC. Analysis of user s preference for legacy carriers was not made. Also, apart from the point, regulatory issue of Japanese government is critical in comparison to other country. (particularly liberalization of aviation policy. ) Also limited number of airport slots in Tokyo are is significant constraint in Japan. It limits the growth of air transport in Japan. Also, the interview with LCC users was limited numbers as 6 travelers (due to budget constraint). So that, the small number of samples could not support reliability of the result.
Appendix. Survey - 1 Methodology: Respondents: Online survey Individuals, men and women who traveled overseas in one year, live in greater Tokyo Valid sample size: 1,036 Period: 26 July, 2010 ~ 28 July, 2010 Gender / Age segment Samples Share (%) Male 20 s 74 7.2 Male 30 s 98 9.5 Male 40 s 80 7.8 Male 50 s 73 7.1 Male 60 s and above 134 13.0 Female 20 s 127 12.3 Female 30 s 102 9.9 Female 40 s 56 5.4 Female 50 s 112 10.9 Female 60 s and above 175 17.0 Total 1,036 100 Survey 2 Methodology : Interview Respondents : Individual men and women who travel overseas by LCC in one year, live in greater Tokyo. Valid sample size : Male : 2 persons, Female : 4 persons (Total 6 persons) Period : 6 July, 2010 ~ 7 July, 2010 Gender / Age segment Female, 20 s Female, 30 s Female, 40 s Female, 50 s Male, 30 s Male, 50 s Used LCC company and Easyjet
Graph 1 Arrangement method of overseas travel ( by travel experience) 0% 20% 40% 60% 80% 100% 1 Timen=71) 7 15.5 50.7 23.9 2-3 Tim esn=112) 9.8 25 46.4 17 4-5 Tim esn=93) 8.6 10.8 47.3 29 6-9 Tim esn=139) 7.9 22.3 38.8 29.5 10-19 Tim esn=281) 12.8 27.4 31.3 26 20 Times or moren=335) 14 40.9 23.9 18.8 Air Ticket only Non Escorted Pachage Tour Other Air Ticket and Accommodation Escorted Package Tour Graph 2 Experience, desire to use and awareness of LCC Skym ark Jet Blue 1.2 0.5 Easyjet 1.6 0.3 Tiger Air 0.6 0.4 Cebu Pacific 1.3 0.9 Air Busan 0.3 0.6 3 14.5 2.8 1.3 Southwest 2.5 1.3 Air Asia 1.4 1.5 Lion Air Ryanair Jeju Air Spring Airlines 0% 10% 20% 30% 40% 50% 60% 70% 80% 90% 100% 0.4 0.9 0.6 1 Jin Air 0.0 0.5 8.8 19 12.1 14 22.8 18.4 13.8 14.8 27.5 16.9 Experienced. Hope to use again 6.7 29.2 35.8 Experienced. Do no't especially want to use again. Don't know. 66.1 68.3 78.6 85.2 90.3 84.6 74.7 80.4 85 83.5 71.5 81.7 65.9 60.3 28.3 Experienced. Will use if an opportunity arises No experience. Know name of LCC. 7.5