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Territorial disputes between China, Japan and the Philippines take their toll on air transport

CAPA (Centre for Asia Pacific Aviation) just released an analysis on the effect of territorial disputes between China on one side, Japan and the Philippines on the other side.

SYDNEY- Traffic is falling between China and Japanas well as China and the Philippinesas a result of China’s dispute with those nations over tiny and largely uninhabited islands according to a report of CAPA, the Centre for Asia Pacific Aviation. The situation in Japan follows a wave of anti-Japanese protests and sentiment, resulting in some Japanese passengers cancelling tickets over safety concerns while Chinese passengers cancel tickets as a mark of nationalism. All Nippon Airways has reported ticket cancellations whileChina Southern and Spring Airlines are cancelling some services.

The Philippines has not seen anywhere near the level of public uproar that Japan has, largely due to historical contention betweenChinaandJapan. But the Philippines have been hurt from a Beijing-imposed travel ban that has resulted in scores of tour agencies, which carry most Chinese tourists, cancelling trips. Scheduled seats between China and the Philippinesare at a near two-year low. Restrictions in thePhilippines mean service resumption could hinge on slow bureaucracy changes while Japan will need a shift of public attitude, which may take much longer to be restored..

All Nippon Airways as of 18-Sep-2012 has seen 18,800 tickets cancelled for travel from September to November, the carrier told the Wall Street Journal. Some 3,800 were from Japan-originating passengers while the remaining 15,000 were from China-originating passengers. The total cancellation rate represents 5% to 8% of available scheduled capacity, according to CAPA’s Innovata database.

ANA accounts for about 24% of the capacity between China and Japan. It operates 24 routes between China and Japan from four Japanese airports and 10 Chinese airports. ANA is so far cautious, noting cancellation rates are in line with decreases that occurred in a 2010 collision between Japanese and Chinese boats.

Japan Airlines, amongst others, is treating the delicately named “Japan/China situation” as equivalent to a force majeur and waiving ticket cancellation and change fees for flights until 19-Oct-2012. Citing “recent irregular changes in travel demand“, JAL on 21-Sep-2012 announced reductions on Japan-China flights from 10-Oct-2012 to 27-Oct-2012. Tokyo Narita-Beijing and Osaka Kansai-Shanghai Pudong will be reduced from two daily to a daily service while Tokyo Narita-Shanghai Pudong will be decreased from three to two daily services. This represents a 22% decrease in capacity in the China-Japan market for JAL.

Far greater proportional consequences are anticipated from Spring Airlines, which primarily carries Chinese tourists. It expects a 30-40% traffic decline in the short-term as a result of the dispute. Spring says 120 of 400 passengers booked to travel on the carrier untilChina’s National Day Holiday in Oct-2012 have cancelled their bookings. Spring has cancelled its planned 10 charters to Tottori (but no other destinations), albeit it was finalised in late Aug-2012.

China Southern, which accounts for approximately 10% of capacity between China and Japan, as a result of the dispute will make unquantified capacity cuts in Sep-2012 and Oct-2012 from Guangzhou to Osaka and Fukuoka; Beijing to Toyama via Dalia; Tianjin to Hiroshima via Dalian; Dalian to Sapporo; Harbin to Niigata and Osaka; and from Shenyang to Fukuoka, Osaka and Nagoya.

Additionally, Juneyao Airlines has cited the dispute as the reason for postponing the launch of Shanghai Pudong-Okinawa services from 20-Sep-2012 to Nov-2012. Although not confirmed as a result of the dispute, China Eastern will indefinitely postpone the re-commencement of four times weekly Shanghai Pudong-Sendai service, which was scheduled for launch on 18-Oct-2012. China Eastern officially cited lack of demand. China Eastern’s Sendai resumption was only finalised in August.

Prior to Japan’s nationalisation of the islands, the director general of China’s aviation regulator CAAC, Li Jiaxiang, and China Eastern Airlines separately cancelled meetings with Fukushima Governor Yuhei Sato. Talks were to centre on resuming services between Shanghai and Fukushima as well as to open new Chinese services from Fukushima.

The critical question is how long China will tolerate – perhaps even propagate – negative sentiment towardsJapan, a decision that could see the current matter be merely a blip or start to have medium-term traffic impacts, as is occurring in thePhilippines.

The Philippines has also seen declining traffic to China in recent months and capacity levels in Sep-2012 have been at lows not seen in over a year. There are currently about 11,000 one-way scheduled seats per week in the Philippines-China market, down about 15% from May-2012 whenChinafirst issued its warning against travelling to thePhilippinesfollowing a naval standoff with thePhilippinesaround the Scarborough Shoal.

Philippine carriers account for nearly three-quarters of capacity in the market. Philippine Airlines (PAL) is the largest carrier, accounting for 37% of current capacity between the Philippines and China. PAL, Zest and Cebu Pacific also operated frequent charters intoChina prior to May-2012, when Chinese tour companies cancelled their charter programmes as a result of the travel warning. Most of the charters operated to airports near beach resorts (such as Kalibo) rather than Manila. The warning has also significantly impacted demand and profitability on scheduled routes, according to executives at Philippine carriers.

The PAL Group’s LCC subsidiary, AirPhil Express also operated flights to China prior to the onset of the current crisis in May-2012. PAL Express will likely resume flights to the country once tensions ease and would be the logical brand for adding destinations in China that are not served by PAL mainline given AirPhil/PAL Express’ leisure focus and all-economy configuration.

(Source: CAPA)

Top 10 Airlines from China to Japan ranked on one-way seats: 17-Sep-2012 to 23-Sep-2012



Total Seats

1 NH All Nippon Airways 31,103
2 MU China Eastern Airlines 31,012
3 CA Air China 26,316
4 JL Japan Airlines 18,130
5 CZ China Southern Airlines 13,571
6 DL Delta Air Lines 3,689
7 FM Shanghai Airlines 2,876
8 ZH Shenzhen Airlines 2,573
9 9C Spring Airlines 2,088
10 SC Shandong Airlines 823