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Welcome to Flight Global Focus, 
the essential podcast for 

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trusted aviation insight. 
I'm Lewis Harper, Airlines 

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Editor for Flight Global. 
And this week, we are talking 

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about domestic markets and more 
specifically the Japanese 

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domestic market. 
Joining me to discuss this is 

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Alfred Cheer Flight Global's 
Asia Airlines Editor. 

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Hi, Alfred. 
Hi, Lewis. 

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So, Alfred, can you give me a 
snapshot of how the Japanese 

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domestic market is performing 
now? 

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Yes, Lewis. 
So if we take a look at the data

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from the two largest carriers, 
Japan Airlines in Eni. 

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So if we look at the October, 
December quarter, that's the 

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third quarter in the Japanese 
financial calendar, we see that 

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for Ana it recorded a 4% rise in
traffic and on the other hand, 

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capacity fell 2.8%. 
And Ana is also saying that it's

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passenger volumes for the 
quarter were up 2.8% to 11.9 

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million passengers. 
That's for the domestic network.

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If we look at Japan Airlines, 
they carried 1.5% more 

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passengers during the quarter. 
Traffic was up 1.8%, but 

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passenger capacity was down 
0.8%. 

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So that kind of gives you a bit 
of a picture of how the two 

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largest carriers in Japan, how 
their domestic networks are 

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performing. 
Thanks, Alfred. 

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Yeah. 
And interesting seeing there 

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that, yeah, you see a bit of a 
rise in traffic, but capacity 

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down in both cases. 
And I think the the key issue 

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we're coming round to here is, 
is demographics, isn't it? 

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Could you talk a bit more about 
the impact of the demographic 

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changes in Japan and maybe the 
challenges that's creating for 

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the airline sector? 
Yes, you're right in saying that

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demographics is a is a key 
challenge. 

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And you know, Japan's shifting 
demographics has been widely 

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documented. 
We know that the country is 

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facing a rapidly ageing 
population and, you know, their 

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implications across a wide 
segment of society, not least 

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the airline sector. 
And you know, for the airlines, 

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the kind of changing 
demographics means, on the one 

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hand, labour constraints, but 
more significantly, it kind of 

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changes to the way we look at 
domestic travel trends. 

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And shifting demographics has 
been one of the key challenges 

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that has been outlined by 
Japanese carriers, both Japan 

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Airlines and Ana. 
And you know, they've talked 

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about this since last year, both
in the network plans and in the 

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financial results. 
And set against this as well is 

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a regulatory environment that's 
also becoming increasingly 

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challenging. 
So we know that Japan 

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regulators, they don't impose 
caps on domestic airfares, but 

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they have oversight in terms of 
the range of fares that domestic

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carriers can set. 
And they also provide aid in 

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some form of subsidies in the 
form of airport usage chargers 

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and aviation fuel. 
So that's one that's one 

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challenge. 
Another challenge as well, and 

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this was raised by A and AI 
think was that there was a 

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structural decline in business 
travel demand according to its 

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traffic data. 
I think it's seeing that 

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business travel demand is down 
20 to 30% against pre pandemic 

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levels. 
So that's quite a significant 

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decline. 
And I think it suggests that, 

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you know, there's no way that 
business travel demand is going 

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to recover to the levels that 
we're seeing pre COVID. 

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And then of course, on top of 
all of this is increasing costs,

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which, you know, the airlines 
have acknowledged that it's 

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going to make it challenging for
them to turn a profit for their 

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domestic operations. 
And of course, Ana in August 

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when it was a, when it kind of 
released its network outlook for

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the rest of the financial year 
to March this year, it says 

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that, you know, it will continue
to adjust flight frequencies by 

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adding or reducing flights based
on what it called a 

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comprehensive assessment of 
demand. 

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So that's kind of, you know, 
what the situation is, the 

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challenges that the the two 
largest carriers in Japan are 

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facing. 
Yeah, it's really interesting. 

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So yeah, you talk about the 
demographic challenges 

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alongside, you know, regulatory 
and the business travel ones, 

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which I guess are in the 
latitude cases probably more 

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familiar to other airlines 
globally. 

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But when we look at how the 
Japanese carriers are are 

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seeking to adjust to this, what 
what are they, what are they 

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saying in terms of how it's 
affecting their strategies going

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forward? 
Yep. 

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So like I said earlier, I mean, 
Ana says that they would do a 

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comprehensive assessment of 
travel demands. 

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And you know, I've spoken with 
executives from both Japan 

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Airlines and A&A at the recent 
assembly of presidents organised

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by the AAPA. 
And basically what I can get 

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from having conversations with 
them is that they are indeed 

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rethinking their long term 
domestic network strategy. 

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So for example, Japan Airlines 
is saying that the population in

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regional centres, that means 
those outside of your 

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metropolises like Tokyo, Osaka 
and Fukuoka. 

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So the regional centre 
population is going to be 

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shrinking at a faster rate than 
your big cities. 

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And So what that means then for 
the airline is that you'll 

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likely see down gauging of 
capacity over time. 

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And the ones that will kind of 
get the first cut, so to speak, 

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will be flights between the 
regional centres, whereas your 

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trunk routes, for example, like 
your Tokyo to Osaka or Tokyo to 

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Fukuoka, these routes demand 
will still hold in the near 

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term. 
So it's not likely, at least for

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Japan Airlines, you're not 
likely to see a kind of major 

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decrease in capacity for Ana. 
They also told me what steps 

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they're taking to manage their 
domestic operating challenges. 

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And as I mentioned earlier, I 
think they did say that you 

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know, one of the the core issues
was a slower than expected 

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recovery of business travel 
demand. 

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And also given the shrinking 
population, they are also 

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flagging an oversupply of seats,
basically an overcapacity. 

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And so to this end, I think for 
them their priority is really in

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right sizing their operations 
that kind of led to them 

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ordering the Embraer E 190 E 
twos at the Paris Air Show last 

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year. 
And of course, you know when 

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they placed that order, they did
mention that one of the key 

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reasons for doing so was in 
anticipation of a shrinking 

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population in the second and 
third tier cities and therefore 

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they kind of want to look to 
right size their domestic 

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operations. 
Thanks, Alfred. 

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Jen, it's, it's really 
interesting because we're 

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obviously in a a global industry
and the narrative is always 

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around growth and where that's 
coming from. 

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As you say, the this isn't 
necessarily about capacity cuts 

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at this point. 
It is unusual and interesting to

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be talking about airlines having
to adjust to this demographic 

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change and thinking in terms of 
not necessarily growing, but 

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moderating capacity on certain 
routes and things like that. 

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And of course, the obvious 
point, as you, as you said 

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earlier, Japan is I guess 
globally ahead of most other 

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countries in this regard in 
terms of the demographic 

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challenge. 
But it perhaps does serve as a, 

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as a template for what what 
might be to come in, in certain 

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other markets and, and on that 
topic. 

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So how does you know Japan's 
experience in the domestic 

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market compare with with markets
elsewhere? 

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Yeah. 
So I looked at, you know, iatus 

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data for global traffic demand, 
which also tracks domestic 

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traffic and capacity for some of
the key markets in the world. 

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So if we look at iatus data, I 
think for 2025, domestic freer 

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demand across the different 
markets it tracks, it hit a 

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record high for both passenger 
number and load factors. 

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But IATA also notes that growth 
has slowed down compared to a 

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very strong domestic rebound 
that it saw in 2024. 

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And these markets, these 
domestic markets that it tracks,

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these includes geographies like 
Brazil, the US, and of course, 

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in Asia, we have mainland China,
Australia, India, and of course,

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Japan. 
So if we just look at Japan's 

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data, that's from IATA, of 
course, the domestic traffic in 

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2025 was up 4.8% and capacity 
kept steady at just 0.4% growth.

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Now if we look at the traffic 
growth for Japan, that's kind of

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one of the lowest growth rates 
amongst the market that it 

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tracks. 
And if we look at IATA's data 

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for 2024, just for Japan, of 
course, traffic was up 3.2%. 

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Well, we saw that capacity 
shrunk slightly. 

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Now in contrast, in India for 
2025, traffic was up 5.2% 

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contrasted with a 6.2 increase 
in capacity. 

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While in mainland China capacity
was up 2.8% and that was 

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outpaced by a 4.7% increase in 
traffic. 

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So India and China of course 
with a relatively younger 

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population compared to Japan 
definitely has the demographic 

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advantage. 
And you know, we will probably 

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see that they will continue to 
still be domestic travel demand 

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in the near term. 
And of course, there are other 

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factors at play as well, 
including a growing middle class

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and of course the the rise of a 
lot of first time travellers, 

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particularly in India. 
So, you know, the overall data 

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from Ayatta suggests that 
domestic travel demand is still 

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quite healthy globally, 
especially in Asia Pacific. 

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But if we look at Japan's slow 
capacity growth, you know, it 

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suggests that there will 
probably be some kind of 

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structural changes to the way 
the domestic market functions in

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the future. 
Thanks, Alfred. 

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Yeah, it's, as I say, a really 
interesting topic and as you you

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talk about, I think the broad 
theme when you speak to IARTA 

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and hear them talking about 
global trends, it's still one of

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growth in domestic markets. 
As you talked about the whole 

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narrative in India, for example,
is the growing middle class 

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driving a huge rise in demand 
for, for air travel. 

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China sort of similar story 
about the the middle class. 

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And when we talk about the 
demographics, I would say it's 

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not something that's brought up 
that proactively at the moment 

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when associations like IATA are 
looking at longer term trends. 

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But that said, I think it's 
something it's really good to 

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flag it. 
And as, as, as we know, Japan is

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maybe a Canary in the coal mine 
a bit on, on some of this 

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because, you know, other more 
advanced economies might be 

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facing similar challenges. 
Not all of them, of course, will

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have a, a domestic market where 
perhaps they will show through 

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quite more strongly, but 
certainly something to keep an 

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eye on. 
And I think it, it also reminds 

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me a bit of the sustainability 
debate where of course, when you

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have advanced economies, keen or
what? 

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Maybe not at the moment, not all
of them, but certainly the, the 

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narrative has been a bit about 
more advanced economies pushing 

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for, for more action on the 
environment. 

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You know, they've kind of done 
their growth, they're sort of 

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through the, the, the boom years
of, of the growth of air travel,

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for example, they've settled 
into something much more slow in

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terms of, you know, year on year
capacity growth. 

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Whereas, you know, other markets
like India, China, Africa, for 

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example, where there's so much 
more potential for growth, say 

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that it's not necessarily fair 
that advanced economies get to 

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dictate what happens elsewhere 
in sustainability terms. 

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So it kind of, yeah, has echoes 
of that as well. 

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So it's a it's a topic that that
touches on, on lots of things 

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there as you, as you nicely 
outlined. 

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So thanks for your time, Alfred.
Thanks, Lewis. 

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You've been listening to Flight 
Global Focus, which is a 

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00:11:10,800 --> 00:11:14,520
production of Flight Global with
audio editing by Lucy Johnson. 

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00:11:15,040 --> 00:11:17,400
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Listen, rate, review and 

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subscribe wherever you get your 
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Join us again next week for more
in depth analysis covering the 

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00:11:30,840 --> 00:11:33,840
latest developments in airlines,
defence and aerospace. 

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00:11:34,320 --> 00:11:37,440
I'm Lewis Harper, and we'll see 
you next time for Flight Global 

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Focus.