Devaluation Sensation: Everybody seems to be visiting Japan, and airlines are loving it

Skymark Airlines never made it beyond Japan’s borders. Too bad, because what it would have found is a Japanese international market that’s on fire.

Stricken with grandiose visions while earning strong domestic profits at the start of this decade, Skymark—until a few years ago the country’s only low-cost carrier—ordered giant A380s with eyes on overseas markets like New York and Frankfurt. Before the first A380 ever arrived, a weaker yen and more LCC competition drove Skymark into bankruptcy, eventually opening the door for its legacy rival All Nippon to step in as a savior (see page four).

But Skymark is a domestic story. For All Nippon and Japan Airlines, as well as the country’s upstart LCCs, the bigger story is a giant influx of international travelers flying into Japan. According to Japan Tourism Marketing, arrivals rose an astonishing 46% y/y in the first half of 2015, and an even more incredible 84% from the same period two years ago.

One obvious driver of the influx is yen weakness—Japan is now a much cheaper place to visit for citizens of many countries. On top of that, the cost of a holiday in Japan is getting cheaper because airfares are getting cheaper, all the more so because of government rules that automatically trigger lower fuel surcharges when fuel prices fall.

Eager to jumpstart a long-moribund economy, Japan’s government is doing its part to stimulate inbound tourism with funds for marketing campaigns and the like. All Nippon and Japan Airlines, themselves eager to earn more foreign currency revenues from points abroad, have done their part to promote Japan’s tourism sector too.

The country is also getting help from unfortunate events elsewhere in Asia. Tourists have shunned Korea, a competing destination, for most of this year because of the MERS virus scare. That’s certainly the case for Chinese tourists, who are also avoiding the ASEAN region in the wake of last year’s disappearance of a Malaysia Airlines plane flying to Beijing, filled with mostly Chinese nationals.

It’s indeed China that’s most responsible for the boom in inbound tourism to Japan. All the stars are aligning behind this trend, including the cheap yen, the MERS virus and the Malaysia Airlines incident, yes, but…

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