expanding airport capacity and enhancing passenger convenience
The tourists are back! Overseas visitors are flocking to Japan once more, with their pursuit of a unique cultural experience made more affordable than ever by a weak yen.
This is providing a welcome tailwind to Kansai Airports, the joint venture between ORIX and French infrastructure group VINCI, that operates the three big airports in Japan’s western Kansai region.
With volumes rapidly improving at Kansai International Airport (or KIX, with around 26 million mostly international passengers a year), Osaka International Airport (or ITAMI, with 14.8m domestic passengers) and Kobe Airport (or KOBE, 3.4m domestic), the group is back in the black for the first time in four years at the FY2023 half-year financial results in last December, states Kansai Airports CEO Yoshiyuki Yamaya.
After plummeting during Covid, when the company was forced to shutter gates, mothball large areas of its terminal and reduce its annual graduate intake, traffic is now back to around 90% of 2019 levels. At KIX there will be almost 1,400 international flights per week this August, the second busiest schedule it has ever had, with new or expanded routes to Canada, Australia and the Middle East.
Foreign visitors are indeed leading the charge and their numbers are back to pre-pandemic levels. Domestic travel bounced back faster than international and passenger numbers are close to pre-pandemic levels, but there is less business travel than before, as home working and video conferencing has become more prevalent.
A new look for new travelers
Intriguingly, notes Mathieu Boutitie, Chief Technical Officer at Kansai Airports, the origin of the travelers has shifted significantly from pre-Covid times. There are still only half as many tourists from China as before and the single largest share – fully one third of the total – is now from South Korea, with arrivals from Taiwan and South East Asia also up strongly and well above their 2019 share.
Given that the Chinese tend to be big spenders while on holiday, this has affected retail and duty free takings at the airports but Mr. Boutitie says the group is compensating by attracting more Japanese tourists, who not only spend generously on ‘omiyage’ (souvenir gifts) but also tend to eat at the airport before their flight.
More importantly, Kansai Airports is modernizing. Despite going into losses during the pandemic, it never stopped investing says Mr. Yamaya, and after a grand reopening of ITAMI in August 2020, it is currently in the midst of a major renovation of Terminal 1 at KIX. This four-year refurbishment project, costing JPY 70 billion (more than $460 million) started in May 2021 and will create a terminal capable of handling 6,000 international passengers an hour – more than 1.3 times the current capacity, allowing KIX to handle 40 million international passengers a year.
Two of the four phases have already been completed on time and budget, consolidating the customs area, departure immigration and the duty-free shops into a single, central location. Not only has this created a better looking and more efficient terminal, it has also allowed management to design a localized food and retail offer. “Most airports look like anonymous shopping malls,” says Mr. Boutitie, “but at KIX you feel you are in Japan. And this is already paying off in terms of spend per passenger.”
The final two phases will consolidate and expand the security checkpoints, international arrival flow, create a common airline lounge and a much higher-quality range of shops and food outlets after travelers have passed security – another improvement that Mr. Boutitie believes will be well received and lead to higher receipts.
Ready to welcome the world
If everything goes well during this year – KIX’s 30th anniversary – then the grand opening will take place next spring, in time for World Expo 2025 in Osaka, which is expected to attract millions of visitors and drive Kansai Airport’s traffic to a new peak.
This demonstrates how closely connected the group, with its gateway airports, is to its economic ‘hinterland’. “With the Expo in 2025, we anticipate a heightened focus on the Kansai region as a travel destination,” says Mr. Yamaya, “and our role is to accommodate that growing demand and to foster economic growth into the future.”
Efforts to increase air traffic in the Kansai region are currently underway, led by the business community and the region, with the aim of achieving 500,000 movements (each takeoff and landing count separately) per year at the three airports in the early 2030s (280,000 in 2023).
A more intractable issue is Japan’s demographics, with both the labor force and the overall population in decline. However, Kansai Airports built this into its projections when it won the 40+ year operating concession to operate KIX and Itami in 2016 (and Kobe from 2018) and is maintaining productivity with a reduced workforce by implementing innovative digital and automation measures.
The group’s senior management is confident that both international and domestic travel will continue to increase, and this presents new opportunities to attract new visitors as a major gateway into Japan.
