The Floor Price for the Discount International Air Transport Association (IATA) PEX Tickets Abolished; Would it Affect Travel Companies in Japan?

With the floor price abolished, airlines have started offering a round trip to Europe for less than 60,000 yen. Securing air seats for package tours becomes a large issue of concern

Yasushi Tanaka

Yasushi Tanaka Columnist

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Ministry of Land, Infrastructure, Transport and Tourism (MLIT) notified airlines of abolishing the PEX(*1) fare floor price applicable for Japan departures. The revision will take effect from April 1, 2008.

PEX fare is defined to be the “published discount fare” which carriers offer directly to passengers and one can purchase tickets online. The abolishment of the floor price will provide consumers with more choices to hunt down the low-priced air tickets for overseas travel.

Carriers seem to be ready, accordingly. All Nippon Airways introduced a new discount fare category called “Super Ecowari”(*2) . Depending on the day to depart, the lowest round trip fare from Narita to Hong Kong or Bangkok is 29,000 yen and 59,000 yen to Europe. ANA strongly promotes customers to combine “Super Ecowari” and hotel bookings they recommend for one can travel at a real low price.

The current marketing strategies of carriers include the downsizing of aircrafts and expanding business class seats to maximize profit. In result, decreased supply of air seats particularly in economy class has been an unfavorable market factor for travel companies in Japan. Due to the increase of inbound travelers to Japan, more number of air seats are sold and taken abroad thereby seat allocation for package products originated in Japan goes scarce now.

The abolishment of PEX fare floor price may enable airlines to boost the sales share of directly sold seats. By contrast, the number of seats allocated to travel agencies could possibly shrink. It is thus inevitable that travel agencies would face more difficulty in securing air seats for package tour sales.

*1) PEX fares (Special Excursion Fares)
Discount fares published by airlines according to destinations and sectors. In Japan’s case, the floor price according to destinations and sectors was set at the maximum discount of 70% of IATA PEX fares according to destinations and sectors, regulated by International Air Transport Association.

*2) “Super Ecowari”
All Nippon Airways’ new discount fare category for economy class passengers departing Japan. Effective from April 1, 2008, the fares are applicable to departures excluding Sundays and returns excluding Saturdays, and a round trip must include at least one Saturday (e.g. departing on Friday and returning on Sunday). Tickets are purchasable on the departing day subject to seat availability.