The saga surrounding Japan Airlines‘ fall from the both the dominant Japanese airline and the largest airline by passengers carried in Asia, to a company in the midst of the largest bankruptcy in Japan’s history, relying on a government backed rehabilitation that involves selling off significant assets, is not only a huge blow to JAL but also a massive opening for All Nippon Airways to step in.
In June Japan Airlines’ passengers carried dropped to 3.55 million people a 1% drop, while All Nippon Airways saw a 10% growth achieving 3.65 million passengers for the month.
Along with the overall passenger growth, ANA has seen a 30% increase in international passenger traffic as JAL shreds apart its international routes, reducing and eliminating routes.
Japan has seen the launch of a number of LCC’s that have cut into the extremely high airfares for domestic and regional travel offered by ANA and JAL. These LCC’s have taken a huge bite out of both ANA and JAL.
ANA is not a new comer to LCC’s, as they’ve wholly owned Air Next, a small domestic LCC based Fukuoka Airport (FUK) since 2004. The announcement to launch a larger scale LCC, using medium sized aircraft with high density seating, of approximately 200-seats per aircraft flying both domestically and internationally, priced competitively with Express Buses is within their grasp.
ANA’s choice of Kansai Airport, near Osaka, offers two advantages. For starters the airport offers them a fairly central location within Japan, as well as an airport well placed for flights to South Korea and major business hubs in China, secondly, the airport is exploring building a terminal dedicated to low cost airlines on its second reclaimed island where its second runway has been constructed.
To reduce costs, ANA plans to use non-Japanese pilots, reduce in-flight services and seek out shorter routes with a quick turn around time. While JAL and ANA have long since offered frequent domestic travel with such high capacity that Boeing created the 747-400D specifically for the high density seating offered by ANA and JAL (with up to 624 passengers, the standard 747-400s operated by JAL & ANA that carry between 287 & 325 passengers) these high density routes have been impacted by LCCs and command higher fares due to the airports they operate from and the higher operating costs and labour costs of both JAL and ANA.
To counter ANA’s announcement that they’ll be launching a low cost carrier, JAL has now announced they’re exploring the creation of an LCC of their own. While JAL sees a low cost carrier as a potential way to boost its financial recover, it has more hurdles to overcome than ANA.
ANA is financially solvent, has the credit to purchase a new fleet of aircraft and has multiple Star Alliance partners in the region to feed potential traffic and the capital to invest in a low cost carrier … not to mention the experience in being flexible enough to let an LCC operate on its own.
JAL on the other hand is selling off assets and while it is on the upswing financially, it is a in a very deep financial hole. Even with the Japanese Government backing JAL’s restructuring it has many hurdles to over come in build a new fleet, a new brand and demonstrating that its new management is flexible enough to allow a new brand to flourish on its own.
A recent independent review panel determined than JAL’s failure was due to the company being so compartmentalized that one division could never know what another division was doing and that management was so short sighted that it couldn’t see its failure on the horizon.
Can a company that literally could not foresee its own failure successfully restructure in such a way that they can not only develop a low cost carrier and create its brand … but also let that own brand work independently to succeed?
The opening shots to the Airline Battle for Japan have been fired … and this is a war that will not only be won in the long term, but by both Mainline ANA and JAL brands and their potential new LCC brands as well..