Japan’s Airline Battle Escalates To War Today

Today … well its ‘today’ in Japan and ‘tomorrow’ where I am … the battle between All Nippon Airways (ANA) and Japan Airlines (JAL) that I have recently written about will officially become a full blown war for dominance over the nation’s airline passengers. ANA has already exceeded JAL as the dominant mainline airline in Japan and they will now proceed to try and dominate the ‘low cost carrier‘ (LCC) market, cutting JAL’s legs out from under them … before JAL even has a chance to put their feet down.

All Nippon Airways is holding what it is calling an “extraordinary board meeting.”  This meeting will officially approve the creation of a subsidiary ‘low cost carrier‘ (LCC) to be based at Osaka’s Kansai International Airport (KIX)

ANA’s new low cost carrier, once approved later today (Japan Standard Time) is expected to begin service as early as 2011, providing domestic and international service. Domestically ANA intends to launch its service with the high-traffic Kansai (KIX) – Tokyo/Narita (NRT) route, with fares starting around US$60 one-way, competing against the Central Japan Railway fares of US$168 one-way.

Other initial start up domestic routes includes KIX-Hokkaido (CTS), Nagasaki (NGS), Sendai (SDJ), Kagoshima (KOJ) and Niigata (KIJ).  These routes all plan to eventually capitalize on the increased landing slots becoming available to ANA at both Tokyo Narita and Tokyo Haneda (HND), with Haneda being located considerably closer to downtown Tokyo than Narita.

The international strategy of the low cost carrier intends to capitalize on the ‘Open Skies‘ agreements opening up new route options for the yet to be created low cost carrier. The international routs would focus into China and Southeast Asia on routes with a flying time of six-hours or less from the Kansai hub. Potential destinations well within the six-hour limit for ANA’s low cost carrier would include Beijing, Incheon, Shanghai, Pusan, Hong Kong, Bangkok and other major destinations.

With the creation of the low cost carrier, ANA would be the top shareholder, but intends to limit itself to a maximum 40% stake in the airline to minimize financial risk. The remaining funds will be sought from a variety of Japanese companies as well as foreign airlines and foreign investment firms.   ANA also intends to seek out an airline executive with prior experience in establishing a low cost carrier … potentially a foreign executive, which is a somewhat radical move for a Japanese corporation.

To reduce costs ANA plans to utilize a new fleet of small and medium sized aircraft with the potential to carry out the intended route network in a high-density seating configuration.  Pilots and in-flight crew will be primarily comprised of non-Japanese staff to reduce the crew expenses as well.

It is expected that once ANA officially establishes the new low cost carrier Kansai International Airport will go ahead with its plans to invest US$120,000,000 in the creation of a low cost carrier terminal at the airport, with ANA’s low cost carrier as the launch customer for the facility.

So why has the battle between ANA and JAL become a war?  With JAL currently expressing an interest in creating a low cost carrier, but presently being US$11,000,000,000 in debt, following being US$26,000,000,000 in debt and filing one of the largest bankruptcy in Japan’s history, the airline’s credit is poor and it would be hard for them to finance the purchase or lease of new aircraft to build a low cost carrier … as well as invest in the infrastructure of creating a new airline.

War is not fair and combatants utilize any tactical advantage to advance across the battlefield … and in this war, ANA has many tactical advantages over the already seriously wounded JAL.

Happy Flying!

Comments

  1. I believe this will be good for All Nippon Airways (ANA) as this will allow them to build an Asian hub at Osaka’s Kansai International Airport (KIX) with more flights and routes to domestic and regional destinations and eventually launch nonstop intercontinental routes from KIX to Europe and North America (namely the United States) once ANA starts taking delivery of its new Boeing 787 ‘Dreamliners’, the mid-size long-range jetliner currently in flight-testing, its application for antitrust immunity for its trans-Pacific alliance with Continental Airlines and United Airlines is approved by the Japanese and U.S. governments and when the new U.S.-Japan “open skies” aviation agreement, reached last December, goes into effect. In the end, all of these factors will enable ANA to offer KIX as an alternative international gateway to Tokyo’s crowded Narita and Haneda Airports to domestic and Asian travelers flying to Europe and North America. Should the Japanese government decided to build more runways at KIX, it would be able to handle more flights than Narita.

  2. Another thing I forgot to mention earlier. ANA could also establish air service from KIX to destinations in Australia such as Sydney and Melbourne with the new Boeing 787 ‘Dreamliners’ it has on order as no Japanese carriers currently fly nonstop from Osaka to Australia. That would also make KIX an even more attractive alternative gateway for travelers seeking to avoid Tokyo’s crowded Narita and Haneda Airports as KIX operates 24 hours a day and has excess capacity.

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