Addendum
Japan Airlines new LCC too late for Olympics
June 1st 2018
Japan’s low-cost carrier industry took another step forward last month with the Japan Airlines (JAL) decision to establish a medium to long haul budget subsidiary by 2020. Read More » The LCC, which is yet to be named, will be based at Greater Tokyo’s Narita airport and will start operations with 200 staff, mainly cockpit and cabin crew. Destinations will take in Europe, The Americas and Asia.
Japan Airlines’ new president, Yuji Akasaska, said more details about the LCC would be announced next month, including funding of 10 to 20 billion yen as well as profit targets. Akasaka said the airline would have a B787 fleet with two of the type earmarked to launch the budget carrier. The fleet will be 10 B787s after five years.
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JAL’s LCC strategy to date has been to manage its 33.3% investment in the Qantas Group’s six-year-old Jetstar Japan. Its decision to go it alone with an international budget carrier is the flag carrier’s response to Peach Aviation, largely owned by All Nippon Airways and AirAsia Group’s AirAsia Japan.
When Peach and later Vanilla Air were launched, JAL was in bankruptcy protection and banned from establishing routes or investing in related projects. With all restrictions lifted in March last year, JAL is free to grow.The LCC will be a consolidated subsidiary but Akasaka has told media he “wants to introduce new know-how” to JAL.
The LCC will carry cargo. It will sell its belly space to JAL’s cargo division who will market the LCC’s freight business. Maintenance will be sub-contracted to JAL Engineering Company Ltd and the new airline will develop a customer built reservation system.
“It’s good news that JAL is planning to establish a mid-and long range LCC brand by 2020,” Japan Aviation Management Research (JAMR) analyst, Haruo Ushiba, said. “Until now JAL has not had a definite LCC strategy and has concentrated its operations as a full service carrier (FSC).”
JAL’s arch rival, All Nippon Airways, is strengthening its LCC position by merging its two subsidiary LCCs, Peach Aviation and Vanilla Air, into a single entity that will operate under the Peach brand and expand onto long haul routes. The new JAL carrier will not compete with Jetstar Japan, which will stay a short haul operator that will feed traffic to its sister subsidiary.
“LCC 101 used to claim that budget carriers only could survive by flying a single aisle airplane for flights of up to four hours. That view is changing, not only in Asia, but in Europe where Norwegian Air has surprised many with its success,” Ushiba said.
“These are compelling reasons for JAL to further penetrate the expanding LCC market and indeed it looks as if the company is late in getting on board. JAL wants its share of the rapidly growing inbound business to Japan and the new airline can provide the seats at the right price. They must hurry up to be in time for the 40,000 new slot allocations at Tokyo’s Haneda Airport scheduled by 2020. For JAL, this is a step they have to take.”
Analysts have pointed out JAL’s decision to delay the first flights of the LCC until July 2020 means the airline will largely will miss out on the air passenger bonanza expected to flow from international visitors travelling to Japan for the Summer Olympics from Juy 24 to August 9 of that year.
