Executive Interview
Quality not quantity
After Japan Airlines’ spectacular recovery from protective bankruptcy in early 2010 to record profits in 2011, chairman, Masaru Onishi, outlines the next step in the carrier’s renaissance.
July 1st 2012
Japan Airlines (JAL) is no different from any other airline in the world. It will be focussing on China’s growing airline market, said chairman, Masaru Onishi. But as international carriers rush to add capacity to their China routes and Mainland airlines expand, he has a warning: there will be overcapacity in the crowded marketplace. Read More »
“Everyone is focussing on China. I believe supply will exceed demand and the trend will continue for a while,” said Onishi.
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| 'I don’t want to be number one in volume. I don’t care about that. I want to focus on profitability, even if the share is small' |
| Masaru Onishi Chairman Japan Airlines |
It won’t stop JAL being a player in China, but it does mean the carrier will be putting a specific emphasis “on the high-end”.
“We want to focus on the section of that market that will give us the most yield and profitability,” he said.
Onishi, who guided JAL out of bankruptcy protection as president before being appointed chairman earlier this year, said he did not want to become embroiled in what he calls “muddy fighting” with rivals for market share.
“We don’t want market share for the sake of market share. I don’t want to be number one in volume. I don’t care about that. I want to focus on profitability, even if the share is small. As long as it is making us money,” he said.
Onishi’s strategy is not confined to China. “On international regional short-haul we have made a shift from quantity to quality. That is where we are making our efforts and that is where we will be competing.
“On medium to long-haul we have the B787 which we see as a strategic aircraft for our future plans. We are enhancing the bilateral arrangements with partner airlines. We have reduced the size of aircraft and have increased frequency. By doing this we believe we can capture high-end traffic and remain competitive,” he said.
He described domestic Japan as a “zero sum game”. Japan’s government has forecast its population will shrink from 128 million to 87 million people in the next 50 years.
While JAL will continue to compete, the market is becoming crowded with the launch of several new low-cost carriers, including JAL’s own joint venture with Qantas Airways, Jetstar Japan. Additionally, surface transport networks, such as the shinkansen, or bullet train, are being expanded.
Onishi believes the LCCs will attract new air travellers from surface transport, which were threatening to dilute full-service carriers.
A key part of his international strategy is to continue to strengthen alliance links.
A oneworld member, JAL has a joint business agreement (JBA) with American Airlines (AA) and in May won anti-trust approval to proceed with a similar agreement with British Airways/Iberia in Europe. It also has strong code-sharing/interline pacts with Cathay Pacific, Air berlin, LAN in South America and WestJet and JetBlue in the U.S. Last month, JAL announced a code-share agreement with Malaysia Airlines.
Onishi said the JBA with American was bearing good fruit: the number of AA customers who booked on JAL services since it swung into operation had increased eightfold. Onishi said the prospect of similar gains in Europe were promising.
In Europe, JAL has not seen any impact from the Euro crisis, but Onishi said JAL was ready if the situation worsened. “We are better able to manage changes in the market. We are more flexible than in the past and able to adjust with speed,” he said.
“This was illustrated following the earthquake in east Japan last year.”
The government-backed Enterprise Turnaround Initiative Corporation of Japan (ETIC), which lent $4.42 billion to JAL to assist its restructuring, is understood to be planning to sell about 96% of its stake by January 2013 once the stock is relisted. If it does relist in September, JAL would be valued at between $7.67 billion and $8.8 billion.
