LIFE AFTER SQ006 - Orient Aviation

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c o u n t r yf o c u sIn 1999, although leisure traffic increased,the critical business passenger sector declined.But from February 2000 executive travel beganto grow again, raising yields.“Our revenue from international passengersgrew approximately 8%. Traffic forthe domestic portion is stable and cargobusiness has been very good through 2000,”said Kaneko.“But recently the slowdown in theAmerican economy, which also influences theAsian economy, has caused a small decreasein cargo traffic between Japan and the U.S.and Asia and the U.S. I am a little concerned,but I am sure the U.S. economy will make asoft landing.“Of course the airline business can behit by cyclical economic conditions so maybefor one year we may have to face some difficulty.But as a trend for five, 10 or 20 yearswe can expect very healthy growth for airtraffic demand in passenger and cargo, bothinternational and domestic.“For 2001 we expect 2% growth indomestic passengers, 3% for internationaltravellers and 5% or 6% for internationalcargo. As an average, we can expect goodgrowth for two decades. So we have to beprepared for the short term depression ordifficulty, but look to long-term averagegrowth,” he said.Kaneko is confident JAL’s profit record isgoing to be far better in the next ten yearsthan it has been in the past ten. “Not very big,two digit growth, but average stable profitcan be achieved,” he said.JAL continues to play a “wait-and-see”game on the airline alliance front. “Up to nowwe have preferred to steer an independentcourse, making alliances with partner airlineson a bilateral basis where we can see benefitsfor both partners and customers. We talk tothe executives of oneworld member carriers,but we are not in a hurry to make a decision tojoin any particular alliance,” said Kaneko.“We have partnerships with carriersbelonging to other alliances like Air France, amember of Skyteam, and THAI and Air NewZealand in the Star Alliance. Last year, weforged a cargo partnership with NorthwestAirlines. There is no hurry, no pressure andwe continue to weigh the pros and cons ofjoining a global alliance.”Kaneko is well aware of the challengesahead, including airport issues, liberalisationand inevitably increasing competition. But allin all, he said, JAL is in a much stronger positionthan it was three years ago. “It’s beenvery tough, but I am happy with the waythings are turning out,”he said.Japan Air System: being wooed by the major manufacturersJAS eyes new jetsJapan’s third major domestic carrier, JapanAir System (JAS), is reviewing a fleetmodernisation plan that could see its ageingfleet of A300s replaced over the next fiveyears. Company sources confirm the carrieris in discussion with both Boeing and AirbusIndustrie over potential replacement jets.JAS, in which major flag carrier JapanAirlines (JAL) has an 8% stake, is, like its localrivals, also making money. Profits last yearmore than doubled to US$9.7 million from$4.6 million in 1999, with sales increasing 5.8%to $3.3 billion.With a fleet of 90 jets, more than a thirdunder lease, it has 36 A300s. They are primarilyused for domestic flights, although four A300-600s operate international services.Airbus is apparently proposing a newlighter version of its A330-500 aircraft, withBoeing pushing the B767-300ER.Airbus plans to develop a version of theA330-500 capable of flying as far as 7,000 nauticalmiles, aimed at European airlines flyingtrans-Atlantic routes or from Eastern Europeto Asia. The jet, which Airbus will build only ifdemand justifies commercial production, maynow have a version aimed at regional carriers,particularly in Asia.The modified plane, suitable for JASneeds, would have a range of about 4,350nautical miles, ideal for airlines seeking anaircraft for purely regional operations.JAS is mainly a domestic operator, but itdoes operate international services to Seouland Hong Kong, as well as Xian and Kunmingin mainland China.JAS and China Southern Airlines alsooperate code-share services between Osakaand Guangzhou, with each operator flyingthree times weekly.Other overseas destinations are servedthrough code-share arrangements, flights toAmsterdam with KLM on the Dutch operator’saircraft and to Seattle, San Francisco, LosAngeles and New York on Northwest Airlinesservices. Continental Airlines code-shares onthe same US-Japan flights.JAS has been looking to rationalise itsoperations through extensive code-sharingand joint ventures in Japan and elsewhere.It is a partner in the joint Tokyo-Osaka shuttleservice which also involves JAL and AllNippon Airways. From last September, JALand JAS combined selected airport servicesfor domestic and international flights. JALprovides baggage handling, cargo, ramp andairplane cleaning services for JAS flights atKansai International Airport.Both carriers also will combine check-inservices in the near future, with passengersable to check in from kiosks located at nearbytrain stations in Tokyo, Sapporo, Fukuoka andHakata, as well as at the Yokohama City AirTerminal.Other JAS cost reduction exercises includeoutsourcing. For example, it has signed a10-year $150 million agreement with Pratt &Whitney for a fleet management programmeof the JT8D-200 engines on its fleet of MD-80aircraft.36 | Orient Aviation | March 01
As ANA names a new president ...Profit forecast raisedWith profits driving upwards, AllNippon Airways (ANA) is movingto consolidate gains by acceleratingreforms in year three of its five-yearcorporate plan.The carrier has raised its full year profitforecast after it reported healthy first halfincome on the back of rising demand withhigher fares offsetting costly fuel.In the six months to September 30 thegroup earned US$272.6 million, the first timeit has reported first half earnings. For the fullyear ending March 31, ANA has boosted itsnet income estimate to $170.9 million froman earlier prediction of $111.1 million andsuggested international services will moveinto profit next year for the first time since itbegan operating offshore in 1986.The optimistic outlook comes despitecontinued high fuel prices and in part reflectssome astute increases in fuel price hedgingcontracts. Some 40% of the carrier’s fuelneeds were protected against price volatilityin the second half compared with only 10%in the first half.“Since embarking upon the [five-year]plan in 1999 the ANA Group has trimmedinvestment and reduced fixed costs, acceleratingconcentration of resources and therebuilding of its air transport network withthe objective of enhancing value to customersand shareholders,” said outgoing presidentKichisaburo Nomura, who will become ANAchairman on April 1.He will be succeeded as president byYoji Ohashi, a 37-year ANA veteran, who iscurrently senior executive vice-president.Like its major rival JAL, ANA is drivingrecovery with a host of improvements acrossits corporate and operational structure. “ANAmanagement has strengthened its commitmentto a network aligned according tomarket demand with a focus on profitability,efficiency and deepened co-operation withStar Alliance partners,” said Nomura.With a fleet of 142 jets carrying 43.2 millionpassengers annually to 62 destinations in13 countries, ANA is determined to underpinits revival without being too ambitious. Fleetplans are cautious. While three Boeing B747sand four B767s are to be retired no new planeswill arrive until 2004, when delivery of sixB777-300s will begin. The -300 series is a newlonger range version of the B777.While continuing to monitor marketdemands, ANA plans to use them on long-haulroutes to Europe and the U.S.In domestic operations ANA will allocateresources to higher demand routes, exemplifiedby an increase in services from Tokyoto Osaka’s Itami Airport. Routes with lowdemand are being adjusted or dropped.The freedom to suspend services is aresult of Japan’s domestic deregulation.While increasing flights to Osaka, FukuokaANA president Kichisaburo Nomurawill become chairman on April 1 and besucceeded by Yoji Ohashi, currentlyANA’s senior executive vice-presidentand Okayama, ANA is decreasing frequencyto Hakodate and Nagoya and dumpingHaneda-Memanbetsu, Nagoya-Aomori andSapporo-Okinawa services.A similar tough approach is being takenon international routes, with ANA flightsfrom Kansai to Denpasar, Indonesia, and fromFukuoka to Dalian and Qingdai, in China, beingsuspended.There will be a number of other domesticand international network changes over thenext few months to streamline routes and liftprofitability. Nomura said ANA will inauguratea service to Ho Chi Minh City, Vietnam, fromTokyo and increase frequencies on the Tokyo-San Francisco route.The airline’s network out of KansaiInternational Airport will be reorganised withresources concentrated on Asian and resortdestinations with Air Japan, ANA’s new lowcostsubsidiary. It will begin with flights toGuam in addition to Seoul.Air Japan began operations in January thisyear using a 216-seat Boeing B767-300ER onthe Osaka Kansai-Seoul route.“Newly permitted international charterflights out of Haneda airport will furnish ANAwith a raft of business opportunities. By takingadvantage of the unprecedented flexibilityafforded by this scheme, flights to Guam willbe operated with plans for service to Honoluluduring peak periods while operations to Seouland Cheju are under consideration,” said thepresident.“By gradually transferring selected shortand medium-haul routes currently operatedby ANA to Air Japan and by re-organisingANA’s international route network at ourNarita and Kansai hubs, we will be able toimprove network efficiency, profitability andconnectivity,” said Nomura.Now operating only from Osaka, afterthe opening of Tokyo Narita’s second runwayin 2002, ANA hopes to expand its operationswith flights from Tokyo to a number of destinationsin the Asia-Pacific.Co-operation with the Star Alliance willcontinue to be strengthened by expandingcode-shares on routes to Canada and Mexico.The carrier has recently announced codeshareswith Thai Airways International on theTokyo-Bangkok route and with South Korea’sAsiana Airlines between Seoul and Osaka.At home, ANA has enlisted in cost-cuttingco-operative ventures with rivals JAL and JAS,including a joint Internet travel site, combinedmaintenance on specific aircraft types and theTokyo-Osaka shuttle. The shuttle has 35 flightsa day, of which ANA operates 15.In January, ANA announced it wouldutilise an independent Internet portal, Jet-A.com, to procure jet fuel from the secondquarter of 2001. The portal is a move by theworld’s oil and aviation industries to improvethe use of Internet technology. It is designed tooptimise the jet fuel supply chain by digitising,integrating and standardising the procurementprocess.While it has a long way to go before it cantruly rival JAL on international routes, ANA isfinally beginning to leverage some power offits massive domestic base. With more stablefinancial returns its next corporate plan willlikely lift the stakes and point towards furthersignificant growth.March 01 | Orient Aviation | 37
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Page 5 and 6: N E W SRegional round-upTHAI “wil
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Page 33 and 34: s p e c i a l r e p o r tBy Jonatha
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LIFE AFTER SQ006 - Orient Aviation

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