Air China's - Orient Aviation

COVER STORYopportunity to develop its network.While it has been widely reported JAL’snew plans involve what was previouslyunthinkable – cutting back the internationalnetwork – Nishimatsu is quick to correct thisimpression.The airline was wrong to use the term“rationalization”, he said. “Perhaps weshould have used a different word, one with amore subtle nuance, because it is overstatingour case to use the word rationalization.”Less profitable flights, mostly to holidaydestinations such as Saipan, Guam andHonolulu, are being adjusted. But they arenot being abandoned. Services are beingmade more elastic, organized to cope withthe peaks and troughs of the holiday seasons,with a mix of regular services and charters.“We have decided to use anew kind of business model.We think the needs of theage are changing and wewant to be able to respondto that appropriately,” saidNishimatsu.Elsewhere, there will benetwork expansion, thanksto the arrival of new, smallerlong-haul jets like the B787,from 2008, which the CEOdesignatesaid presentsJAL with new businessopportunities.“Before, we were limitedbecause we had to use verylarge aircraft such as theB747 and B777 for longhaul,non-stop flights. Wehad to confine some of our business to themost profitable routes such as London, Paris,Frankfurt, Amsterdam and Rome,” he said.“In the past, we also used to fly non-stopto Zurich, Madrid, Copenhagen, Dusseldorfand Berlin, but because these routes did nothave the traffic to fill these large aircraft wehad to stop some of them.“With smaller aircraft we can perhapsrevive these destinations. It might give usan opportunity to fly to new destinationsthat can provide us with new business.”Similarly, there would be opportunities touse the same planes to open up new routeswithin Asia, to India, China and elsewhere,he said.“Yes, we have till now gone through astage of cutting back and we are reviewingour international flights. But I think we areentering a new age, a new period when weare looking to the future and finding out whatkind of new business opportunities are outthere. This is a very striking, dramatic andimportant period for us,” said Nishimatsu.JAL intends to increase its competitivenessby reducing its aircraft types. It willintroduce more fuel-efficient medium andsmall-sized aircraft while speeding up theretirement of older planes.From a current fleet of 279 aircraft,including nine aircraft types, it will haveeight types and 296 aircraft by 2010. Longerterm it plans to have only five or six typesin its fleet. All the carrier’s veteran AirbusA300B and YS11 planes will be retired bythe end of this financial year. Its 30 BoeingB747 ‘Classic’ jets will be withdrawn fromservice by 2009.Nishimatsu is bullish about the prospectsAll Nippon Airways: benefitedfrom JAL’s safety lapses,particularly in the domestic marketfor growth in China. “I cannot think ofenough words to describe how importantChina is [to us],” he said.Air treaty talks are currently underwaybetween Japan and China. “If the negotiationsturn out in a positive way for uswe would certainly want to establish newroutes [between China and Japan] as soonas possible,” said Nishimatsu.He said China has a “wonderful balance”between the demand for passenger and cargotransportation. “Often you may not haveenough passengers to make it a profitableroute, but if you have enough cargo in thebelly then it is a different story. There is somuch cargo demand in China that overallthese routes could be very profitable. Thisdemand for passengers and cargo is onlygoing to grow in the future,” he said.Another factor in Japan’s favour interms of the China market is that Japan’sbaby boom generation of the 1950s is nowbeginning to retire. “Until now these werea group of people that had great health, a lotof money, but no time. Now they are goingto retire and they are going to have a lot oftime. They will definitely go to China,” saidNishimatsu.“In surveys of this population group theylist travel as the first or second thing theywould most like to do. They are definitelygoing to want to go to China in greatnumbers.”With passengers in mind, JAL willspend a massive $552.8 million in thenext few years to improve the quality ofits customer products and services. Theinvestment includes $212.6 million oninternational first and business class cabins,inflight entertainment, mealsand membership of theoneworld alliance, $136million on strengtheninginformation technology(IT) systems in such areasas sales, aircraft scheduling,cargo revenue and e-businessand $204 million on airportfacilities and equipmentmaintenance.Nishimatsu has t wopriorities for the airline.He wa nt s to restore amanagement philosophy ofplanning and doing. “In thepast people spent so muchtime and energy on theplanning part that they didn’thave any energy left whenthey got to the doing part. What is reallyimportant is the doing; creating solutions,bringing them to a conclusion and seeingthe results,” he said.And he wants JAL to change its focusfrom being inward-looking to having anoutward focus. “We have to look at how otherpeople and other companies are viewing us.We have to constantly be able to createmessages and send these messages to theseoutside stakeholders,” he said.Nishimatsu may be setting out to cutcosts, but said he had no fears of simplybeing seen as a financial man there for thesole purpose of chopping expenses. “Mymain purpose is not to save money, but tocollect money,” he quipped.Doing that, while reshaping thecarrier’s corporate culture and rebuildingits performance levels, will be far fromeasy.38 ORIENT AVIATION MAY 2006