Bloomberg News

Japan Air May Add Southeast Asia Routes as Focus Turns to Growth

September 18, 2012

JAL President Yoshiharu Ueki

Japan Airlines Co. (JAL) President Yoshiharu Ueki. Photographer: Tomohiro Ohsumi/Bloomberg

Japan Airlines Co. may add more flights to Southeast Asia using on-order Boeing Co. (BA:US) 787s as it turns its attention back to expansion following a trip through bankruptcy and a state-backed turnaround.

“We’ve totally restructured and we’ve changed our mentality,” President Yoshiharu Ueki said in an interview in Tokyo, ahead of JAL’s return to the city’s stock exchange today. “That will allow us to keep on making profits.”

The carrier is assessing Southeast Asian destinations without direct flights to Japan as the fuel-efficient 787s will let it operate routes that aren’t economically viable with larger planes, Ueki said, without naming specific cities. Tokyo- based JAL is also using 787s to add U.S. and European routes as it contends with a shrinking population and new competition from low-cost carriers at home.

“We’re focusing on premium customers and specifically on medium to long-haul routes for growth,” Ueki said Sept. 14. “The domestic market is getting smaller and so our goal there is to secure stable profits.”

The 45 Dreamliners JAL has ordered are central to its plans to boost international capacity 25 percent over five years. The carrier is growing overseas after a 2010 bankruptcy filing and delisting forced a restructuring that included retiring all of its larger 747 planes, cutting a third of workers and ending unprofitable routes. The turnaround paved the way for a 663 billion yen ($8.4 billion) share sale by the carrier’s state- backed parent and a re-listing.

Boston Flights

JAL has already begun a new route to Boston using 787s. It filled about 90 percent of seats in the three months to June 30, according to a preliminary share-offering brochure. Its average load factor on overseas flights in the period was 73 percent.

In December, the carrier will use 787s to start the first Asian service to San Diego. The flight will link up with Oneworld partner American Airlines’ operations in the city. JAL will also work with alliance member Finnair Oyj (FIA1S) when it starts flights to Helsinki in March.

“By adding routes to our Oneworld partner’s hubs then it’s more convenient for transfers,” Ueki said. The carrier also has a venture with American on trans-Pacific flights. A similar tie- up on European service with British Airways begins Oct. 1.

Within Southeast Asia, JAL already flies to Kuala Lumpur, Bangkok, Singapore, Jakarta, Manila, Ho Chi Minh City and Hanoi, according to its website. Malaysian Airline System Bhd. has said it plans to join Oneworld as early as November.

JAL has also used the four 787s it has received so far on existing routes to New Delhi and Moscow. Some Dreamliners may be used on domestic services as 767s are phased out, Ueki said.

The carrier is predicting a profit of 130 billion yen for the year ending March 31, compared with a forecast of 40 billion yen at All Nippon Airways Co. (9202) JAL was surpassed as Japan’s largest carrier by ANA during its restructuring.

In the last fiscal year, JAL posted a record profit of 187 billion yen, helped by the restructuring and tax credits against earlier losses.

To contact the reporters on this story: Chris Cooper in Tokyo at ccooper1@bloomberg.net; Kiyotaka Matsuda in Tokyo at kmatsuda@bloomberg.net

To contact the editor responsible for this story: Neil Denslow at ndenslow@bloomberg.net


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