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Wednesday, May 22, 2013

Boeing Confirms $1.6 Billion Order From Garuda Indonesia For 777s And 737s [June 25, 1996]

SEATTLE, June 25, 1996

Garuda Indonesia, the flagship carrier for Indonesia, today announced an order for 23 Boeing jetliners. The order is valued at approximately $1.6 billion, Boeing Commercial Airplane Group confirmed.

The order includes six long-range Boeing 777-200s and 17 regional/ domestic 737-300s and -500s. The airline also has reserved the right to acquire six 747-400 options. Deliveries of the 737s begin in 1997 and continue through 1999. Deliveries of the 777s begin in 2000 and continue through 2002.

There are three engine manufacturers who produce engines for the 777; however, Garuda has not yet made an engine selection for their newest widebody airplanes. The airline's 737s will be powered by the CFM- 56 engine series.

Ron Woodard, Boeing Commercial Airplane Group president said, "We are extremely proud to welcome Garuda Indonesia as the latest member of our 777 family of world-class customers, and to add them to the growing list of airlines operating all models of the current generation 737 family."

Garuda Indonesia's decision again confirms that the Boeing 777 is an excellent airplane for operations into and out of the Asia-Pacific region. The superiority of the 777 in terms of range, speed, interior flexibility and passenger comfort is highly valued by airline customers," Woodard added.

The president-director and chief executive officer of Garuda Indonesia, Mr. Soepandi said, "We are very pleased with the flexibility demonstrated by Boeing in working with us to restructure our previous purchase commitments to allow Garuda Indonesia the ability to meet the demands of a changing marketplace and to further modernize our fleet.

The 777 is a magnificent airplane incorporating the latest developments in technology and customer-pleasing features which will aid our international expansion into the next century. At the same time, the efficient 737 family will continue to be the backbone of our expanding regional and domestic route network," Soepandi said.

Garuda Indonesia is the tenth Asian airline to order the 777 and 21st customer globally to have placed a firm order. Today's announcement brings the total 777 orders to 274. Garuda currently operates 24 Boeing jetliners, including nine 747s and 15 737s. Garuda has been a Boeing customer for almost 20 years.


http://www.boeing.com/news/releases/1996/news.release.960625.html

Boeing Showcases BBJ 3 for the First Time at EBACE 2013


Boeing Showcases BBJ 3 for the First Time at EBACE 2013Boeing Showcases BBJ 3 for the First Time at EBACE 2013Boeing Showcases BBJ 3 for the First Time at EBACE 2013
These images are available for editorial use by news media.

GENEVA, May 20, 2013 /PRNewswire/ -- Boeing [NYSE: BA] Business Jets (BBJ) is displaying a BBJ 3 for the first time at the 2013 European Business Aviation Conference and Exhibition (EBACE) in Geneva, Switzerland.

The airplane, based on the 737-900ER, was outfitted with its custom VIP interiors at Jet Aviation in Basel, Switzerland. The BBJ 3 is currently for sale, so the exterior remains "green" or unpainted, ready for a livery to be selected by a new owner.

The range of the BBJ 3 exceeds that of other business jets in its class. It can fly 4,900 nautical miles; more than 1,500 nautical miles (3 hours) farther than its direct competitor.

"The BBJ 3 range advantage is the reason why it has outsold its direct competitor by seven-to-one," said Capt. Steve Taylor, president, Boeing Business Jets. "Our customers demand airplanes with great performance, enabling them to conduct business around the world."

The BBJ 3 also features lower cabin altitude, pressurizing the cabin at 6,500 feet versus 8,000 feet of other business jets. This allows BBJ passengers to arrive at their destination relaxed and refreshed without feeling jet lagged.

The cabin interior is finished in a bright, high-gloss sycamore wood, with hand-crafted marquetry woodwork integrated in the entrance panel. It features a large main lounge and a smaller area for staff, a dining room and a bedroom suite with a queen-sized bed and bathroom with a shower.

Jet Aviation has completed the interiors of two dozen Boeing commercial and private aircraft since 1978.

"We value our long standing partnership with Boeing and look forward to continued success providing quality work and craftsmanship to our mutual customers," said Dan Clare, president, Jet Aviation.

The BBJ 3 on display can carry 38 passengers and eight crew members. It has a large cargo area that holds 230 pieces of luggage.

To date, seven BBJ 3s have been ordered. Three are in completion; four are in service. The next airplane is scheduled to enter into service June 1.

Contact:
Dina Weiss
Boeing Business Jets Communications
+1 206-853-9620
dina.m.weiss@boeing.com
SOURCE Boeing

Boeing Begins Certification Testing on 747-8 Performance Improvements

Performance package improves fuel burn by another 1.8 percent
Boeing Begins Certification Testing on 747-8 Performance Improvements
These images are available for editorial use by news media.

EVERETT, Wash., May 21, 2013 /PRNewswire/ -- A Boeing (NYSE: BA) 747-8 Intercontinental successfully completed its first test flight this week with a package of performance improvements including enhanced GE engines. This package is designed to improve the fuel efficiency of the popular jetliner.
With Boeing Flight Test and Evaluation Capt. Kirk Vining and Chief Pilot Capt. Mark Feuerstein at the controls, the airplane took off from Paine Field in Everett, Wash. at 1:30 p.m. local time and landed at Boeing Field in Seattle approximately four hours later.
"It was a great flight and the engines performed as expected," said Capt. Vining. "This is an important milestone for the flight test program."
The airplane Performance Improvement Package (PIP) includes improvements to the GEnx-2B engines and Flight Management Computer (FMC) software.
Boeing's continuous efforts to improve the 747-8 family have resulted in an accumulated 1.5 percent gain in fuel efficiency since the first airplane was delivered less than two years ago. These new improvements will give operators an airplane that is an additional 1.8 percent more efficient.
"These improvements are a part of our commitment to continually improve our great airplanes for our customers," said Eric Lindblad, vice president and general manager of the 747 program. "Improving fuel efficiency by another 1.8 percent saves the airlines approximately one million dollars per year in fuel per airplane and reduces the carbon footprint."
The test program will also validate the design changes and demonstrate the operation of the horizontal tank fuel system on the passenger version of the 747-8, which was deferred from the initial deliveries. The new configuration will first deliver in early 2014 and be available for retrofit. Entry into service of the new engines and FMC software will take place in late 2013.

Contact:
Joanna Pickup
747 Communications
+1 425-879-6077
joanna.pickup@boeing.com
SOURCE Boeing

A350-1000 could demand extra assembly line

EADS is to look into supplementing assembly capacity for the A350 following the increased interest for the A350-1000, the largest member of the family.
The -1000 has emerged, over the past year, from a period of dormancy with agreements from Cathay Pacific and Air Lease, while conversion of a Qatar Airways order has reinforced backing for the twinjet.
British Airways has also tentatively selected the -1000 to help replace its Boeing 747-400 fleet, and potentially provide additional capacity for Iberia.
"We've been talking about A350-1000 incremental [final assembly line] capacity," says EADS chief financial officer Harald Wilhelm. "No decision has been taken on that yet.
"This is clearly on the radar screen for later this year. And with such important endorsements [from high-profile carriers] on the -1000 we feel encouraged to look into that."
Wilhelm has not indicated how EADS and Airbus might increase assembly capacity. Boeing established a second US-based line for the 787 at Charleston.
"On the level of demand we've seen recently [for the A350-900 and -1000] there would be a very clear business case for an accelerated ramp-up," says Wilhelm.
"But we have to [trade] incremental potential and the risk we'd take on board."
Airbus unveiled its newly-painted A350-900 flight-test prototype, MSN1, on 13 May and Wilhelm says the rest of the test fleet is "coming in progressively".
MSN3 is already in final assembly and Airbus is preparing MSN2 to enter the Toulouse line "soon", he adds.
"All in all we're making good progress on that," he says. "These aircraft need to be completed pretty quickly throughout the year, to have the full flight-test aircraft population up in the air progressively through the year and early in 2014."
He says that while there is a "lot of emphasis" on MSN1 to prepare for the maiden flight, there is "very much" focus on the rest of the test fleet. "We didn't forget about them, but it remains very tight and challenging," says Wilhelm.
EADS says there are still "significant" ground tests to be performed on MSN1 and, while it will be handed to the flight-test centre "not a long time from now", the manufacturer is not giving away details of the schedule.
"We don't want to disturb the operation with too many people hanging around the fence spotting," he says. "We are focused on executing it rather than celebrating it."
He says Airbus not focusing on any particular date. "The key thing is the maturity of first flight. It opens the flight-test campaign."
While EADS is "confident" of flying the aircraft this summer, and progress on development has been "very encouraging", Wilhelm says production of the A350 test fleet and preparation for the industrial ramp-up "remains a tough ride".
"We're pleased to see that, over the last weeks and months, we could stick to the schedule," he says. "For quite a number of months now we are operating inside [the schedule], again without margin, but [with] no further drift - and that's good news."
 
 
 
flightglobal.com

Lion 737 crash crew had no visual contact with runway

Indonesian investigators indicate that the crew of a Lion Air Boeing 737-800 continued to descend below minimum altitude despite not having visual contact with the runway during a non-precision approach to Bali.

The National Transportation Safety Committee, in its preliminary report into the 13 April accident, says the first officer, who was flying, mentioned that the runway was not in sight as the aircraft descended through 900ft.

Although the aircraft's automated systems issued a "minimum" warning at 550ft the crew disengaged the autopilot and autothrottle, and continued the descent.

Within a minute the 737 had descended to just 150ft and the captain took control of the aircraft, while the first officer again said that he could not see the runway.

The enhanced ground-proximity warning system called a 20ft height alert and the pilot commanded a go-around but, just 1s later, the aircraft impacted the water.

Approach charts show the missed-approach point is 2nm west of the Bali VOR, giving the altitude as 465ft.

While the 737 was severely damaged as it struck, short of runway 09, all seven crew and 101 passengers survived, although four passengers were seriously injured.

NTSC says the 48-year old Indonesian pilot had logged 15,000h in total, with 7,000h on type, but the 24-year old Indian co-pilot had 1,200h and 923h on type.

Surveillance camera images indicate it was raining at the time of the ill-fated aircraft's approach. Indonesian investigators have sought additional information from other pilots about weather conditions at the time.

A pilot holding short of runway 09 corroborates that it was raining, with visibility reduced to 1-2km, and he was unable to see the 737 when his collision-avoidance system informed that the flight was 3nm away.

Another crew, approaching the airport 5nm behind the Lion Air jet, stated that they could not see the runway at the published minima and decided to execute a go-around.

Flight JT904 from Bandung appeared to be uneventful until the final seconds. The NTSC's timeline of the accident reads as follows:

06:48UTC: While 80nm from Bali VOR, the pilot makes first contact with the Bali controller. The flight is cleared for descent to 17,000ft.

06:52: The pilot is cleared to descend to 8,000ft and proceed to the Kuta waypoint, which lies west of runway 09 over the sea.

06:59: The aircraft is vectored for a VOR/DME approach for runway 09, and cleared to descend to 3,000ft.

07:04: Pilot tells Bali tower that he is leaving Kuta waypoint. The tower tells the crew to reduce speed to ensure sufficient separation with another aircraft.

07:08: Bali tower sees the Lion 737 on final and gives clearance to land, informing the pilot of a 5kt wind from the south-east.

07:08:56: At a height of 900ft, the first officer says he is unable to see the runway.

07:09:33: The enhanced ground proximity warning system calls "minimum" at 550ft. The pilot disengages the autopilot and autothrottle and continues to descend.

07:09:53: Captain takes control at 150ft, first officer says he cannot see the runway.

07:10:01: Ground-proximity system calls "twenty" and captain orders a go-around, but aircraft hits the water short of the runway. The 737 comes to rest 20m from shore and 300m southwest of the beginning of runway 09.
 
 
 
flightglobal.com

Kuwait Airways confirms order for 15 A320neos, 10 A350s

Kuwait Airways has signed an initial agreement for 25 Airbus aircraft, state news agency KUNA reports, comprising 10 A350-900 XWBs and 15 A320neos.
The Kuwaiti flag carrier has secured five additional options for each type, chairman Sami Al-Nesif was quoted as saying at a press conference on 16 May.
It will further lease 22 aircraft as an interim solution, he added, with earlier media reports pointing to A330s and A320s.
Kuwait Airways has struggled to secure parliamentary backing for its fleet renewal in recent years. An earlier commitment for 12 Boeing 787s and seven A320s was scrapped in 2007.
Its existing fleet of five A300s, three A310s, three A320s, four A340s and two 777s was partially grounded last year after a spate of emergency landings.
The carrier has also been bogged down by recurrent failed privatisation efforts, plus a legal battle with Iraqi Airways over the theft of 10 aircraft during the First Gulf War. That dispute was settled late last year.
Signalling a new era for the beleaguered airline, communications minister Salem Al-Utheina said Kuwait Airways is committed to modernising its operations.
"The successful bid of Airbus for supplying Kuwait Airways Corporation with passenger planes, including leased ones, is the lowest in price and meets the technical specifications," he told state-owned KUNA.
A memorandum of understanding formalising the agreement will be signed with Airbus over the next two weeks, Al-Nesif is quoted as saying.
In September 2012, Kuwait Airways board member Adel Boresly told Flightglobal that the airline was considering leasing five or 10 aircraft during the next parliament, which was subsequently formed in December.
If the number of leased aircraft exceeded five, he said that would indicate immediate expansion of the route network.
In recent weeks, Marwan Boodai, chairman of Kuwait's Jazeera Airways, has repeatedly said that his airline would consider buying a stake in Kuwait Airways following its privatisation.
 
 
 
flightglobal.com

Emirates chief urges Boeing to control 777X supply chain

Emirates has urged Boeing to "take total control" of the production and supply chain of the proposed 777X to avoid the kind of problems that have dogged the 787 programme.
The Dubai carrier has been deeply involved with Boeing on the definition of the new "big twin" and president Tim Clark says Emirates is a likely launch customer. But it does not want to see a repeat of the delays and programme interruptions that have plagued the Dreamliner almost since its roll-out in July 2007.
"It's no good just saying 'we've learnt'. Boeing has had a bitter lesson and they've got to take total control: quality in - quality out," Clark says. "Don't let anybody mess about with the aeroplane. Obviously they have a vendor supply chain, but where they can control it - they must control it."
Last month, Boeing received from its board authority to offer 777X to potential customers. This is the last step before a formal programme launch.
Clark says Emirates is interested in both proposed 777X variants which include the larger 777-9X and the smaller, ultra-long range -8X. "If the commercial terms were right, we could definitely be a launch customer," he says. "We're actively engaged with them."
Both variants will be powered by the General Electric GE9X with the 777-9X the lead variant slated for service entry in 2020. The -8X will follow around nine months later.
"We were concerned about it being underpowered in the early days, and Boeing has now grown the thrust [from under 100,000lb] to around 103k," Clark says.
"We want the -9X to be able t fly routes like Dubai-Los Angeles and Buenos Aires-Dubai with maximum payload - 400-plus passengers and a modicum of freight - around 55t."
Clark says the 777-8X will be "an absolute peach" because it has the qualities of today's 777-200LR but "is bigger with much greater legs. You're talking 330-plus passengers in three classes doing Dubai-Lima."
 
 
 
flightglobal.com

Late delivery delays start of Emirates A380 wing repairs

Wing modification work on Emirates' Airbus A380 fleet has begun around two months later than planned due to late arrival of new aircraft.
The repair programme, designed to address wing cracks, will cover 34 Emirates A380s and is due to be completed by the end of next year.
"The modifications were due to begin in mid-March, but the first aircraft only went into modification in early May," says Tim Clark, president of the Dubai-based carrier. "We need to receive the new aircraft to backfill the fleet and maintain the route network when we release A380s for modification. There's been quite a long delay driven by the lateness of delivery of the new aircraft."
Emirates has just received its 32nd A380, which Clark says was around six weeks late, and has three more undergoing the delivery process in Toulouse. Aircraft delivered from next year will be delivered with wings built to a revised wing structure and will not need repairs after delivery. In the interim, new-build A380s with the original wing specification are having repairs undertaken prior to delivery.
Clark says that 34 of its A380s will undergo the repairs over the next 18 months or so, four aircraft at a time. The work was due to take about 20 months and be completed by November 2014. Although the programme has started two months late, Clark hopes that the November target can still be achieved: "We estimated the downtime is eight weeks, but Airbus hopes it will be able to do it in six. So Airbus is relatively optimistic that it can recapture the timeline after this delay at the front end, by shrinking the time it takes to do the job."
Clark says the revisions to the wing incorporate some structural and material changes, including the replacement of composite ribs with metal ones, and has a small weight penalty of around 60kg (132lb). It is a lifetime modification certificated to a flight limit 19,500 cycles, he adds.
The work on the Emirates fleet is being undertaken at four MRO organisations around the world, under an Airbus-managed and funded programme. "It's not our responsibility - Airbus takes the aircraft, modifies, certifies them and brings them back to us," Clark says.
 
 
 
flightglobal.com

Comac completes ARJ21 minimum unstick speed tests

Comac has completed the minimum unstick speed tests for its ARJ21 regional jet programme.
Nine such tests have been successfully completed since they began on 24 April, says the Chinese airframer.
Both the Civil Aviation Administration of China (CAAC) and the US Federal Aviation Administration were present at Xian Yanliang airport for the tests.
The minimum unstick speed validation tests measure the minimum speed at which an aircraft can lift off the ground and continue to take off. Once determined, the speed will be recorded in the aircraft's manual so that pilots will know the minimum take-off speed required to avoid a tail strike.
The minimum unstick speed test is one of the highest risk and most difficult tests the aircraft has undergone since the stall tests, say Comac.
Comac said at Airshow China in Zhuhai last year that it is targeting to receive certification from the CAAC for the ARJ21 in the first half of 2013. This schedule, however, is widely expected to be delayed.
 
 
 
flightglobal.com

United returns 787s to revenue service

United Airlines resumed revenue flights on its fleet of Boeing 787-8 aircraft today, a little more than a month since the US Federal Aviation Administration (FAA) cleared the type to return to service.
Flight UA1 departed Houston Intercontinental airport at 11:00 local time and arrived at Chicago O'Hare International at 13:20 local time. A second flight, United 80, departed Houston at 11:30 local time for Newark Liberty International.
The inaugural flight was operated by N27903, which was delivered to United in December 2012, according to Flightglobal's Ascend Online database.
"We are delighted to have the 787 back in service," says Jeff Smisek, chairman, president and chief executive of United, in Houston before the flight. "It's a terrific airplane. [But] it was a fairly expensive piece of sculpture to have on the ground."
He says that modifications have been completed on four of the airline's six 787s, with the remaining two scheduled to be complete by 24 May.
Ron Baur, vice-president of fleet at United, says that the airline has not discussed compensation for the four-month grounding with Boeing.
Michael Sinnett, vice-president and chief project engineer for the 787 programme, declines to comment on any possible compensation
"We are very sorry about the delay," says James McNerney, chairman and, president and chief executive of Boeing, in Houston today. "It has been solved by some of the technology work arounds that we've had to recommend over the past month or two. But the promise of this airplane remains unchanged."
The FAA approved the type's return to service on 19 April with three Boeing-recommended modifications to protect against short-circuits and fires in its lithium ion batteries.
United plans to return all of its 787s to service within the next month. Service will initially be between Houston and its other domestic hubs, including Chicago, Denver, Newark and San Francisco.
New nonstop flights between Denver and Tokyo Narita - United's first international service on the aircraft since the grounding - will begin on 10 June.
The FAA grounded the 787 on 16 January after two separate battery incidents on aircraft operated by All Nippon Airways (ANA) and Japan Airlines.
 
 
 
flightglobal.com

Oman Air orders three more A330s

Middle Eastern carrier Oman Air has ordered another three Airbus A330-300s, which will take its overall A330 fleet to 10 aircraft.
The airline ordered three A330-300s and two -200s in November 2007 as it transformed its operational strategy, re-establishing itself as a long-haul carrier.
Oman Air also leased a pair of A330s to supplement its fleet, and selected Rolls-Royce Trent 700 engines for the jets.
Airbus has confirmed that the Muscat-based carrier is ordering three more -300s. It has not stated which powerplants will be fitted to the aircraft.
"This additional order will allow us to continue our strategy of growth with an aircraft we know to be both reliable and profitable, and in addition offering the highest levels of passenger comfort," says Oman Air chief Wayne Pearce.
Neither Oman Air nor Airbus has indicated when the additional aircraft will be delivered. Oman Air started introducing the A330 in 2009.
It also has six Boeing 787s on order which will be powered by Rolls-Royce Trent 1000 engines.



flightglobal.com

QATAR AIRWAYS’ 787 DREAMLINER RETURNS ON LONDON HEATHROW ROUTE

London, UNITED KINGDOM – Qatar Airways has resumed Boeing 787 Dreamliner services between Doha and London Heathrow after a worldwide grounding of the aircraft in January.
The Doha-based carrier was the first to launch Boeing 787 Dreamliner flights to the UK in December, and the return to service means it remains the only airline in the world to operate scheduled 787 flights to and from the United Kingdom.
Landing at London Heathrow at 11.19am local time yesterday, QR075 was the airline’s first Boeing 787 to resume flights to the capital. The aircraft returned to Doha a few hours later as flight QR076, one of the airline’s five daily services between the UK and the State of Qatar.
The first of the airline’s five Boeing 787 Dreamliners returned to service on the Doha – Dubai route on May 1. The airline will be gradually phasing in Boeing 787 flights over the next few weeks on long-haul routes such as Munich, Frankfurt and Zurich.
Qatar Airways Chief Executive Officer Akbar Al Baker said: "The Doha – Heathrow route is one of our most popular international services, and so I’m thrilled that our Dreamliners are back in the skies, providing our passengers with an unparalleled level of service and comfort to and from the UK.
“I have always hailed the Dreamliner as the state-of-the-art aircraft destined to change the way people travel. After a setback that not only affected our own worldwide operations, but those of many carriers worldwide, we look forward to now deploying the Dreamliner on other key routes over the coming weeks.”
Qatar Airways UK Country Manager Richard Oliver said: “We are absolutely delighted to be back in the air with the Boeing 787s in the UK providing our passengers with a unique travel experience.
“With our Heathrow operations going back up to five flights a day following the re-introduction of the Dreamliner on the London route, we fly to our Doha hub and offer passengers a raft of excellent connections to cities across the Middle East, Africa, Asia and Australia.”
Made up of composite materials, the 787 Dreamliner is lighter and more fuel efficient than any comparable aircraft of its size and range.
Qatar Airways has 254 custom-made seats across its 787 Business and Economy Class cabins with specially designed interiors. Business Class is configured 1–2–1 with 22 seats, while Economy has 232 seats in a 3–3–3 layout.
The airline’s 787s are the world’s first fully connected Dreamliners with wireless facilities for passengers to remain in touch with friends and colleagues on the ground through the internet and SMS mobile texting across both the Business and Economy cabins.
Unique features of the 787 Dreamliners include larger windows, reduced cabin noise and cleaner cabin air.
Qatar Airways has seen rapid growth in just 16 years of operations, currently flying a modern fleet of 124 aircraft to 126 key business and leisure destinations across Europe, Middle East, Africa, Asia Pacific and The Americas.
Qatar Airways has so far launched four destinations this year – Gassim (Saudi Arabia), Najaf (Iraq), Phnom Penh (Cambodia) and Chicago (USA).
Over the next few weeks and months, the network will grow further with Salalah, Oman (May 22), Basra and Sulaymaniyah (Iraq on June 3 and August 20 respectively), Chengdu, China (September 3) and recently-announced new routes of Addis Ababa, Ethiopia (September 18), Clark International Airport, Philippines (October 28) and Philadelphia, USA (2 April 2014).



aviator.aero

Japan Airlines flies into a ‘new sky’

Japan Airlines (JAL) is a black swan, or more precisely, a red crane called “tsurumaru” in the airline industry. It is nothing short of a remarkable turnaround story, a rarity in a highly competitive industry that saw national champions such as Malev go bankrupt and Air France, Iberia and the likes struggle to compete against an onslaught of low-cost carriers (LCCs) that have placed significant pressure on these legacy carriers’ short-haul operations.

So when Japan Airlines (JAL) emerged from bankruptcy with its US$8.5 billion blockbuster re-list on the Tokyo Stock Exchange in September 2012 as the year’s second-largest initial public offering (IPO) behind Facebook, during which the quasi-governmental Enterprise Turnaround Initiative Corporation (ETIC) of Japan sold its 96.5% stake in the carrier and made a US$4 billion profit out of a ¥350 billion bailout, this made its turnaround legendary, much akin to its chairman-emeritus Kazuo Inamori, founder of electronics giant Kyocera Corp. brought out from retirement to save the ailing flag carrier.

Further taking into account that Japan Airlines (JAL) became the world’s most profitable carrier in 2011 with a ¥186.6 billion (US$1.84 billion) net profit merely a year since its January 2010 bankruptcy with US$25 billion of debts on its balance sheet, it is clear the reason why the “JAL Philosophy” handbook, authored by Inamori, has become a must-read for JAL managers.

The critics, including JAL’s arch-rival, All Nippon Airways (ANA) that has never received a single dime from the government for its 60 years in existence, cry foul of 4 government bailouts of JAL within a decade, as well as debt forgiveness from banks totalling ¥520 billion (US$5.1 billion) during the bankruptcy process. The ¥1.1 trillion loss carry-forwards, the critics claim, will yield a US$4.5 billion corporate tax break over the next 9 years that will significantly distort JAL’s underlying financial performance.

Still such criticisms fail to undermine the significance of the restructuring that forms the genesis of a reborn Japan Airlines (JAL). It cut 49 unprofitable international routes, sacked 15,700 employees, a third of the 47,000 total workforce at the time and withdrew its entire fuel-guzzling Boeing 747 fleet from an airline that was once the world’s largest 747 operator.

With a solid foundation, Japan Airlines now aims to grow with a three-part strategy: enhancing its brand, improving its international network with the mid-sized Boeing 787 Dreamliner as a cornerstone of its strategy and sustaining high profitability through boosts in cost competitiveness.

This laser focus on its core competency bodes well against its competitors and differentiates it from ANA’s capital-raising to possibly expand into other lines of business and invest in other Asian carriers, which may ultimately prove to be a deviation from its core competency with which it has competitive advantages.

Image Courtesy of Yoshidyaji
Image Courtesy of Yoshidyaji

Not a legacy carrier anymore
From a financial performance perspective, with a clean balance sheet owing to the forgiveness of debt during the restructuring, Japan Airlines (JAL) is not a legacy carrier saddled with an uncompetitive cost structure anymore. On the contrary, JAL has remained highly profitable since its exit from bankruptcy, especially so as it is expected to be the world’s most profitable carrier in 2012 for a second consecutive year.

Its operating revenue increased by 2.8% year-over-year from ¥1.205 trillion in FY2011 to ¥1.239 trillion in FY2012, primarily attributable to a 5.5% rise in international passenger revenue from ¥385.2 billion in the prior fiscal year to ¥406.6 billion this fiscal year while domestic passenger revenue remained largely unchanged with a marginal 0.9% or ¥4.1 billion increase to ¥485.2 billion in FY2012. This offset a 4.9% decline in cargo revenue to ¥75.5 billion in FY2012 from ¥78.8 billion in FY2011. Other revenues rose by 4.5% from ¥259.5 billion in the prior financial year to ¥271.4 billion in FY2012, as Jetstar Japan commenced its services on 3 July, 2012.

Though the modest increase in revenue was dwarfed by a 4.4% increase in operating expenses from ¥999.8 billion in FY2011 to ¥1.04 trillion in FY2012, thereby producing a 4.7% drop in operating profit from ¥204.9 billion in FY2011 to ¥195.2 billion and a 1.2% reduction in operating margin to 15.8% from 17%. Similarly, net income fell by 8% to ¥171.6 billion (US$1.69 billion) in 2012 from ¥186.6 billion (US$1.84 billion) in the prior year.

Passenger traffic measured in revenue passenger kilometres (RPKs) surged by 8.5% from 52.6 billion RPKs in FY2011 to 57.05 billion RPKs in the succeeding financial year, whereas passenger capacity rose proportionately less at a 3.3% pace to 81.2 billion available seat kilometres (ASKs) in FY2012 from 78.56 billion ASKs a year earlier, thus resulting in a 3.4% increase in load factor to 70.3% from 66.9% a year earlier.

This robust financial result was achieved against the backdrop of a territorial dispute with China over uninhabited islands in the East China Sea which negatively shaved ¥5 billion off international passenger revenue in FY2012 and the 787 grounding since 16 January which impacted the fourth-quarter international operation by ¥1.3 billion, with a ¥1.7 billion loss in revenue partially offset by a ¥0.4 billion saving in expenses. In total, Japan Airlines suffered a ¥4.8 billion and a ¥2.6 billion dent in total revenue and operating profit in FY2012, respectively, as a result of the worldwide Boeing 787 Dreamliner grounding as it is one of the launch customers of the game-changing 787 Dreamliner alongside All Nippon Airways (ANA) and operates 7 examples.

Absent these factors beyond JAL’s control, the airline would otherwise have recorded a 3.6% increase in revenue to ¥1.249 trillion instead of a 2.8% increase and a steady operating profit of ¥205.1 billion from FY2011′s ¥204.9 billion, rather than a 4.9% decline. Likewise, its FY2012 net income would have registered a significantly less 2.7% fall to ¥181.5 billion instead of a 8% drop.

The financial impact arising from the 787 grounding, in which multiple short-circuits in cell number 6 of the lithium cobalt-dioxide (Li-CoO2) battery in the aft electronics/equipment (E/E) bay onboard a Japan Airlines (JAL) Boeing 787-8 in Boston on January 7 led to an overheating and opened a pandora’s box preceding the 787′s 3 months-long grounding, was more prominent in the fiscal fourth quarter.

Japan Airlines’ revenue was marginally up by 0.4% year-over-year to ¥296.7 billion during the quarter despite a 2% increase in passenger traffic to 14 billion RPKs. While capacity soared even slower by 0.4% to 20.1 billion ASKs, this did little to halt a 14.3% slide in operating profit to ¥37 billion and a 23.6% plunge in net income to ¥31 billion. Excluding the 787 impact, JAL’s fourth-quarter operating profit would have dropped by 9.4% to ¥38.3 billion and net profit by 11.3% to ¥34 billion instead.

These results, benign on the surface, masked significant progress achieved in its operations, both domestically and internationally.

For instance, Japan Airlines (JAL) has commenced the operation of an expanded codeshare partnership and a joint business agreement with International Airlines Group (IAG) unit British Airways (BA) on 28 September last year, with 4 additional BA European routes and 9 extra JAL flights to 7 Japanese cities being added to the existing partnership, bringing the number of JAL codeshare routes on BA’s European network to 27.

JAL also expanded its codeshare partnerships with fellow oneworld alliance members American Airlines (AA) and S7 Airlines, with Japan Airlines placing its code on the former‘s flights from Dallas Fort Worth and New York John F. Kennedy international airport to both Sao Paulo and Rio de Janeiro and the latter‘s flights between Tokyo Narita and Khabarovsk as well as Vladivostok in Russia.

These partnerships are producing early results for the Japanese carrier, with load factors on North American and European flights increasing to 80.1% and 76.8%, respectively, up from 76.8% and 71.3% in the prior year. The number of international passengers carried rose by 9.9% from 6.84 million in FY2011 to 7.5 million in FY2012 and passenger traffic jumped by 12.3% from 30.3 billion revenue passenger kilometres (RPKs) in FY2011 to 34 billion RPKs a year later. Passenger capacity only rose by 4% from 43 billion available seat kilometres (ASKs) in FY11 to 44.7 ASKs in FY12, thereby producing a 5.6% increase in load factor to 76.1% in FY2012 from 70.4% in the prior fiscal year. Unit revenue rose by 1.5% to ¥9.1 from ¥9 a year ago, albeit yield, measured in revenue per revenue passenger kilometre (RPK), plummeted by 6% to ¥11.9 in FY2012 from ¥12.7 a year earlier.

Image Courtesy of Japan Airlines
Image Courtesy of Japan Airlines

The softness in the profitability measures carried into the fourth-quarter of FY2012, which is traditionally a weak period for business travel, only to be compounded by the 787 grounding this year, with yield sliding another 2.2% year-over-year to ¥11.4 and unit revenue slipping by 1.3% to ¥8.7 despite 1.7% more passengers being carried during the period.

Domestically, the airline was boosted by ¥16.5 billion over the post-2011 Great East Japan earthquake recovery, with 3.6% more passengers being carried to 30 million in FY2012 from 28.97 million in FY2011 and 3.4% more passenger traffic to 23 billion revenue passenger kilometres (RPKs) from 22.3 billion RPKs, whereas passenger capacity rose by 2.6% to 36.4 billion available seat kilometres (ASKs) in FY2012 from 35.5 billion ASKs in the prior year period, thereby leading to a 0.5% higher load factor at 63.1%.

Though Japan Airlines (JAL) is facing an increasingly challenging domestic market with a plethora of low-cost carriers (LCCs) such as Jetstar Japan, AirAsia Japan and Peach Aviation commencing operations during FY2012, as well as an extension of the Shinkasen high-speed rail. This is highlighted by the 1.7% decline in unit revenue, measured in revenue per available seat kilometre (RASK), to ¥13.3 last fiscal year from ¥13.5 in the prior period, as well as a 2.4% decrease in domestic yield to ¥21.1 in FY2012 from ¥21.6 in FY2011.

“Meanwhile, the entry of low cost carriers (LCC) based in Narita and Kansai airports and an increase in LCC domestic and international services produced additional supply. A marked increase in LCC services was seen on short-haul routes, especially to/from Korea. In addition, other modes of transportation had great impact on demand (e.g. extended Shinkansen network), and depending on the route, demand shifted to Shinkansen express train services,” the airline said in its 2013-15 medium term management rolling plan.

The airline is actively realigning its product offerings to market demand, including suspending the Tokyo Narita-Osaka Kansai and Chubu-Ishigaki routes altogether and reducing flight frequencies on Tokyo Haneda-Osaka Kansai, Itami-Niigata, Fukuoka-Kagoshima routes while resuming the Fukuoka-Hanamaki and Niigata-Sapporo routes during FY2012.

Going forward, this will likely see Japan Airlines (JAL) focusing on profitable domestic routes from Tokyo Haneda and Osaka-Itami while letting its Jetstar Japan joint venture (JV) with Qantas Airways take over and fiercely compete on routes where yields are low and costs are high.

Examples include JAL’s newly-launched flights from Tokyo Haneda-Chubu and the airline upping flight frequencies on the Tokyo Haneda-Sapporo and Tokyo Haneda-Naha routes from 17 to 18 and from 13 to 14, respectively; while significantly increasing frequencies on flights from Osaka Itami to Sapporo, Fukuoka, Sendai, Hanamaki, Oita, Miyazaki and resuming services to Matsuyama, Hakodate and Misawa.

In doing so, not only could Japan Airlines avoid committing the same mistakes in the past in flying to small regional airports with losses, it could also improve the traffic mix and passenger yield by ensuring a satisfactory level of profitability on its mainline flying and focusing on last-minute price-inelastic business travellers who usually pay the full fare, while relying on Jetstar Japan to stimulate demand with its low fares supported by a low cost base to make profits on those routes as well.

This focus on profitable routes flying business travellers, with JAL introducing more business class and first class seats onto its domestic flights during the financial year, is partly attributable to a reversal of declining unit revenue trend in the fiscal fourth-quarter, with the measure rising 1.4% year-over-year to ¥12.8 despite a 1.5% decrease in domestic passenger traffic to 5.4 billion revenue passenger kilometres (RPKs) and a 0.7% drop in the number of passengers carried during the quarter to 7.07 million passengers.

Simply put, the flexibility and laser focus on its core competency of carrying business traffic the airline has shown, the result of which yields are maximised while reducing costs by shedding unprofitable domestic routes, have symbolised Japan Airlines is now a nimble carrier.

Image Courtesy of Bloomberg

Cost leadership & revenue premium against ANA
In the meantime, ANA produced a stellar record FY2012 profit, with an astonishing 53.1% increase in net profit to ¥43.1 billion (US$424.1 million) from ¥28.1 billion in FY2011, buoyed by a 7% rise in operating profit to ¥103.8 billion in FY2012 from ¥97 billion in the prior fiscal year, as a result of operating revenue rising by 5.1% from ¥1.41 trillion in FY2011 to ¥1.48 trillion in FY2012, slightly outpacing a 5% increase in operating expense from ¥1.31 trillion in FY2011 to ¥1.38 trillion in FY2012. Operating margin, as a result, rose marginally by 0.1% to 7%.

Similar to its rival, All Nippon Airways (ANA) suffered adversely in the FY2012 fourth-quarter owing to the worldwide Boeing 787 Dreamliner grounding, of which it is the launch customer of the revolutionary carbon-composite jet and has 17 examples in its fleet when the grounding took place.

ANA took a ¥9 billion hit to its operating revenue as a result of the grounding, with ¥5 billion less in domestic revenue and ¥1 billion less in international revenue.

Absent the 787 grounding, ANA would have broken even in FY2012 fourth-quarter instead of losing ¥9 billion, worsened from the ¥5.6 billion loss recorded in the prior fiscal year period. Operating revenue during the quarter rose by 2.8% to ¥351.4 billion from ¥341.7 billion a year earlier, which was dwarfed by a twice as fast increase of 5.7% in operating expense to ¥355.1 billion from ¥335.8 billion in the year-ago period.

For the quarter and the year, the international part of ANA’s business was on a more upbeat note, with passenger revenues for the FY2012 and fiscal fourth quarter rising 8.8% and 6.7%, respectively, to ¥348.3 billion and ¥83.3 billion. Passenger traffic for the financial year rose by 12.6% to 28.5 billion revenue passenger kilometres (RPKs) from 23.35 billion RPKs in the preceding financial year, and the airline carried 6.7% more passengers to 6.28 million from 5.88 million a year ago, while passenger capacity rose by 10.3% to 28.5 billion available seat kilometres (ASKs) in FY2012 from 25.4 billion ASKs in the prior fiscal year, thus generating a 1.5% rise in load factor from 73.7% in FY2011 to 75.2% in FY2012.

The Star Alliance carrier more than doubled its revenue in the trans-pacific partnership with United Airlines and its European partnership with Lufthansa now includes Swiss International Air Lines and Austrian Airlines from 1 April onwards while its “Is Japan Cool?” and “ANA 60th Anniversary Eco-wari Youth” campaigns both contributed to the surge in international passenger traffic in FY2012. Though this resulted in a yield and revenue dilution, as the unit revenue dropped by 1.3% year-over-year to ¥9.2 per available seat kilometre (ASK) from ¥9.3 per ASK in the prior year period, while yield declined by 3.3% to ¥12.2 per revenue passenger kilometre (RPK).

This strength in its international business carried into the first 3 months of this year, despite a ¥2 billion charge against reduced China flights due to the territorial disputes and a ¥9.5 billion charge for the whole FY2012. Passenger revenue during the quarter rose by 6.7% year-over-year to ¥83.3 billion with 5.8% higher passenger traffic at 7.15 billion RPKs, albeit the number of passengers carried dipped by 3.1% to 1.507 million and capacity increased by 9.8% to 9.7 billion ASKs, thereby resulting in a 2.7% lower load factor of 73.5%. Unit revenue slid by another 2.8% to ¥8.6 per ASK although yield remained more or less stable at ¥11.7 per RPK, a 0.8% year-over-year growth.

For its domestic business, an increase in low-cost capacity, coupled with the extension of high-speed rail Shinkasen line, weighed during the year, such that while there was a 5.3% increase in the number of passengers being carried to 41 million in FY12 from 39 million in FY11, domestic passenger revenue only rose by 2.2% to ¥665.9 billion in FY12 from ¥651.5 billion in FY11. Domestic passenger revenue further decreased by 2.8% during FY12 fourth-quarter to ¥149.8 billion, with a 3.6% drop in passenger yields to ¥17.7 per RPK.

Yet these solid financial results are not indicative of the work lying ahead of All Nippon Airways (ANA) to enhance its competitiveness and restore its cost leadership that it once had. After all, bigger is not better, a lesson ANA should have learned and recognised over the years for being the underdog in the Japanese airline industry.

Crucially, Japan Airlines (JAL) has both a cost advantage and revenue premium against All Nippon Airways (ANA). For 2012, JAL’s cost per available seat kilometre (CASK) was ¥11.5 per ASK whereas ANA’s is 3.36% higher at ¥11.9 per ASK while JAL’s unit revenue, measured in revenue per available seat kilometre (RASK) was ¥10.98 per ASK compared to ANA’s ¥10.47 per ASK, a 4.87% lower figure.

When combined, these make Japan Airlines (JAL) having a 8.23% advantage in unit profitability. A noteworthy point is All Nippon Airways (ANA) takes a subtly but meaningfully different approach in calculating its unit costs by only dividing the passenger operating expense against all outputs measured in available seat kilometre (ASK) whereas JAL adopts an approach of dividing total operating expenses against ASK.

While it is understandable that ANA’s method may produce a fairer representation of passenger unit cost, one should caution the way each airline splits its cargo expenses, especially underbelly cargoes carried by passenger aircraft, to passenger and cargo segments differently. Such a difference may inadvertently distort either the unit cost of the passenger operation or the cargo operation.

In light of this difference and the limited availability of information, the aforementioned calculation by Aspire Aviation adopts JAL’s method by dividing total operating expenses against total ASKs produced during the period.

ANA FY2012 unit cost reduction

While ANA currently plans to slash cost by ¥100 billion over the next 2 years, thereby reducing its passenger unit cost in CASK by ¥1 to ¥9.09 per available seat kilometre (ASK) despite the passenger unit cost is expected to increase marginally to ¥9.53 per ASK in FY2013, this was insufficient to recover the lost ground in terms of unit costs against Japan Airlines (JAL).

Aspire Aviation estimates ANA’s cost per available seat kilometre (CASK) to be ¥11.4 per ASK by FY2014, a 4.3% reduction from FY13 to FY14, whereas Japan Airlines (JAL) will have an estimated CASK of ¥11.27 per ASK by FY2014, assuming a run-rate of ¥10 billion per year in cost saving of the ¥50 billion cost reduction programme laid out in its 2012-2016 medium term management rolling plan, spread over a 4.2% higher total capacity in FY2013 over the preceding financial year and a 4.5% higher figure in FY14 versus FY13.

Japan Airlines aims to achieve a CASK of ¥8 per ASK excluding fuel and ¥11.1 per ASK including fuel by FY2016 through more than tripling its number of air transport companies from 6 to 32 of which each business unit will seek to maximise its cost saving as an independent effort while investing ¥517 billion in new aircraft by FY2016.

JAL retired its entire MD90 fleet, as well as 1 Boeing 767-300 and 2 737-400s during FY2012, while receiving 2 Embraer E170s, 5 Boeing 787-8 Dreamliners and 8 737-800s during the period. It will also retrofit 6 Boeing 767-300ERs with winglets in FY2013 and start retiring early 777s and 767s under the medium term management rolling plan.

ANA, on the other hand, withdrew 3 Boeing 747-400s, 6 Boeing 767-300s, 3 Airbus A320s, 2 Boeing 737-700s and 2 Dash 8-300 turboprops while adding 4 fuel efficient 737-800s and 11 787-8 Dreamliners to its fleet in FY2012.

Interestingly, both the cost bases of ANA and JAL remain chronically high against its international competitors even with these cost reduction programmes.

On a like-for-like basis, JAL’s 2012 cost per available seat kilometre (CASK) of 11.32 US cents per ASK (¥11.5/ASK) was 14.3% higher than Cathay Pacific’s 9.7 US cents per ASK (HK$0.753/ASK) and a staggering 28.6% higher than Emirates’ 8.08 US cents per ASK (AED 0.2969/ASK). It was also 13.7% higher than Qantas’ 9.76 US cents per ASK (9.73 Australian cents/ASK) figure. ANA fared even worse with its 11.71 US cents per ASK figure being 16.7% higher than Qantas’, 17.2% higher than Cathay Pacific’s, and a whopping 30.9% higher than Emirates’.

Moreover, such a picture characterised hitherto does not take into account the significant product investment Japan Airlines (JAL) is making, which further enhances its ability to command a revenue premium for its services.

Make no mistake, it is indeed impressive for All Nippon Airways (ANA) to have received the 5-star ranking from London-based Skytrax, of which the airline launched its international premium economy services in FY2012.

However, Japan Airlines countered ANA’s “Inspiration of Japan” with “JAL New Sky” product line-ups, including a fully flat bed in business class and a premium economy class and economy class that boast the world’s largest seat pitches.

The 8 “JAL Suite” first class seats onboard JAL’s Boeing 777-300ER “777 Sky Suite” aircraft boast a 78.5-inch bed length and 33-inch bed width and its 49 business class “JAL Sky Suite” seats feature a 74-inch bed length and a 25.5-inch maximum width with a base width of 21 inches. In comparison, All Nippon Airways’ first class seats on board the Boeing 777-300ER feature a 76-inch pitch and 33-inch width whereas its business class seats feature 62-inch pitch and 21-inch width.

Likewise, Japan Airlines’ new premium economy class seats, dubbed “JAL Sky Premium”, feature a 42-inch pitch and 19-inch width, while its new economy class seats, “JAL Sky Wider”, have a seat pitch and width of 33-34 inches and 18 inches, respectively. In contrast, ANA’s premium economy class seats onboard the 777-300ER have a seat pitch and width of 38-inch and 18.5-inch, respectively, while its economy class seats feature a 31-inch seat pitch and a 16.5-inch seat width.

Coupled with its Sky Wi-Fi in-flight connectivity deployed on JAL’s New York, Chicago, Los Angeles and Jakarta routes; a new in-flight entertainment (IFE) system on all aircraft that enables in-flight sales on private television screen, this fully demonstrates JAL’s determination to drastically improve its international service offering. JAL has already announced that its Sky Suite 777 service will extend to the Tokyo Narita-New York route from 1 May onwards, as well as flights to Paris, Los Angeles and Chicago from Tokyo Narita beginning July, November 2013 and January 2014, respectively.

Image Courtesy of Japan Airlines
Image Courtesy of Japan Airlines

Low-cost revolution
Meanwhile, one of the most significant paradigm shifts in the Japanese airline industry is the recent low-cost revolution, where the low-cost capacity share of total Japanese domestic seats skyrocketed to 20.3% in 2012 from 9% and 8.8% in the two previous years, from just 1% in 2001, OAG data shows.

The low-cost sector is where Japan Airlines (JAL) and All Nippon Airways (ANA) differ in strategy, with ANA adopting a multi-brand strategy through the establishment of its ANA Holdings Inc. holding company and Osamu Shinobe being appointed as ANA president in addition to Shinichiro Ito becoming ANA Holdings Inc.’s chief executive.

Its Tokyo Narita-based joint venture (JV) AirAsia Japan carried 340,000 domestic passengers over 599 million domestic capacity in available seat kilometres (ASKs) and 382 million revenue passenger kilometres (RPKs) since it began operation on 1 August, 2012, as well as 60,000 international passengers over 113 million ASKs and 70 million RPKs, thus leading to a domestic and international load factor of 63.9% and 61.9%, respectively.

AirAsia Japan now has 4 Airbus A320 aircraft flying from Tokyo Narita to Kuala Lumpur, Taipei Taoyuan, Seoul, Busan whereas its domestic destinations include Sapporo, Nagoya, Okinawa, Fukuoka and plans to add Kumamoto and Okayama to its network later 2013 with 6 aircraft by the end of June 2013.

At the same time, ANA’s Osaka Kansai-based Peach Aviation has 8 Airbus A320s in its fleet and flies from Osaka Kansai to Sendai, Sapporo, Naha, Seoul Incheon, Fukuoka, Nagasaki, Kagoshima, Ishigaki, Taipei Taoyuan and Hong Kong, with the addition of Osaka Kansai-Busan and Naha-Ishigaki routes from September 2013 onwards.

Whereas ANA employs a localisation strategy with AirAsia Japan and Peach Aviation specialising in price-sensitive leisure traffic from their respective hubs at Tokyo Narita and Osaka Kansai, as well as possibly from Naha to Bangkok, Ho Chi Minh City and Hanoi, according to a Centre for Aviation (CAPA) report, Jetstar Japan adopts a simplistic but effective single-brand strategy.

Jetstar Japan currently flies from Tokyo Narita to Osaka Kansai, Oita, Fukuoka, Okinawa, Sapporo; and Kagoshima and Matsuyama from 31 May and 11 June onwards, respectively. The low-cost carrier (LCC) also flies from Osaka Kansai to Tokyo Narita, Fukuoka, Sapporo and Okinawa and from Nagoya to Sapporo and Fukuoka, in addition to Osaka Kansai and Nagoya from Fukuoka.

As Jetstar Japan further expands in a large domestic market which is 6 times larger than the domestic Australian market with 13 aircraft whereas Peach Aviation has 10 examples by the end of June, it will be able to leverage on the strength of the Jetstar brand and the frequent flyer programmes (FFPs) of Qantas and Japan Airlines (JAL), of which JAL codeshares on Jetstar Japan flights originating from Tokyo Narita, Osaka Kansai and Nagoya Chubu.

With Jetstar Japan utilising the Sabre global distribution system (GDS), this will lure first-time domestic passengers to connect onto Japan Airlines’ international flights through 50% cheaper fares and international passengers onto Jetstar Japan’s domestic flights, thereby maximising connecting traffic on both carriers.

Furthermore, as Jetstar Japan seeks to expand to possibly as many as 100 aircraft and its chief executive Miyuki Suzuki says low-cost capacity may account for as much as a 35% domestic share by 2020, the pent-up demand unleashed by the proliferation of low-cost carriers (LCCs) as the Japanese economy remains depressed and is plagued by a decade-long endless deflation, with low fares making air travel affordable from a consistently declining disposable income; ensures Jetstar Japan will have a bright future.

In addition, ANA’s fragmented collection of domestic low-cost carriers (LCCs) will invariably help Jetstar Japan, not least because of its lower selling, administration, training and maintenance cost which are all standardised while ANA’s plethora of domestic partners each have individual systems, fleet, etc. These include Starflyer which is 17.97% owned by ANA and specialises in flying to Kyushu from Tokyo Haneda, Solaseed Air with which it codeshares on flights from Tokyo Haneda to Miyazaki and Air Do on flights from Tokyo Haneda to Hokkaido.

Consolidating these brands will significantly strengthen AirAsia Japan’s competitive position, particularly with these partners’ precious slots at Tokyo Haneda and bolster AirAsia Japan’s domestic LCC capacity share to 7% from under 1% at press time. At present, Air Do has a 2.9% capacity share, whereas Solaseed Air and Starflyer hold a 2.5% and 1.7% share, respectively.

In contrast, Jetstar Japan holds a 1.8% domestic capacity share, while Japan Airlines (JAL) and All Nippon Airways (ANA) hold a 26.9% and 48.4% domestic capacity shares, respectively. Other JAL subsidiaries Japan Transocean Air (JTA) and Japan Air Commuter (JAC) hold another 3% and 2.2% capacity shares.

Image Courtesy of Abram Chan
Image Courtesy of Abram Chan

Looking beyond Japan
Though both Japan Airlines (JAL) and All Nippon Airways (ANA) are not over-relying on Japan for their future, as a consumption tax rise from the existing 5% to 8% in April 2014 and to as high as 10% in October 2015 threatens to cause disposable income to dwindle and there is an inherent risk the crowding-out effect of Japan’s unsustainably high public debt over which gross debt-to-GDP ratio is expected to reach 240% soon and the Japanese government used more than half of its tax revenue to service its national debt alone last year, will weigh on the domestic economy and thus air travel market heavily.

In response to this impending fiscal crisis and in light of the market reality that while low-cost carriers (LCCs) will create a large amount of new air travel demand, it will nevertheless cannibalise on some of the mainline carriers’ domestic trunk routes, both ANA and JAL are setting their sights on Asia.

In particular, an increase in the number of slots at both Tokyo Narita and Haneda airports is a rare opportunity on which JAL and ANA are capitalising to expand internationally in a highly slots-constrained market.

The number of slots at Tokyo Haneda will increase to 447,000 by end-FY2013 at the earliest from the current level of 390,000 through the use of a new runway whilst the number of slots at Tokyo Narita will increase to 300,000 by FY2014 from 270,000 at the moment through the simultaneous operation of take-off and landing at the airport.

“We regard the increase of departure and arrival slots in Tokyo metropolitan area (Haneda and Narita) as our biggest business opportunity. In particular, we will allocate our aircraft to mid/long haul international routes (Europe, North America, and Southeast Asia), and rapidly improve the route network,” Japan Airlines said in the medium-term management rolling plan. The airline plans to launch the Tokyo Haneda-Shanghai Pudong and Tokyo Haneda-Guangzhou routes subject to government approval.

Key to this international expansion is the Boeing 787 Dreamliner, with which both JAL’s and ANA’s futures are inextricably intertwined. The revolutionary game-changing aircraft chiefly made from carbon fibre reinforced polymer (CFRP) that is 35% made in Japan, has enabled carriers to launch long-haul thin routes that would otherwise be economically unfeasible.

Its 21% lower block fuel burn has been used to JAL’s fullest advantages by launching Tokyo Narita-Boston and Tokyo Narita-San Diego routes whereas ANA launched the Tokyo Narita-San Jose route using the aircraft.

Following the resumption of 787 commercial flights with a three-layered protection contained in Boeing’s battery modification plan (“Boeing 787 is a dream come true, again.“, 26th Apr, 13), JAL plans to reinstate the 787 beginning 1 June on routes such as Tokyo Narita to Boston, San Diego, Singapore and Delhi from 12 July onwards. It also plans to deploy the Boeing 787 Dreamliner on routes to Moscow starting from 1 September, Sydney and Bangkok from 1 and 2 December, respectively. Flights from Tokyo Haneda to Singapore and Beijing using the aircraft will begin on 1 June while flights between Haneda and San Francisco will start on 1 September.

At press time, Japan Airlines has completed the battery modification on all 7 of its 787 aircraft whereas ANA completed the modification on 11 of its 17 aircraft as of May 13, the Star Alliance carrier said in a daily update.

ANA also plans to reinstate the 787 Dreamliner on the temporarily suspended Tokyo Narita-San Jose route and Tokyo Haneda-Frankfurt route as well as the Haneda-Beijing route starting from 1 June while also deploying the aircraft for the first time on the Tokyo Narita-Beijing, Tokyo Narita-Shanghai Pudong and Haneda-Taipei (Songshan) routes.

Unlike JAL, All Nippon Airways (ANA), Asia’s largest carrier by sales, is planning to establish an investment management company in June 2013 in Singapore in order to explore new growth and strategic investment opportunities presented by the fast-growing region.

“We’re considering various options, including acquisitions or collaboration with a partner if we find one. Our main focus is southeast Asia. We haven’t made any decisions yet,” ANA president Osamu Shinobe said in a Bloomberg interview.

“The strategy we decide on will vary depending on whether we team up with an airline, or whether it’s with an investor. New investments will be decided by the holding company,” Shinobe explained.

While growing in Asia is paramount to ensuring ANA’s future success, such strategic investment does not make sense unless it bolsters its own Tokyo Narita and Haneda hubs which carries a considerable amount of risks. Such risks have to be justified and provide a sufficient return on investment in order to outweigh the opportunity cost involved.

For Japan Airlines (JAL), it could focus on further deepening its partnership with fellow oneworld member Malaysia Airlines (MAS), with which it already codeshares on MAS’s 11 weekly Kuala Lumpur-Tokyo flights and 6 times weekly Kuala Lumpur-Osaka flights. Such a deepening in alliance will significantly expand the scope of co-operation between the carriers and could include transpacific flights to Vancouver, Boston, Chicago, New York, Dallas, San Francisco, San Diego, thereby granting instant access to MAS to these destinations which it currently does not serve and complementing its existing Los Angeles flights via Tokyo Narita.

In doing so, Japan Airlines (JAL) could further improve the passenger yields on its transpacific flights, especially on those existing and future long-haul thin routes to North America operated by its 186-seat Boeing 787-8 Dreamliner with connecting MAS passengers from not only Kuala Lumpur, but also Penang, Kota Kinabalu, Langkawi, Kuching and Kuantan already covered under the existing codeshare partnership.

Last but not least, while Japan Airlines (JAL) forecasts a 31.2% fall in FY2013 net profit to ¥118 billion and a 28.2% slump in this year’s operating profit to ¥140 billion despite a 2.7% increase in total revenue to ¥1.27 trillion, by no means does this symbolise a decline in the company’s fortunes. Quite the opposite is true: with an unbelievable 0% debt-to-equity ratio and a still unparalleled profitability, it could finance its growth, significant product investment in JAL’s “New Sky” seat designs, at the same time putting a laser focus on cutting costs and enhancing its ability to charge customers a revenue premium for services one class above its competitors’ that they are willing to pay.

Under the leadership of JAL’s president Masaru Onishi and chairman Yoshiharu Ueki, which is already a hard act to follow, let alone that of its chairman emeritus Kazuo Inamori, Japan Airlines (JAL) is flying high into a new, but often turbulent sky and is determined to prevail in it against all odds the future may hold.

Image Courtesy of Bloomberg
Image Courtesy of Bloomberg




aspireaviation.com

ANA to join JAL in resuming 787 operations on 1 June

All Nippon Airways (ANA) will join Japan Airlines (JAL) in resuming Boeing 787 operations on 1 June.

The aircraft type will be used on routes from Tokyo Narita to San Jose, and from Tokyo Haneda to Frankfurt and Beijing.

On 1 June, ANA will deploy the 787 on the Tokyo Haneda-Taipei Songshan and Tokyo Nartia-Beijing routes. The 787 will also replace the 767-300ER on the Tokyo Narita-Shanghai Pudong service starting 1 August.

The airline intends to use the 787s on services from Tokyo Haneda to Akita and Toyama, starting 1 and 15 June respectively. It also intends deploy the aircraft type on additional domestic flights from July, primarily on services to Okinawa.

Domestic destinations previously served by the aircraft type will also resume in June, says an airline spokesman.

Meanwhile, its Tokyo Narita-Seattle services - which were suspended as a result of the 787 groundings - will resume on 1 June using Boeing 777-300ER aircraft.

ANA and JAL are in the process of changing their 787s' main and auxiliary lithium-ion batteries, as well as adding new containment and venting systems. Both expect modifications to be completed by mid-May.

Data from Flightglobal Pro shows that ANA has received 17 787-8s, with an additional 19 -8s and 30 787-9s on order. JAL, meanwhile, has seven -8s in its fleet, with an additional 18 -8s and 20 787-9s on order.
 
 
 
flightglobal.com

ANA 787 experiences minor electrical fault owing to loose nut

An All Nippon Airways Boeing 787 experienced a minor electrical fault during a recent proving flight, but the cause was traced to an insufficiently turned nut in an electrical panel.
During a proving flight on 4 May on the Tokyo Haneda-Chitose route, the flightcrew of aircraft registration JA809A observed five advisory messages about an error in an electrical distribution panel located in the aircraft's aft power bay, says an ANA spokeswoman.
Only a pilot and co-pilot were aboard the aircraft.
The flightcrew continued to Chitose and landed safely at 16:15 local time. Upon examination, it was revealed that a nut used to secure the panel had been insufficiently tightened, thus causing heat and turning part of the panel black.
Both the nut and electrical panel were replaced by 7 May, and the aircraft returned to Tokyo Haneda on another proving flight with a new crew.
ANA is conducting 230 proving flights with the 787 to ensure crew proficiency in the type before it re-enters revenue service with the carrier on 1 June.
The world's 787 fleet was grounded in January after separate battery fires aboard a Japan Airlines 787 on the ground at Boston Logan airport and aboard an ANA 787 that resulted in an emergency landing. Boeing's modified battery and containment system has been installed on 15 to 16 of ANA's 17 787s, says the spokeswoman.
The carrier also received its 18th 787 in the week ended 19 May.


flightglobal.com

JAL's fleet of seven 787s complete modifications

Japan Airlines' (JAL) fleet of Boeing 787-8s have completed modifications and is on track to resume operations on 1 June.

Aircraft JA826J was the seventh and last aircraft to receive modifications to its lithium-ion batteries, including the installation of a new containment system. The works were finished on 13 May.

Four of JAL's seven 787s have also completed confirmation flights, where no battery problems were found, says the carrier.

Fellow Japanese carrier All Nippon Airways (ANA) still has six 787s undergoing modifications. Works on 11 others have been completed, where like JAL, the carrier did not discover any further problems.

JAL and ANA have also been conducting familiarisation flights with its pilots on the aircraft type since 4 May and 28 April respectively.

Both carriers, which together own about half of the worldwide fleet of 787s, have said that they plan to resume 787 operations on 1 June.

ANA will deploy the aircraft type on routes from Tokyo Narita to San Jose, and from Tokyo Haneda to Frankfurt and Beijing.

JAL meanwhile will use the 787s on services from Tokyo Narita to Boston, San Diego and Singapore, and also on routes from Tokyo Haneda to Singapore and Beijing.

Flightglobal Pro data shows that ANA has received 17 787-8s, with an additional 19 -8s and 30 787-9s on order. JAL, meanwhile, has seven -8s in its fleet, with an additional 18 -8s and 20 787-9s on order.



flightglobal.com

Boeing delivers 1st 787 since grounding ended

Boeing today marked another landmark on the 787's path to recovery from a battery scare by delivering the 51st aircraft - and the first since the fleet was grounded in mid-January - to All Nippon Airways (ANA).

Aircraft 83 was handed over to the 787's launch customer to become the first such delivery in more than four months.

Boeing now must deliver between 60 and 65 787s over the remaining 7.5 months of the year to stay on target.

"Despite the disruption in deliveries over the past several months, we still expect to deliver all the 787s we originally planned to by the end of the year," Boeing vice president of marketing Randy Tinseth writes in a blog post that announced the delivery to ANA.

The 787 fleet was grounded by regulators worldwide after two batteries overheated over a period of nine days in early January. Investigators are continuing to search for what caused the batteries to fail.

Meanwhile, Boeing developed a redesign for the battery and the battery enclosure that is intended to prevent an over-heating problem from jeopardising the safety of the aircraft in the event of another failure.

In late April, the US Federal Aviation Administration approved Boeing's redesign and the test results verifying the performance of the new battery enclosure. The decision cleared the 787 fleet to re-enter service.


flightglobal.com

China Southern to become first Chinese 787 operator by early June

China Southern Airlines is expecting to take delivery of its first Boeing 787-8 by early June, making it the first Chinese operator of the type.

The carrier is awaiting Boeing's confirmation of a definite delivery date, but understands that it should be around end-May or early June, a company official tells Flightglobal Pro.

"Our schedules have been prepared and we've also trained our pilots. The aircraft type has been delayed for a while now, so we're hoping they will come in soon," he says.

He adds that China Southern is likely to receive at least half of its 10 787s on order within the year - which means the carrier will be taking one 787 on average for the next several months.

The aircraft will first be used on domestic services, likely from its base in Guangzhou to major cities such as Beijing and Shanghai, before it is used on international routes, says the official.

When contacted, a Boeing China spokesman says the airframer does not disclose its delivery schedule.

"China Southern will be the first Chinese carrier to take delivery of the 787. We're working closely with our customer and relevant stakeholders to prepare for the first delivery, to ensure a successful entry into service of this game-changing aircraft," he adds.

Flightglobal's Ascend Online database shows that China Southern is due to receive eight 787s by end-2013. It also shows that Hainan Airlines will be the second Chinese operator of the type, with the carrier scheduled to take its first 787 in June, and a total of seven 787s by year-end.

Hainan Airlines has 10 -8s on order.



http://www.flightglobal.com/news/articles/china-southern-to-become-first-chinese-787-operator-by-early-june-386206/

Lion Air to launch Thai subsidiary

Indonesian carrier will intensify competition 

 

The plan by Lion Air, Indonesia's largest low-cost carrier, to join Thailand's hotly contested airline market is coming to fruition, six years after it was mooted.

The Jakarta-based airline is setting up a subsidiary airline, Thai Lion Air, and has already started recruiting pilots, cabin attendants and ground staff.

Thai Lion Air intends to start its operation strongly with the deployment of up to six single-aisle twin-jet Boeing 737-800s and by using Bangkok's Don Mueang airport as its base, according to people with knowledge of the matter.

Woradej Harnprasert, director-general of the Civil Aviation Department, yesterday confirmed Lion Air is launching a Thai subsidiary, although the department has not yet received an application for air operator's certificate.

The creation of Thai Lion Air comes in the form of joint venture with Thai entities, which are required by law to have a minimum 51% holding.

However, the identities of the entities remain a mystery.

Reports suggest Phuket Airlines, which used to operate scheduled domestic and international flights nearly a decade ago, is an investor.

But Mr Woradej discounted that possibility, saying Phuket Airlines, founded by businessman and former senator Vikrom Aisiri, has been preoccupied with charter services.

Lion Air's entry will intensify Thailand's s highly contested market. It will compete with major players Thai AirAsia and Nok Air and, to a lesser extent, with Orient Thai, which has significantly downsized its scheduled operations over the past two years.

"Lion Air's entry is good for more healthy competition, giving passengers choice," said Mr Woradej, noting that Thai skies are open to airlines as long as they meet regulations.

Thai Lion Air aims to operate flights within Thailand and to neighbouring countries, sources said.
Lion Air has sought to set up a sister carrier in Thailand since 2007. It considered a tie-up with One-Two-Go, the now-defunct budget airline of Orient Thai, or a partnership with a holder of an airline licence in Thailand.

Chief executive Rusdi Kirana in March told reporters the airline was still exploring earlier plans to set up subsidiaries in Australia and Thailand.

The airline reportedly reached a recent accord to acquire 49% of an unnamed Australian company and base six aircraft in that country.

Executives have also said the airline is considering partnerships in Myanmar, Vietnam, Bangladesh, Malaysia and the Philippines to grow its operation, essentially to absorb its huge aircraft capacity.

In February 2012, Lion Air ordered 201 Boeing 737 MAXs and 29 next-generation 737-900ERs worth US$22.4 billion, the biggest single order for the US aircraft maker in its history, measured by the number of planes and the value of the order.

In March, it placed an order for 234 Airbus A320 aircraft worth $24 billion.

Executives have said the company wants to have 1,000 planes in 10 years.

As of last December, Lion Air operated nearly 100 aircraft, mostly Boeing 737-800 and 900 models.
Lion Air recently launched domestic carrier Malindo Air as a joint venture in which it owns a 49% stake and is planning to set up full service carrier Batik Air in Indonesia later this year.

The airline, founded in 2000 with the slogan "We make people fly", has a poor safety record. Its fourth accident in 16 months occurred in April when a Boeing 737-800 crashed into the sea at Bali airport.

Mr Woradej said Thai Lion Air will be regulated by the department's safety standards.

 

 

http://www.bangkokpost.com/business/aviation/351235/lion-air-to-launch-thai-subsidiary