Japan Airlines (JAL) packed a roomful of delegates eager to know more about its new low-cost, long-haul carrier at last week’s Aviation Festival Asia. But details were scant, and the audience left without knowing a lot more.
They found that the key basics are still under consideration, even though an air operator’s certificate for the new airline is imminent. Details such as name of company, branding, senior management team, seating configurations, total number of seats, seats per row, seating segment mix, pricing, destinations, countries or airports served, specific routes, and actual start date have all not yet been decided.
It would have been extremely frustrating had it not actually been funny and curious, with the man heading the new venture, Director and Executive Officer Hiroyuki Uehara, starting his presentation by saying JAL had set up a new holding company for the new carrier called TBL Co.
TBL means To Be Launched. Seriously.
What’s Known so Far
Here’s what is known so far about the new airline, which JAL first announced in May 2018:
It plans to operate flights from Tokyo’s Narita International to select destinations in Asia, Europe, and the Americas. This will be starting from summer 2020, in time for the Tokyo Olympics and the expected completion of Narita’s massive capacity expansion program.
There will be two refurbished B787-8 aircraft in year one, and the airline will subsequently add two B787-8 planes per year for the next four years, either leased from JAL or from its own aircraft order.
The airline’s initial investment is $8.9 million, of which capital is $4.4 million. JAL plans to accept new investors for a planned investment of $200 million as it expands. “It’s 100 percent a subsidiary of JAL, but we welcome other investors. They must be good business partners; it’s not just cash,” said Uehara.
Other than that, everything else is speculation, including reports that the airline would be called Zipair, based on JAL’s acquisition of website domains Zip Air and Zip Air Tokyo last February. Uehara declined to comment if this was the name.
A new long-haul experience
While the carrier will operate within Asia first until it obtains certification to fly over Siberia and the Pacific, a process Uehara said would take a year, it’s clear that the U.S. West Coast is a key aspect of the airline’s strategy.
“Apart from Air Canada’s Vancouver to [Osaka] Kansai [flights], there are no other low-cost carriers doing the trans-Pacific route so far,” he said.
“The common conception of long-haul [flight] is over five hours. For Japanese, that is to the Far East, such as Thailand. We need more than that,” Uehara said. “To go to the U.S. West Coast takes eight to 10 hours. …If you fly more than nine, 12 hours, what you want to do in the aircraft is a lot different from that in short and medium-haul flights.”
Uehara hinted of “a new experience for long-haul flights,” and Skift understands that the new carrier intends to siphon off demand even from full-service carriers. He gave away little, but it was enough to show he envisioned something never done before. Many would argue, however, that there’s only so much more space to innovate in low-cost, long-haul operation.
He said the branding and product won’t be JAL, “but it won’t be textbook low-cost carrier either.” Flight attendants will be new hires and not from JAL. Likewise, pilots. Recruitment has started.
formula for success?
Can JAL’s new low-cost airline crack the code on a winning formula for long-haul? So far, no airline has perfected this model, and, according to a Skift Megatrend for 2019, it’s not clear if any carrier ever will.
Uehara spoke of providing attractive fares; offering customized, unbundled services suited for long-haul flights; having a high-density aircraft; optimizing digital technology; selling cargo space; and sharing JAL’s infrastructure, such as maintenance, as the keys to success.
“Everyone is making a big effort to be a digital airline, but I’m optimistic we are very new, we can do anything. On the other hand, to change a legacy structure is very difficult.”
Added value for the customer is key, he added, and it will offer unbundling of services suited for long-haul. “We have to create many new things to give comfort to passengers because of the long journey,” he said.
“Of course we have to bear high crew costs, …but our calculations are we can be very profitable compared to a full-service carrier,” said Uehara.
Uehara said he went “underground” in summer 2017 to start the project solo, then employed three to four people in May last year when JAL officially announced the plan for the new airline.
He joined JAL in 1986 and is also its vice president of strategy development.
JAL had recovered well from its bankruptcy in 2010, and is looking for a new growth avenue, particularly with the big capacity expansions in Tokyo’s Narita and Haneda airports, and the government’s goal of 40 million arrivals in 2020 and 60 million in 2030, said Uehara.
The airline group noted that All Nippon Airways’ Peach Aviation had been successful from its base in Kansai, while other low-cost carriers outside Japan, such as Malaysia’s Air AirAsia X and Singapore’s Scoot, had also entered, launching fifth freedom flights from Kansai.
AirAsia X operates from Kansai to Taipei, Kuala Lumpur, Bangkok and Honolulu, while Scoot flies from Kansai to Honolulu and Singapore.
“JAL is doing well in full service; it is profitable and always full. It needs another price-sensitive market. Although we have Jetstar Japan [in which JAL and Qantas Airways each have a 33 percent share], it is strong in short-haul, especially domestic, and does not have enough resources to expand into longer-haul operations. [Even if it does], it’s going to be a Jetstar Japan route…we need a real new JAL strategy,” Uehara said.
Uehara does not believe Kansai-Honolulu flights by AirAsia X or Scoot represent a big threat. “They are able to create new demand, and Western Japan is a big market. If you have a good product, demand will come,” he said.
But if JAL’s low-cost, long-haul product is so good, won’t it compete with full-service JAL?
Steven Smith, JAL’s vice president and head of global sales, said, “Will we see some customers bleed over? Possibly, but we’re not going to take people to the same destinations we go today probably, why would we?”
”I’m not too concerned about this. I think there is enough traffic that will help us preserve what we have today but will also help us with a brand-new market on low-cost, long-haul,” he said.
All will be revealed — hopefully — when TBL receives the air operator’s certificate in a few weeks.