January 19th, 2010
07:54 PM GMT
Share this on:



January 19th, 2010
04:36 AM GMT
Share this on:

I boarded Japan Airlines flight 1381 at Tokyo’s Haneda Airport. My destination: a small town in western Japan called Shirahama.

I slid into my seat towards the rear of the plane. I didn’t have to compete for a spot to toss my overhead baggage, because there wasn’t anyone in my row. In fact, there wasn’t anyone in the seats next to me, the row behind me or in the ten rows in front of me.

Flight 1381 took off from Tokyo more than half empty. The flight appeared about 70 percent empty. That’s a lot of empty seats for this plane, an MD-81 which, according to Japan Airlines, seats approximately 160 people.

Shirahama is near a world heritage site. It’s a gorgeous, remote area of Japan where the ocean meets cliffs of spectacular beauty. It’s not a highly populated area of the country. Yet Japan Airlines flies flights in and out of the small airport in Shirahama twice a day.

Japan Airlines, or JAL, in its November 2009 report, shows the Shirahama-Tokyo flights had an occupancy rate of 54.3 percent.. In October 2009, the airline says occupancy for that route was 39.5 percent. You see a bigger problem for the airline when you look at passenger loads for all of its domestic routes: In November 2009, 95 routes - more than two-thirds of JAL’s domestic flights – had occupancy rates less than 60 percent. Industry analysts say that, generally, 60 percent capacity means that a route isn’t profitable.

Aviation specialist Kotaro Toriumi says all these empty planes symbolize many of JAL’s problems. “JAL was originally a government-controlled company, although it was privatized,” says Toriumi. “What we see today is the legacy of its bureaucratic roots.”

Toriumi says the company’s inflexibility to cut unprofitable routes, downsize aircraft, and adjust to economic downturns has been an ongoing problem for the last twenty years.

As the nation’s flagship carrier, Japan Airlines has been subject to political pressure, both from the national and local governments. Air travel has been traditionally seen as a source of vital transportation and income into communities.

“You can’t just blame JAL. The airline hasn’t been able to eliminate non-profitable routes if they’re popular destinations for Japanese, such as resort locations, because there’s a strong resistance by the government.”

Japan Airlines would not speak to CNN on camera, citing its upcoming bankruptcy proceedings. The airline did respond to CNN questions via a statement. “It is important to note that the profitability of a route cannot be determined by the seat factor alone. Past reports have claimed that the break even seat factor is 75%, but this is wrong to say. It would vary from route to route. Since January 28 of last year, JAL has announced that it will suspend 20 domestic routes, with the closure of four domestic offices. JAL has been progressively switching to the use of smaller, more efficient aircraft on both its international and domestic network.”

I boarded my return flight to Tokyo from Shirahama. Again, I had plenty of elbow room: no one was in my row. There were a few more passengers on the return, but the plane was still mostly empty.

A woman on my flight said that without this flight, Shirahama would be “cut off” from the rest of Japan. She hoped that the route wouldn’t be eliminated. Japan Airlines will have to balance the needs of its customers with its own financial survival. The choices will not be easy, but vital to the airline’s post-bankruptcy future.



January 19th, 2010
02:58 AM GMT
Share this on:

Brazil, Russia, India and China – the so-called BRIC countries – cover about 25% of the world's land area, and are home to about 40% of the world's population. Over the past year, their stock markets have also been outperforming those in developed nations. So where might investors want to place their bets in the year ahead?

On this week's Biz Clinic Andrew Stevens gets advice from a man who's had his eye on emerging markets for more than 40 years - Mark Mobius.

Filed under: Biz ClinicInvestment


About Business 360

CNN International's business anchors and correspondents get to grips with the issues affecting world business, and they want your questions and feedback.

 
 
Powered by WordPress.com VIP