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Akio Airline Industry in Japan Essay
Airline Industry in Japan since September 11 Attacks in the US Introduction Some outcomes of the September 11th terrorist attacks are proximal certainties. In other words, the multi-front battle against terrorism will be one of the points of Japanese foreign policy in the nearest future. An already unsteady economy has been tipped into economic slump.
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Write My Essay For MeBeyond these certain aspects appearing after September 11 attacks, almost nothing is clear. Will the battle “against terrorism cause a fundamental change in how key nations appraise their interests and formulate their policies”, or will it simply “quicken trends and tendencies that were already in indication?” (Potehsman 2004, p.18) Will the Japan and world economies spring back after some period of uncertainty, or will a consequential security premium be effectively imposed on most economic transactions, resulting in considerable cost increases that retard growth indefinitely?
Will Japanese, similarly to Americans react by trying to close the country’s doors, or will “they delegate to greater international cooperation against common threats?” (Potehsman 2004, p.19) With all these uncertainties, it is exceedingly premature to prophesy whether the events of September 11th will, a half century from now, come into view as a watershed in world’s history, much less the nature of such a watershed.
In the midst of people’s sorrow over the loss of life and world sense of everyday security, individuals still remember that the countries like United States and Japan continue to have a range of worldwide interests. Though America may have refused from the role of top policymaker and mass-market commentator, it is still significant. They will progress to the front and center again very soon. Even though Americans effectively react to the fact and intimidation of terrorist attacks and most people think that terrorists consider western countries to be their primary target, all individuals around the globe must listen to these risks or the terrorists may too catch us unexpectedly.
Factors Affecting the Demand in Japanese Airline Industry A harsh Japanese airline industry operating environment dominated during the past 4 years, under the impact of factors such as a series of grim international events, including the Iraq Conflict and the outbreaks of SARS and of unknown influenza, and also a dramatic increase in the price of aviation fuel. In home passenger operations powerful sales promotion measures were conducted, and competitiveness was increased by the steady implementation of the integration plan, including network reorganization. As a result, unit prices improved, and revenues grew substantially (Rutledge 2003).
In international passenger operations, nevertheless, the impact on passenger psychology of the external factors referred to above was grimmer than expected, and the consequent slump in demand led inevitably to decline in revenue. Implementation of the integration plan was sped up powerfully, and a total of ¥45.5 billion of emergency counter-measures to lift the profitability of all companies forming airline industry were implemented.
However, as it can be seen from the example of JAL (Japanese Air Lines) that combined operating revenues equaled ¥1,931.7 billion and the company has incurred an operating loss of ¥67.6 billion, there was a recurring loss of ¥71.9 billion, and a net loss of ¥88.6 billion (www.asiapacificbusiness.com).
From the reporting term forward, the method of presenting segment information has altered. When previously businesses related to flight matters, credit card and leasing business, and retailing and distribution business were linked together and presented as Air Transport-Related Business, from this time on businesses related to flight operations is given the status of a separate business division. For the intent of formulating business strategies, businesses related to flight operations are shown separately by themselves as Airline-Related Business (www.
asiapacificbusiness.com). In international passenger business, factors such as the Iraq Conflict and the severe cases of SARS and unknown type of influenza had a major impact on demand, which fell to 80.2% of its year-earlier level in terms of revenue passengers carried, and to 84.6% in terms of revenue passenger-kilometers (www.asiapacificbusiness.com).
Given such alarming information, steps were taken to reduce slash by adjusting supply to match trends in customer demand, and various promotional campaigns were run to encourage demand, such as the “Fly JAL! Across the Ocean”, for instance, marketing campaign.
These measures attained a recovery in demand on routes to Europe, America, Hawaii, Micronesia, and Oceania, but getting back to normal in tourism demand on routes to China and Southeast Asia was slow. In consequence, revenues in JAL alone declined by ¥118.7 billion year-on-year in 2002, to ¥549.7 billion in 2004. Factors Affecting the Supply of airline travel in Japan Demand is one of the economical indicators that drive the number of potential businesses needed to be open. In other words, supply doesn’t necessarily encourage demand. But demand almost always means that supply will grow in this case also.
As it was stated earlier in domestic passenger operations, strong passenger demand could be observed, particularly among individual passengers. Such situation in turn triggered a rising supply of services in the airline industry in Japan. It is important to make a clear point at this stage. On the on hand, the demand for on international market dramatically fell because people were simply scared to fly at that time.
This has caused a number of international carriers to bankrupt and go out of business. Hence, the supply in the international sector of the airline industry has fallen dramatically since the September 11 attacks on the World Trade Center. However, the supply on the Japanese local market grew because demand has increased greatly. The factors behind such situation were the increased numbers of routes and flights that resulted from the coherence, improvements to timetables, and potent measures to promote sales, including adjustments to the fare structure and the use of e-business sales methods.
Demand in 2003 was close to its year-earlier level, with sales before taxes coming from passengers carried at 99.9% of the year 2002 figure, and revenue passenger-kilometers at 99.6%/ However, as a result of a real improvement in units prices, revenues increased by ¥39.5 billion from the previous first half, to ¥668.8 billion (Rutledge 2003). International supply represented by cargo operations was affected by slow overall supply during the first half of the fiscal year 2003.
Among the causes in the first half were a significant decrease in cargo space as the number of passenger flights was reduced owing to the SARS outbreak, and a fall in demand on Pacific routes (Alderighi and Cento 2004). In the second half of 2003, demand on China and other East Asian routes was strong, and it recovered on Pacific routes.
For the year 2003 in general, revenue ton-kilometers were 99.2% of their year-earlier level, and revenue, which was also influenced by the strength of the yen, was reduced by ¥4.2 billion from the previous year, to ¥153.0 billion. The net outcome of these developments was that the combined volume of transportation of passengers and cargo on domestic and international routes declined by 7.3% year-on-year from 2002, operating revenues were reduced by ¥101.6 billion, to ¥1,548.8 billion in 2004, and there was an operating loss of ¥72.1 billion (www.asiapacificbusiness.com ). In Airline-related business there could be observed a great decline in the number of airline passengers on international routes as a result of factors such as the SARS outbreaks, which resulted in declines in the revenues of TFK Co. , Ltd., and other subsidiaries engaged in the sale of in-flight meals (Airline Security 2004).
In contrast, sales-promotion maneuvers helped AGP Corporation to achieve a strong increase in sales to foreign airlines for the operation of additional power units for the supply of electric power to aircraft, and it also generated sharp sales in its subsidiary business: the sale of electric-power equipment and parts and food-service carts. As a result, income before taxes in this business segment totaled ¥243.7 billion, with operating income of ¥1.8 million (Watts 2004).
JALPAK Co., Ltd., which main activity is planning and creation of overseas travel products, suffered a substantial fall in revenues, particularly for travel to China and other places in Asia. The main cause was the sharp decline in demand for overseas travel triggered by events such as the SARS cases in Japan. At the same time, the revenue of JAL Tours Co., Ltd., whose main area of specialization is the planning and creation of domestic travel products, was boosted by the switch of demand away from overseas travel (Rurledge 2003).
This helped to attain healthy sales to destinations within the Japanese archipelago such as Okinawa and the Tohoku areas. The travel planning and sales business divisions reached revenues of ¥381.9 billion, and operating income of ¥3.9 billion (Rutledge 2003). The new market equilibrium for airline travel in the Japanese domestic and/or Japanese international airline industry. The slow activities of deregulation in the Japanese airline industry started in 1986. A significant step was made in February 2000, when the market became almost completely liberalized with the prohibition of regulations on ensuring a balance between supply and demand, as well as the ending of restrictions on the setting of airfares (Airline Transport Association 2003).
Nevertheless, there is still no probability for some time to come of the lifting of restrictions on the number of passenger flights at domestic hub airports, such as Tokyo’s Haneda Airport and Itami Airport in the Kansai region, which rationalize over 70% of passengers on domestic routes (Sugisaki 2002). As a result, all the airline firms have very little room to operate their businesses in an open and just way. Against this background, one may judge that neither JAL nor JAS, acting separately, had any real hope of expanding. Graph 1: Source- Sugisaki 2002.
These figures represent the Japanese airline industry market distribution illustrating the main players on the market. Characteristics of the Japanese Airline Industry The Japanese regime shaped its industry in ways completely consistent with this authority. Its national leader was government-owned Japan Airlines, a largely international carrier that was allowed to fly some of the larger domestic routes. The largest domestic operator was privately-owned ANA, which was not allowed to move in international markets (Chuvak 21).
These companies formed very high standards of service with high costs. A second privately-owned domestic-only operator was Japan Air Systems, previously known as Toa Domestic Airways, loosely connected to JAL (Japan Air Lines) but also competing with it in domestic markets. This carrier strove to keep up with the Big Two.
There were also a number of other, much smaller, domestic airlines with no international operations (Watts 2004). The distinction between international and domestic systems was so exaggerated in Japan that when there was an anticipated need for a second airport for Tokyo, it was designated an international airport and the domestic and international route systems of Japanese airline industry operators were virtually entirely separated.
