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Friday, October 16, 2009

Rumor: JAL to codeshare with Asian low-cost carriers?

There are more rumors every day. This time it's about another possible Japan Airlines "tie-up" with low-cost carriers from Asia.

According to the Asahi Daily, JAL is seeking code-sharing partnership with low-cost carriers in Asia to replace its own operation to resort destinations such as Hawaii, Thailand and Indonesia. As these flights are in general less profitable. This will allow JAL to focus on the more profitable routes to North America, Europe and China and also reduce the personnel needed.

Currently JAL operated resort flights by its subsidiary JALways, which has a lower operating costs than JAL. There were reports earlier suggesting JAL may sell part of JALways share but then now they might be reconsidering the sale because of the recent debt wavier idea. It is unclear whether the code-sharing agreements with low-cost carrier is to completely replace JALways operations or JAL is just going to scale back JALways operation.

The report also mentions Narita has limited slots and is very difficult for new carriers, e.g. the low-cost carriers, to enter the market right now. However, it will be a completely different story if they partner with JAL. There will be plenty of slots open for them (probably from the flights JAL suspends).

This might be a game changer for the Japan aviation market. Till now it is still dominated by JAL and ANA, especially in Tokyo, because of the slot limitation. It might even do some harm to ANA's bottom line if not done carefully.

But will people be satisfied with the service quality of the low-cost carriers? One of the major reasons people choose to fly on JAL is its consistently high standard of service. Flying to those resort destinations from Tokyo is NOT a short ride. I would rather fly on a quality airlines than a budget carrier. If you were an AA customer who want to fly to Bangkok from Los Angeles. If the price is the same, would you choose to fly LAX-NRT-BKK on JAL (LAX-NRT on either AA or JL, NRT-BKK operated by budget carrier) or LAX-HKG-BKK on CX? Yes this will save costs, but it will also drive some customers away, especially the ones who are willing to pay an extra dime for their comfort.

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