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Tuesday, February 14, 2012

[UPDATED] JAL Mid-Term Management Plan for FY2012-2016

[UPDATE: Added more details on the plan not covered by the summarized press release]

Nikkei broke the news two days ago and revealed more details on Japan Airlines' (JAL) mid-term management plan which is due to announce today (Feb 15). Today JAL has finally announced the plan and confirmed some of the rumors including extra 787 orders and launch of new routes to San Diego (SAN) and Helsinki (HEL). With this new plan, JAL aims to establish high profitability structure to reach their next stage of growth.

The three main highlights of the plan are:
  • Launch new non-stop service to Boston in April 2012, to San Diego in December 2012, and Helsinki in March 2013 with 787-8
  • Purchasing 20 787-9s and 25 787-8s
  • Enhance the "JAL Brand" with product innovation and high quality of service
Below are more details of how JAL plans to implement these:

JAL Brand Enhancement
In order to distinguish JAL from the new low-cost carriers which are due to start service later this year, JAL will further enhance its "JAL Brand" to provide high quality full-service flights with a comprehensive international and domestic network. 

JAL will focus on "high quality, full services" for international flights and "convenience and simplicity" for domestic flights. Due to strong demand in the North America, European and Southeast Asia markets, JAL will allocate resources on these operations. Which means we can expect the further growth and expansion to come from these markets. 

International Services
  • Proactively refurbish in-flight seats of aircraft used on mid and long haul international routes
  • By FY2014, will have products more advanced than competitors
  • Will enhance in-flight comfort in flights to North America, Europe, SE Asia and Honolulu with 787-8 and 787-9
  • Upgrade existing aircraft such as by installing full-flat seats in business class
  • Will progressively replace IFE with the next generation IFE
  • Continue to improve in-flight catering in both business and economy classes based on customers' preferences
  • New catering facility in HND 
  • Enhance quality control of in-flight meals for flights TO Japan! (about time!!!)
  • JAL will expand HND international lounge in 2014
  • Renewal at some overseas lounges
Domestic Services
  • Introduce "JAL SmartStyle" service to consistently provide "convenient and simple" services to customers and provide services focused on "effective use of travel time" and "shorter waiting times at airports"
  • Periodically refurbish in-flight seats of aircraft
  • Domestic First Class seats on all 777-200 used on HND-CTS/ITM/FUK. (Aren't they retiring those soon? :o Refer to later section)
  • Will install Class J seats on ALL 737-800s in FY2012
  • Introduce simple and easy-to-understand fare system which is flexible enough to respond to demand trends and of course to maximize revenue.
Website Improvements
JAL will enhance the existing website to launch a more convenient communication tools and easy to look up information.

Mileage Program Enhancement
  • Set flexible exchangable mileage according to supply and demand
  • Improve usability of award seats
  • Increase opportunities for customers to accumulate mileage to make it easier to accumulate
  • Enhance redemption opportunities to make it easier to use the miles on non-flight awards
Plane Orders
JAL will invest around 489 billion yen to upgrade their fleet in the next 5 years, including placing 20 orders of the larger version 787-9, which consists of 10 orders converted from existing 787-8 orders and 10 new orders. 787-9 deliveries will start in FY2015 and JAL plans to deploy them on medium and long haul international routes. So JAL will have a total of 45 firm orders 787s with an option of 20 more.

Fleet and Expenditure Plan
  • Introduce 29 787s, 9 737-800s, and others between FY2012 and FY2016 (So they did order extra 73H? There are only 5 unfilled orders of 73H according to Boeing website)
  • Retire MD-90 in FY2012
  • Retire aging 777s and 767s
  • Expect to have 33 787s by end of FY2016
  • Expect to have 222 aircraft by end of FY2016 with 83 in international fleet and 139 in domestic fleet. This is an increase from the 212 aircraft (72 in international and 140 in domestic fleets) JAL has by the end of FY2011.
  • Cabin refurbishment
  • System upgrade especially on Global Distribution Systems
International Network Expansion
JAL will expand its international network once again FY2012. 
  • Tokyo Narita - Boston 787 service will start from April 22 2012 with 4 weekly service. Then expand to daily service from June 1 2012
  • Tokyo Narita - San Diego 787 service will start from December 2012 with 4 weekly service. Then expand to daily service from March 2013
  • Tokyo Narita - Helsinki 787 service will start from March 2013 with 4 weekly service. Then expand to daily service in first half of FY2013
  • Frequency increase on Narita - Singapore from 1 daily to 2 daily services from October 28 2012. Together with HND-SIN, JAL will provide 3 daily service between Tokyo and Singapore and all of them will be operated with 787-8
  • Frequency increase on Narita - Delhi from 5 weekly to daily service from December 2012. 787 introduction in late April 2012 (4x 787 1x 772)
  • Introduction of 787-8 on Haneda - Beijing and Narita - Moscow in late April
  • Product improvements on Tokyo - Bangkok route. Shell Flat seats will be used on existing flights when JAL upgrades BKK flights to 777-200ER services. JAL will deploy 787-8 on HND-BKK and NRT-BKK from Feb 2013
Beyond FY2012, JAL will take advantage of the upcoming HND and NRT expansion in FY2014 to provide daytime, late night and early morning flights on major routes to North America, Europe, and Asia. You can expect to see daytime long haul flights from HND to the US and Europe and extra HND daytime flights to SE Asia from FY2014. JAL will also increase the seat capacity on Honolulu flights and improves their business class seating!

JAL will also pursue new business alliances to improve onward connection network to US East and West Coasts, Latin America, within Europe, and to Middle East, Africa, within China and in Asia.
Domestic Network
JAL will make use of the regional jets to provide highly convenient network around Tokyo Haneda and Osaka Itami
  • Increase flights by utilizing early morning slots at HND
  • Enhance HND status as a hub linking regional Japanese cities and overseas by utilizing the increase in slots in FY2013
  • Downsizing to smaller aircraft due to change in business environments caused by fierce competitions from LCCs and Shinkansen!
  • Establish a new operating company in KIX and ITM in FY2012
  • Seek further deregulation and promote expansion of services via ITM
  • Will leverage Jetstar Japan to compliment JAL network
  • JEX will continue to operate 737-800 and J-AIR to operate regional jets in a nationwide network
  • Retire large aircraft Boeing 777-200
  • Retire MD90 in FY2012
  • Large size aircraft proportion will decrease while mid-sized and smaller aircraft proportion will increase in domestic network.
  • JTA will reform its structure and downsize its fleet from 15 to 12 aircraft in FY2012
  • RAC and JAC who have 5 and 22 planes respectively will maintain the current number of aircraft
Cost Savings
JAL will improve cost efficiency to achieve an additional 50 billion yen of cost improvement by the end of FY2016.

Safety Initiatives
Safety is always the top priority and JAL will further reinforce safety operations through comprehensive training and system to preclude sources of problems beforehand.

Management
Adopt a divisional profitability management system to achieve high level of productivity and profitability.

HR Development
JAL has defined a set of criteria for the role model of an ideal JAL employee and will launch training program to develop professionals capable of delivering the highest levels of safety and service.

Management Target
1. Flight Safety!
2. Provide unparalleled services and to achieve "Customer Satisfaction No. 1" by FY2016
3. Establish sufficient profitability and financial stability levels by achieving more than 10% operating margin for 5 consecutive years and more than 50% equity ration in FY2016.

For more details on JAL mid-term management plan, you can refer to JAL press release (Japanese, English)


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