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Japan Airlines is proceeding with plans for what analysts expect to be the second-largest public listing this year after Facebook, despite a recent move by rival All Nippon Airways to raise capital, according to its president.
Yoshiharu Ueki said JAL’s plans to relist – marking the final stage of its emergence from Japan’s largest non-financial bankruptcy – would not be impacted by ANA’s decision earlier this month to raise up to Y211bn ($2.7bn) in capital by issuing new shares.
“We are proceeding as scheduled,” Mr Ueki said in an interview. “Putting aside any questions of possible impact … we are proceeding with our preparations as before.”
Mr Ueki, a career pilot who was appointed president in February, refused to outline the timing of the listing or how much money the carrier hopes to raise.
“If I provided the scoop on that, I would lose a year’s salary,” Mr Ueki joked.
Analysts expect JAL will try to raise somewhere in the region of Y600bn but some experts believe investors could have less appetite for Japanese aviation shares in the wake of ANA’s fundraising.
JAL entered bankruptcy in 2010 after the ruling Democratic party decided to end government bailouts for the struggling carrier which was once the pride of the nation. Over the past two years, it has cut its fleet size and slashed personnel costs, helping it to emerge as a much stronger airline.
JAL posted better-than expected net profits of Y186.6bn in the year that ended in March, on revenues of Y1.2tn. However, for the current year through March 2013, the airline is forecasting a 30 per cent decline in net profits to Y130bn on relatively flat revenues of Y1.2tn, based on expectations of higher fuel costs and a stronger dollar.
Mr Ueki stressed that JAL had managed a quick turnround but that it faced challenges, including expected increased competition as more landing slots become available at Narita and Haneda – the two main airports that serve Tokyo.
Analysts have warned that JAL and ANA are also likely to face tougher competition as a handful of new low-cost carriers emerge in Japan. Mr Ueki said 80 per cent of JAL’s domestic revenues come from flights serving Itami airport outside Osaka and Haneda, where low-cost carriers have a very limited ability to get landing slots.
“The impact of LCCs [low cost carriers] in the Japanese domestic market is very different I think from the effect it might have in other nations … the effects of LCCs in Japan are going to be very limited.”
Mr Ueki said JAL had seen “almost no impact” on routes where it competes directly with budget carriers, mainly because the new airlines are generating new demand.
Asked about the challenges facing the aviation industry amid the challenging global economic environment, Mr Ueki said JAL had, for example, seen “no big impact” on passenger travel to Europe.
He said JAL wanted to develop its business in China, but that it was constrained by the difficulty obtaining landing slots at Beijing and Shanghai. The former 747 pilot said he would like to target airports in second tier Chinese cities, but that JAL would only be in a position to do so after it had further reduced its “unit” costs, meaning the cost associated with flying each passenger.
Asked if Japan could sustain two major carriers, Mr Ueki said it was important to ask “what would be best for the people” of Japan, adding that a merger of JAL and ANA would result in only one global airline alliance serving Japan.
“In the past, there was only one international airline in Japan and that was ourselves JAL. But that situation was the beginning of our long flight to eventual crash,” said Mr Ueki, explaining that JAL would benefit from healthy competition.
Additional reporting by Michiyo Nakamoto