Tokyo Haneda Airport

All Nippon Airways confident due to 2011 financial success but there are changes ahead

Japan's All Nippon Airways (ANA) has achieved the impressive accomplishment of posting a record profit not only in the current economic environment but in the year immediately after Japan’s Mar-2011 devastating earthquake and tsunami. ANA's JPY97 billion (USD1.2 billion) operating profit came on the back of international growth and early introduction of cost-cutting measures. While ANA may enjoy this momentum for another year or two, its medium- and long-term strategy is far from certain and could challenge the ability to repeat ANA's recent gains.

The Japanese market is about to undergo a significant structural shift with the introduction of LCCs that will reshape domestic and short-haul regional flights. ANA is fully aware of new LCCs – its subsidiary Peach was the first to market and ANA will shortly co-launch AirAsia Japan – its management plan has seemingly not taken the carriers into full consideration. Rival Japan Airlines is planning to decrease its exposure to the domestic market, already lower than at ANA, while ANA is planning to grow its LCC-exposed domestic network.

History suggests ANA's domestic strategy is in substantial need of revision.

Asia Pacific airports move up the ranks in 2011, with Beijing this year to overtake Atlanta

The rankings of the world’s busiest airports for 2011 show key developments and lasting changes in global aviation, although the world’s busiest airport by total passenger movements, Atlanta Hartsfield-Jackson International Airport, continued to hold off Beijing, the world’s second busiest airport, in 2011, according to Airports Council International (ACI). It is, however, expected that Beijing, driven by exponential GDP growth, will overtake Atlanta in 2012, ending the airport's 14-year reign in the top spot.

While Beijing Capital is the dominant airport in China, it is on track to become be the world’s busiest hub by the end of this decade, leaving London and even ambitious Dubai in its wake. And new developments will ensure the city of Beijing has an airport in the top spot: its new airport at Daxing, south of Beijing, could have up to nine runways and ultimate capacity to handle around 370,000 passengers per day, or a staggering 135 million passengers p/a. This would increase capacity at Beijing area airports to around 220 million p/a – almost a quarter of a billion passengers.

MAS will achieve its targeted 12% capacity reduction by February, to the delight of Gulf carriers

Gulf carriers and AirAsia will likely emerge as the main beneficiaries of the network restructuring at Malaysia Airlines (MAS). The Malaysian flag carrier has selected several routes to discontinue by early next month, resulting in a 12% reduction in system-wide capacity as it begins implementing its new business plan.

JAL's new 787 Dreamliner routes to Moscow and New Delhi allow it to trim capacity on thin flights

Airlines can deploy the B787 in broadly two ways: the high-profile option of opening new long-haul routes, and the less exciting, but often more practical, replacement of older aircraft, B767s in particular. It is in this latter category that fit Japan Airlines' (JAL) new B787 destinations of Moscow and New Delhi. JAL's deployment of the B787 will see the aircraft largely replace the B777-200ERs that currently serve the routes, allowing JAL to trim capacity as its B787s seat 186 while its B777-200ERs seat 245. Moscow and New Delhi may have been better suited to be served by the B767, but JAL and many airlines never planned to fit out B767s for long-haul sectors. JAL will also deploy its B787 to Beijing from Tokyo Haneda, following All Nippon Airways (ANA).

Japan’s homegrown independent LCC, Skymark Airlines, upgrades full-year profit forecast

Skymark Airlines, Japan’s third largest carrier, expects its profitable run to continue in the current fiscal year through Mar-2012 with the carrier, like Japan Airlines, upwardly revising its operating profit forecast for the full year. The LCC has revised its profit forecast upward by 21% to JPY17 billion (USD221.2 million) after reporting a 55% year-on-year increase in operating profit in the six months ended 30-Sep-2011, amid a positive outlook for the current quarter.

2011 has been a busy year for Skymark Airlines, which earlier in the year placed a landmark order for six A380s, as part of its ambitious growth plans, moving it away from the small (and successful) domestic quasi-LCC model to a long-haul international carrier. The carrier’s expansion strategy is unique in that it will operate two very different models. Long-haul international services will utilise A380 equipment configured in a low-density seat configuration. Domestic and short-haul services will continue to be operated with economy-only B737 aircraft and no-frills service, with the carrier recently launching its 'Narita Shuttle' service as part of its domestic expansion.

Australia-Japan open skies agreement fails to gain traction in shrinking market

There is unlikely to be any short-term change to Australia-Japan air services following an open skies agreement between the two countries that gives Australian carriers access to Tokyo Haneda airport and fifth-freedom traffic rights. Qantas serves Tokyo Narita and has been given nonviable midnight slots at Haneda, and furthermore its low-cost arm Jetstar – the largest operator in the market – is establishing a subsidiary at Narita. The liberalisation comes as the Australia-Japan market continues to shrink, with traffic down 56% from its 2005 peak, making Japan Australia’s largest shrinking market.

The Australian government announced with great fanfare the open skies agreement with Japan, proclaiming it “landmark”. Japan last month concluded an open skies agreement with Canada and is working on a similar agreement with Taiwan.