JAL tries to upgrade scaled-back cargo ops

Having terminated its cargo flights at the end of October, Japan Airlines is seeking to enhance the profitability of its remaining cargo business, according to the Nikkei Report.

The airline, which is undergoing court-led rehabilitation, decided to discontinue cargo flights to revamp its money-losing freight operations. It now intends to use the holds of passenger aircraft to carry cargo as well as offer freight services on a lease basis.

JAL started operating cargo flights in 1959. Its cargo routes included runs between Chicago and Narita, a link that carries a large amount of auto parts. But the global financial crisis caused cargo demand to plummet. For the year through March,

JAL's cargo business incurred a US$119.94 million loss.

After talks to merge its freight operations with Nippon Cargo Airlines, a subsidiary of Nippon Yusen KK, fell through, JAL decided to terminate its cargo flights at the end of October. The company, which owns five of its nine freight aircraft, will try to find buyers for them.

Meanwhile, air cargo demand is recovering. Due to rapidly growing shipments of LCD materials and components to Taiwan and other Asian markets, the volume of air cargo from Japan logged a year-on-year increase for 11 straight months through September.

But the capacity of air cargo from Japan is said to have shrunk about 10 percent since JAL's withdrawal from cargo flight services. In response to a tighter supply-demand balance, other service providers, including All Nippon Airways started raising their prices this autumn.

This prompted some at JAL to lament lost opportunities.

JAL is now looking to raise the efficiency of its cargo operations that use the holds of passenger planes.

"We want to transport the types of cargo that improve profitability," said executive officer Kunio Hirata.

Passenger aircraft are unable to carry large items and ending its cargo flights reduced JAL's overall cargo capacity by 30 percent. So JAL hopes to transport more value-added items, like medicines and microchips.

It is introducing special containers for such items and touting its years of cargo experience, thus its ability to transport sensitive items, to try to convince customers to choose JAL.

Though the airline has withdrawn from cargo flight services, Hirata said the company would continue such services on a lease contract for routes from which it expects to profit. He said JAL could offer the same services as before by leasing aircraft and crew.

Japanese carriers rarely offer services in this manner.

The company has already signed a contract with US air cargo carrier ABX Air, which began this month operating six cargo flights a week for JAL on a route linking Narita, Kansai and Shanghai.

But with its rivals also focusing on value-added items, JAL will not find it easy to restore its cargo operations.

Meanwhile, struggling Japan Airlines reached a basic agreement with its major creditor banks on new loans of US$3.42 billion, moving another step toward reconstruction as it undergoes court-administered rehabilitation, Kyodo News reported.

The airline's rehabilitation plan is expected to gain approval from the Tokyo District Court by the end of this month as banks and other creditors are almost certain to give the nod to the plan through postal voting.

But the airline's management will likely face continuing issues such as boosting its financial base through increasing capital and handling the forced dismissal of its pilots and cabin attendants after its voluntary retirement programme failed to meet its job reduction target.

After reaching the basic accord on the new loan with the banks, including the governmental Development Bank of Japan, the airline is expected to receive the loans by the end of March next year, the report said.
(Source:www.cargonewsasia.com)