While Japan Airlines’ cargo and logistics business is doing well, the carrier is also keen to grow it through various ways so that the company can benefit from the recovering air freight market.
In an interview with Asia Cargo News during the 2017 China Air Cargo Summit in Tianjin, Hiroo Iwakoshi, executive officer of cargo and mail at Japan Airlines, says that the airline’s international cargo performance in 2017 has been quite good, and that the company expects revenue from cargo and logistics overall, including warehouse activities at Narita International Airport and Kansai International Airport, to exceed ¥100 billion (US$882 million) this financial year.
“All routes and regions have been good, but the best performance came from places like Japan, China, Thailand and Vietnam,” Iwakoshi says. “The European market has also been doing well because of the shifting shipping alliances, and we have been carrying some cargo that usually does not use air from Europe to Japan. In the first half of fiscal year 2017, from April 1 to September 30, our volume of international cargo increased by about 20% year-on-year, while domestic cargo was relatively stable.”
As part of Japan Airlines’ recovery from bankruptcy, JAL Cargo terminated all of its Boeing 747 and 767 freighter flights towards the end of 2010. According to Iwakoshi, that has presented the carrier with challenges that it still faces today.
“After we suspended freighter operations, we lost some market share in China and the US, for example,” he says. “We need to expand our capacity on these routes, but unfortunately our business now relies on passenger aircraft only, so now we’re negotiating with other airlines, either ACMI carriers or traditional airlines, for additional space on those routes.”
The other aspect concerns the mentality of the airline’s employees. After exiting bankruptcy, the company has been concentrating on maximizing profit and the cargo division has only been focusing on filling the bellies of its passenger aircraft instead of expanding or working with other airlines.
“We haven’t really been thinking about marketing,” says Iwakoshi. “Playing safe was important during the restructuring period, but on the other hand, we lost some customers. That means they no longer understand who we are and what we do. We have a long history in international air cargo, having started in 1954. From now on, we can use that experience to expand again. That’s why we’re now trying to change our mindset but that’s quite difficult.”
The Japanese government is aiming to attract 40 million visitors annually by 2020 and 60 million by 2030. In line with those goals, Japan Airlines currently has 18 Airbus A350-900s and 13 A350-1000s on order, as well as more Boeing 787-8s and 787-9s.
“We would like more but the number of pilots is limited, so the focus is on increasing passenger aircraft first,” says Iwakoshi. “If we operate freighters again, I’d say a minimum of 10 would be needed. That would also require a large number of pilots but it is not possible to achieve that at this point. That’s why we don’t have any plans to operate freighters until at least 2020. After that, I’m not sure yet.”
According to Iwakoshi, the Japanese government has now approved cargo charters, so JAL Cargo can hire and use freighters from ACMI operators to address any surge in demand on a particular route.
“This peak season, for example, we operated nine charters between Kansai and Chicago using Western Global Airlines,” he says. “That has been quite successful but I’m not sure how it will be in the long term.”
In the meantime, there has been some expansion in the form of a few new routes. In September 2017, JAL launched non-stop flights from Narita to Melbourne with a 787-8 and to Kona with a 767-300ER, and in October the airline launched a second daily flight between Haneda and Heathrow with a 787-8.
“There’s almost no cargo between Narita and Kona,” Iwakoshi says. “Melbourne has been quite good, with perishables out of Melbourne and some shipments from the US down to Australia. As for London, we suspended our flight between Narita and Paris, so our capacity to Europe is the same. Performance in both directions has been quite good.”
While Narita Airport is still JAL’s primary international departure origin and is where most forwarders have their own warehouse facilities, Haneda is also home to a substantial JAL operation where, on top of domestic flights, the airline flies to destinations such as Bangkok, Beijing, Ho Chi Minh City, Hong Kong, London, New York, Paris, Shanghai and Singapore.
“It’s quite costly to have operations at both airports, because we have to build up the cargo at Narita, hire trucks to transport it to Haneda, and pay the handling fees at Haneda,” says Iwakoshi. “We also do that in the opposite direction. This year has been quite good for cargo so we increased our rates a bit, but rates have been going up and down for a long time based on supply and demand. It’s difficult to solve the situation.”
One way to alleviate the challenge is to save time and costs by shifting to electronic and paperless processes, but that is still proving to be easier said than done.
“The use of electronic Air Waybills has not been increasing much in Japan, to be honest,” Iwakoshi says. “There is still so much paperwork. Maybe it’s because there is no leader in the Japanese market. In Hong Kong, for example, you have Cathay with a huge market share and they have insisted on the use of eAWBs. In Japan, we have JAL, ANA and NCA. In this respect, we should cooperate because it’s better for everyone. We’re discussing with ANA the possibility of using eAWBs on domestic routes starting from 2019.”
JAL is also trying to modernize its cargo-handling operations.
“I joined the company in 1986 and since then, the process has remained pretty much the same,” says Iwakoshi. “We’re now introducing robotic equipment in the warehouses and at our head office to reduce the workload. We’re also thinking about rolling out automatic data readers in two years’ time.”
For the year ahead, Iwakoshi is quite optimistic about cargo demand, particularly given the performance of several industries in which Japan is a major player.
“The semiconductor business is doing well,” he says. “While the machinery itself can only be carried on freighter aircraft, the parts can be carried in our bellies to places like Korea, Taiwan and China. Another growing sector is LCD screens and panels. According to our customers, that trend will continue until the first half of next year. In 2018, some Japanese carmakers will be introducing new models in Europe and the US, so spare part exports to these markets will also be quite strong.”
At the same time, e-commerce is booming, not just between China and Japan, but also between Japan and the US and between China and the US, which places JAL in an advantageous position to benefit from the additional traffic.
“Geographically, Japan is right in the centre so I expect this trend to continue,” Iwakoshi says. “We don’t have our own solution for e-commerce, so we cooperate with the forwarders, post offices and the integrators to carry these shipments. For example, Japan Post is one of our biggest customers and they’ve been growing their express mail service, so we reserve more space for these shipments.”
Overall, Iwakoshi says that Japan Airlines’ cargo business is looking solid and will continue to be a crucial part of the company.
“The important thing is to meet our customers’ needs, not just to carry a lot of cargo, because customer satisfaction and service quality are more important for JAL Cargo,” he says. “That is a key policy for us, rather than just competing with other airlines.”
By Jeffrey Lee
Asia Cargo News | Tianjin