Japan's StarFlyer, struggling to expand its niche, will reduce its fleet and receive new management

One of Japan's smaller carriers, StarFlyer is finding that being boutique does not imply versatility. The carrier in just a year has swung from slight profits to a negative 10% operating margin, spearheading the resignation of its president and cutting the all-A320 fleet from 11 to nine. Weighing the carrier down, besides foreign exchange, was a drastically unsuccessful foray into the international market with a Kitakyushu-Busan service that linked two secondary cities with limited demand and too high a cost base to stimulate demand.

StarFlyer has strengths. It retains the fourth-largest slot pool at Tokyo Haneda and sees healthy codeshare bookings from All Nippon Airways, which also owns part of the carrier, a measure likely to support ANA's position relative to rival Japan Airlines. It is possible to address past performance, and a restructuring plan intends to do so. But the future will pose further challenges. Shorter routes are being impacted by LCCs, and StarFlyer has ended Fukuoka-Osaka Kansai services. Skymark's forthcoming all-premium A330 service will deliver better comfort at lower prices, which it can sustain with a cost base half that of StarFlyer and ANA. That low cost base is the critical ingredient giving Skymark expansion opportunities. The restricted nature of Haneda grants security and, likely, a future for StarFlyer. But expansion opportunities also look restricted, possibly confining StarFlyer to its niche and ultimately see the carrier lose relevance.