oneworld won JAL. How do JAL’s cutbacks affect the alliance?

Now that JAL's best friend, the Japanese government is less able to provide overt support, in light of competitor All Nippon Airways' pleas for equal treatment, the atmosphere is decidedly chilly. ANA President, Shinichiro Ito, this week stated that "public money was injected to preserve a (JAL) network necessary for the Japanese people ... investments need to be examined to determine what impact they would have on competitors".

But the depth of the service cuts announced this week did at least show a serious intention to give the wheel a push, despite some last minute push and shove between JAL management, ETIC (Japan's funding mechanism) and other creditors. The reductions are not unexpected and still reasonably bold; it will be intriguing to see how JAL's oneworld partners respond - and the extent to which they have been consulted (probably not). Meanwhile however, cutbacks at Japan's domestic airports are raising hackles among powerful regional political forces, perhaps presaging more political intervention into JAL's restructuring.

The cutbacks: capacity down 40% internationally

JALwill discontinue services on 15 international routes with 86 weekly services, as well as on 30 domestic routes with a maximum of 58 daily services (excluding seasonally-operated flights). In addition to the changes made since FY2009, JAL will end operations on 28 international routes, with the closure of 11 overseas bases.

Domestically, 50 routes will be terminated, along with eight offices. International and domestic passenger capacity will, as a result of the cuts, be reduced by 40% and 30% respectively compared with levels in FY2008;

European implications of JAL's cutbacks

The main implications of JAL's announcement fall on European routes; service will be terminated from Tokyo to Amsterdam, Milan and Rome.

This leaves the European routes of:

• London, which JAL shares with three other carriers, including its alliance partner British Airways;
• Frankfurt, where it faces competition from two Star members and with little opportunity for alliance feed;
• Paris, where is it outgunned by Air France and SkyTeam - yet the two carriers are close and have for some time enjoyed a very successful codeshare, allowing good access for JAL into continental Europe; and
• Moscow, shared with Skyteam member Aeroflot.

Nonstop European Service from Tokyo/Osaka/Nagoya-Europe

Tokyo	Carriers	Osaka	Carriers	Nagoya	Carriers
AMS	KL	AMS	KL	FRA	LH
CAI	MS	CAI	MS	HEL	AY
CPH	SK	FRA	LH
FRA	JL,NH,LH	HEL	AY
HEL	AY	IST	TK
IST	TK	LXR	MS
LON	JL,BA,NH,VS	PAR	AF
MIL	AZ	ROM	AZ
MOW	JL,SU
MUC	LH	DXB	EK
PAR	JL,AF
ROM	AZ
VIE	OS
ZRH	LX
AUH	EY
DXB	EK

Source: OAG

By abandoning non-stop Amsterdam, Milan and Rome service, JAL allows Skyteam members a clean sweep in those markets, with six other European points served by Star members.

Also, both Etihad and Emirates offer considerable connections over their respective hubs, which provides a vast number of one-stop opportunities to many other points, large and small. Then of course so does Cathay Pacific.

Finnair's greatly enhanced role?

One of the oneworld airlines which mostly remained quietly in the background (another was Cathay Pacific) when the public battle to save JAL was raging was: Finnair.

The Finnish flag makes its meal from its ideal hub position just south of the North Pole, straddling the main air routes from north Asia to Europe. Anything that reduced JAL's services and passed some crumbs on to other oneworld members was always going to be good for Finnair.

And - surprise - Finnair flies to all three Japanese gateways, connecting each of them one-stop to all of its European points.

Ironically therefore, Finnair's main European competitor for Japanese travellers may now be Air France, by virtue of its close relationship with JAL - although Star's Lufthansa is ever-present. And there will be no love lost between Finnair and its oneworld partner, Cathay Pacific.

Thus Finnair is the only European airline carrying the alliance flag overseas from the major industrial centre, of Osaka. Otherwise there is much greater market penetration at that city by Skyteam and Star - along with Emirates.

Likewise, at Nagoya's new, expensive airport, Finnair is the sole European oneworld carrier to operate now, although it must compete there with Lufthansa for European traffic. But there is - as yet - no service to be offered on Japanese carriers. (Nagoya's powerbrokers have expressed their dissatisfaction in no uncertain terms and will undoubtedly be going to great lengths to convince ANA to enter with its own metal, just as Lufthansa will be assuring it that it can do the job for Star full well.)

The Americas: smaller cuts

Two destinations in the Americas are to be cut; Kona, Hawaii and Sao Paulo, Brazil. Neither of these cuts will bring big changes and each had been heavy loss makers, but of the 16 cities with nonstop service to Tokyo, oneworld is represented in 7, and in 6 of those gateways there is competition from SkyTeam, Star or both.

The only city served solely by oneworld is Dallas. With the additional elimination of 30 domestic routes, the possibilities of connections within Japan are further constrained.

But JAL has also stated that it will reduce frequencies from Tokyo to Seoul, Guam, Beijing, Hong Kong and Taipei.

Nagoya's sole nonstop link to the Americas is a Delta service to Detroit and Osaka is linked by United directly to San Francisco, again leaving oneworld unrepresented.

Within Asia: Osaka loses most - again

Osaka will be hard hit within the region as flights are terminated to Bali, Guam, Hong Kong, Guangzhou and Beijing leaving those markets primarily served by other alliances.

Kansai routes into Asia
To	Carrier
DPS	GA
GUM	NW,CO,KE
HKG	NH,CX,AI
CAN	CZ
BJS	CA
Source: OAG

And Nagoya will lose Bangkok and Guangzhou leaving Thai (Star) and China Southern (SkyTeam) as the operators.

Even without further reductions, the number or regional connections available via Tokyo and facilitated by JAL is limited.

Many onward connections are either inaccessible or undesirable. For instance, from Tokyo to Manila, JAL operates at 0930 and 1835. The transpacific arrivals tend to be early to mid-afternoon and the Europeans arrive in the morning. From Helsinki, Finnair's 0855 arrival is ill-timed for onwards travel as is BA's 0905 touchdown. Even JAL's own LHR flight arrives at 1500; requiring a 3.35 hour layover.

By contrast, the Delta departure at 1900 serves SkyTeam flights from all US gateways and probably accommodates the 1800 Air France arrival from Paris.

A need for oneworld carriers to step up and plug the gaps quickly

oneworld certainly is better served by having JAL's continued presence and would have taken a mighty hit had the carrier shifted its affiliation.

However, the Japanese flag carrier's contribution to a global network is being continuously diminished and its ongoing instability will make schedule adjustments to accommodate partners a low priority.

This is a moving picture and, just as ANA sees new opportunities for expansion into the gaps left by JAL's withdrawal, so other oneworld airlines will see possibilities where they didn't exist before - for example offering their own metal upon which JAL can return to non-stop routes. But they will not be the only ones.

And, as JAL's domestic network is also increasingly cramped, so ANA's partners will find more passengers and freight moving across to them. JAL's alliance partners came forward with a lot of promises when they were fighting to retain it as a member; it will be in their own interests, as well as JAL's to be prompt in stepping forward.

The genuine, and perhaps unique, opportunities offered by JAL's contraction will not be short of opportunist new entry.