A Japan Airlines-AirAsia partnership could help JAL catch up with ANA in Southeast Asia

Japan Airlines is eagerly counting down to 01-Apr-2017, which is expected to be the date when business expansion restrictions on JAL that were put in place after its bankruptcy restructuring will be lifted. The rules are complex and contain exceptions; JAL has been able to open new service to points like Boston and San Diego and invest in Jetstar Japan, but not able to open other routes or to invest in Skymark Airlines. Recent years have been a bonanza for its rival All Nippon Airways, which had been Japan's No. 2 airline but used government support and JAL's restrictions to embark on ambitious expansion, from long haul growth to purchasing Skymark Airlines and A380s.

JAL is unlikely to engage in rapid capacity expansion. JAL is firmly focused on maintaining high airline margins while replicating ANA's group strategy of non-cyclical ground-based businesses (flight training, maintenance, etc.). One exception however is Southeast Asia, where ANA has been growing. Japan has become politically closer to Southeast Asia and commercially too, with tourism influxes.

Yet there is still a hesitation when it comes to organic growth. One solution could be a partnership with AirAsia, which would give JAL access to a wide network and growing business segment. In return, JAL could even invest in AirAsia Japan, which is facing start-up delays and could benefit from parental help. JAL would join ANA in having two LCCs; JAL is an investor in Jetstar Japan, whose owner Jetstar is a partial rival to AirAsia. JAL-AirAsia would combine two of ANA's main foes: AirAsia Japan, which was a JV between ANA and AirAsia, was dissolved in bitter disagreement.