Japan Airlines (JAL) to relist shares on Tokyo Exchange amid growth but significant challenges

Plans by Japan Airlines (JAL) to relist its shares on the Tokyo Exchange come as the carrier is in its strongest position in recent history but faces a monumental structural shift in its market following the entrance of three new low-cost carriers. LCCs for much of the last decade accounted for approximately 5% of capacity in the lucrative Japanese domestic market but in Oct-2012 LCCs will represent nearly 19%. Preliminary indications show that incumbent carriers are not adequately prepared to respond to one of the largest changes in Japan's aviation history.

JAL is in a stronger position than competitor and larger carrier All Nippon Airways (ANA) due to JAL's bankruptcy re-organisation that saw sweeping changes in reducing headcount, aircraft and unprofitable routes. While ANA and JAL plan to rapidly grow flights in the under-served international market, there is little thought to substantially change the domestic market that will be engulfed by LCCs. With domestic services already lacking efficiency through low aircraft utilisation rates and load factors, legacy carriers will be in for a shakeup.