Airline Leader Interview ZIPAIR Tokyo CEO Yasuhiro Fukada

Transcript

Adrian Schofield:I'm very pleased to be joined this morning by ZIPAIR CEO Yasuhiro Fukada. As many— as some of you might know, ZIPAIR is a long-haul low-cost carrier subsidiary of the Japan Airlines Group with a very interesting model, and Yasuhiro has kindly agreed to talk to us about the carrier's business model, growth plans, and some innovative products that you may have seen at the booth outside. So, Yasuhiro, welcome, and thank you for coming all this way to speak to us at CAPA.

Yasuhiro Fukada:Yeah, thank you for inviting me.

Adrian Schofield:So just to start off and to set the scene, could you tell us a bit about your business model and what kind of customers that you're targeting with ZIPAIR?

Yasuhiro Fukada:Okay, so actually though, our business model concept is starting in 2018 before COVID Because as you know, last time, maybe 15 years ago, Japan Airlines have experienced bankruptcy, right? So reviving back to the market, so we learned so much about that, especially for the international routes. So that at the time when the president of Japan Airlines ordered me to that totally new concept airlines. It means something that, as you know, full-service carriers, all the air prices going up, definitely. So we do like to develop the new market, especially for the younger generations, including Gen Z or Gen Alpha or something, right? So we collected all the information to starting all the business model. So it should be just very, very, very reasonable prices. To affordable for the, especially for younger generations. And also, we do like to, we choose to suggest all the services to be optioned. Customer can choose everything they need. Of course, they can buy. They don't need, no need to buy. This is very important thing. I mean that we can covering all the airfares. to covering the operational cost of the flight. It means maybe profit we can make come from other options both. This is very, very important. And also at that time already internet is more already popular for the, especially for younger generations. It means Gen Z, as you know, Gen Z. No internet, no life, right? So it means, so we already decided to, especially for the, this airlines, should be very concentrated on the, this connectivity and also the payment. This is very important area. So because they can buy anything through the any means of the payment forms.

Adrian Schofield:Yeah.

Yasuhiro Fukada:This is very important. And so we already decided to introduce Starlink at the time of 2022, 4 years something. But as you know, at the time, COVID, right? So we just waiting for the development of the STC for introducing to the 787. So last January, we starting to install the Starlink. Right now, we have only the 8 fleets.

Adrian Schofield:Wow.

Yasuhiro Fukada:All the 8 fleets completely installed Starlink. Our customers can enjoy the high-speed internet even though any classes, free internet, no charging at all. This is very important. I mean that maybe right now our customers can enjoy that. Nobody likes, but they can doing the Zoom meeting even though in the air, right? And also younger generations like to do esports games, Nintendos, all the time fighting with some of the friends on the ground. Something like this, we do like to do a totally new experience to customers. This should be the maybe, or most maybe, future-wise, especially for younger generation. No, not only for the younger generations. all the people can enjoy. I mean, maybe last time I believed that. I engaged in this industry for more than 30 years, right? Japan Airlines. But totally in the air is totally, totally different. I mean, there was something like a sanctuary from the connectivity, right? Totally different from the on-ground. I really understand right now in the air, customer can enjoy almost the same as on the ground.

Adrian Schofield:Right.

Yasuhiro Fukada:This is totally different. We need to change the mindset, especially for our parent company, Japan Airlines, need to change the mindset to service-wise, because this connectivity can help us. And also, we realize in these 3 months something, our operational safety, especially cockpit, can enjoy this high-speed internet benefit. It means maybe pilots can anytime access any weather chart, real-time one. It should be a very safer operation. This contributes to safety operations also, right?

Adrian Schofield:And we can certainly talk more about Starlink later, but, but on your business model again, do you focus more on outbound travel from Japan, or is it more focused on inbound travel to Japan.

Yasuhiro Fukada:I don't mind outbound, inbound. But actually, as you know, right now the Japanese economy is not so good. So I mean, there may be so many inbound markets to Japan, very strong, even though it's not from the United States, and also, of course, from Australia, Southeast Asia also. But unfortunately, August itself, it is very, very, very horrible hot in Japan. Right. So August, last time, 20 years ago, peak season of the Japanese market. Right now, August itself is not the most lowest season in Japan's market because of no inbound market, right?

Adrian Schofield:Right.

Yasuhiro Fukada:So of course, I mean, maybe depending on the economy, outbound, inbound, sometimes going in and out, right? So I don't mind. So maybe we can put in all the same prices. to the Home Run Japan and the outbound station, same price, just only converting the currency.

Adrian Schofield:Yeah, okay. And so in terms of your network, how many destinations do you have now, and is the US your main focus market at the moment?

Yasuhiro Fukada:Yeah, I mean, maybe we have the only— we are operating a wide-body aircraft. It means we're very frank so far, right? So it means Going to the United States more than 8 hours, it means only the wide-body aircraft can fly. So I mean, I mean, we are flying to the US West Coast right now, 4 stations, right? And also Southeast Asia. As you know, right now the US and Southeast Asia, very, very huge market. I mean, to Japan, beyond Japan also, right?

Adrian Schofield:Mm-hmm.

Yasuhiro Fukada:So of course, This is very important for us, the Pacific is a very good market. So right now we decided to expand our fleet. In 5 years we'll have over 20 fleets, means more than double. It means we do like to expand our destinations, of course including Australia also, right? Pacific is very important. As you know, right now Japan is North Asia, right? So from Japan to Australia. It's around 7 hours, 8 hours, something, right? Of course, some destination can reach by the narrow bodies, right? Extra long range or something, right? But basically, we need to fly wide bodies to more than 8 hours, including Melbourne, Adelaide here, or Sydney, any places. Yeah, yesterday I just go down to our booth. So many— I'm very, very welcoming to so many airports. Right. Yeah. Okay.

Adrian Schofield:And I'm also going to ask you about Australia. When, when do you think you may consider flying to Australia?

Yasuhiro Fukada:I don't know exactly, because as you know, all the people, all the airlines are suffering from the delivery delaying, right? Right now, we have only the 8 fleet. And so just I told you now, in 5 years, more than 20, means maybe every year, 2 or 3 aircraft Delivering, right? So it means that maybe we do like to more than 2 or 3 destinations every year we are introducing, newly introducing the flight. I mean, maybe I hope in 2 or 3 years we do like to— of course, right now, maybe right now studying about all the stations. Well, okay.

Adrian Schofield:I mean, and you, you said you're interested in Sydney and Melbourne perhaps?

Yasuhiro Fukada:Yeah, of course. Other things, Queensland, Brisbane, or any place is okay, right?

Adrian Schofield:Okay.

Yasuhiro Fukada:So I don't mind to any places, right? So, but, and also, totally, totally different market from the full-service carriers, especially younger generation, something. Of course, I know so many younger generation, Australian, loves to go to Japan through a year, not only for the skiing, just only to enjoy the sakura all year. This is a very, very important market, I think.

Adrian Schofield:What about Auckland?

Yasuhiro Fukada:Auckland, New Zealand? Yeah, of course. Of course. I mean, maybe so many, many Japanese students studying in New Zealand. And I love— I never been there, New Zealand, but I heard very nice places.

Adrian Schofield:It's fantastic.

Yasuhiro Fukada:Yeah, good. So of course I do like— and also maybe I always respect New Zealand trying new ideas of our industry. Technology also, and so many spaces. And just yesterday, explained to us some of the new concepts of the cabin or something, right?

Adrian Schofield:Exactly, yeah.

Yasuhiro Fukada:I respect, I love the New Zealand mindset. It's very important.

Adrian Schofield:That's true, yeah. And looking further afield, is Europe a possibility for ZIPAIR? Would you consider that?

Yasuhiro Fukada:Yeah, of course. But actually, right now, our coverage business areas except for China, because maybe we, Japan Airlines, have another subsidiary company, Spring Japan, flying to China. So except for China, all the area is our area, right? So, but as you know, unfortunately right now the Ukraine and there's a Middle East something that maybe— of course I don't like to fly to Europe, so all the way around, because we need to giving the customers some reasonable prices. Okay, right now the fuel price is very high, right?

Adrian Schofield:Yes.

Yasuhiro Fukada:So maybe we do like to— operational efficiency is very important. So at this moment, up to the 20 aircraft, we don't have any plan to go to Europe, but just only US, Asia, and Australia.

Adrian Schofield:Okay.

Yasuhiro Fukada:After that 20 aircraft, of course, we do like to study about this one.

Adrian Schofield:Yeah, right. Okay. And what about Asia growth? Do you see more potential for Asia growth in your network?

Yasuhiro Fukada:Yes, of course. Because right now, we have only Singapore, Bangkok, Thailand, and also Incheon, Seoul, right? So we already announced maybe introducing by the end of October to Kuala Lumpur, Malaysia. Because maybe Asia is growing very fast, and so maybe, I mean, maybe I feel all the, all the business players, even though they're from the United States, also targeting Asia also, right? Of course, Asia is a— Asia and Australia is a promising country, I think, right?

Adrian Schofield:Yeah, right. So, um, so Kuala Lumpur is, is your next route for growth?

Yasuhiro Fukada:All right.

Adrian Schofield:Is that the only route you've announced yet that you'll be introducing?

Yasuhiro Fukada:Yeah, already announced. So we already started 2 days before to the selling. Actually, we are introducing flights the 20th of October, starting to Narita to Malaysia. OK, right.

Adrian Schofield:Yeah, right. And you obviously have quite high hopes for that market, for the Malaysia market. You have— you're quite optimistic about the Malaysia market?

Yasuhiro Fukada:Domestic market?

Adrian Schofield:Sorry, the Malaysia market.

Yasuhiro Fukada:Yeah, yeah, of course. As you know, right now Malaysia is picking up economically very fast, right? Of course, I know that maybe Singapore, Thai is following the 2 countries. Malaysia is picking up so fast. And so right now, maybe this is a totally Japanese-specific reason. I mean, Japanese students studying overseas, Malaysia is picking up so fast. Right. I mean, there may be Singapore, too expensive right now. So Malaysia should be the reason for Japanese students, I think.

Adrian Schofield:Interesting. Okay. And looking at the fleet, how many more 787s are you currently scheduled to receive? I think, I think you're meant to get 2 more 787-8s?

Yasuhiro Fukada:That's newly introduced from Boeing. By the end of March, coming March, right?

Adrian Schofield:2, by the end of March.

Yasuhiro Fukada:After that, we will introduce a -9.

Adrian Schofield:Oh, wow.

Yasuhiro Fukada:Okay.

Adrian Schofield:So why, why the, the change up to the -9s? Is that for greater, greater seat capacity?

Yasuhiro Fukada:Yeah, actually, the— as you know, right now we have the flatbed seat as well, even though at the same time the low-cost carriers at the time in 2020 Even though our parent company board members are asking me, who taking the flatbed seat in the low-cost carriers, right? But for just operating our flatbed seat, either 2 months before, all the flatbeds, only the 18 sold out. So we do like to increase the number of the flatbed seat, especially for long haul. You say something more than 30, I do like to— Yeah.

Adrian Schofield:And do all your 787s come from, from JAL, or will you get some direct from the manufacturer?

Yasuhiro Fukada:Actually, right now, the discussion with Japan Airlines, right? I don't mind other aircraft, newer aircraft, because maybe financial-wise, those are newer, it should be very, very expensive, right? Right. I don't mind. But maybe, of course, right now, up to the end of this March, our fleet will be 10. Among the 10, 4 is newly from Boeing, 6 is converted from Japan Airlines.

Adrian Schofield:Right.

Yasuhiro Fukada:Right. So actually, each aircraft can covering the profitable— we can making a profit, even though they may be expensive right now.

Adrian Schofield:And when do the -9s begin arriving? When do the -9s begin arriving?

Yasuhiro Fukada:I don't think— I don't actually know, maybe because of the Boeing rate or something, right? But maybe later half of 2027 should be there.

Adrian Schofield:Okay.

Yasuhiro Fukada:Right. Coming. Right.

Adrian Schofield:Right. Very good. Okay. And turning to product, you know, ZIPAIR completed the Starlink introduction across all your aircraft in May. Can you tell us about how Starlink improves the onboard experience and also for your onboard service for the crew?

Yasuhiro Fukada:All right. Actually, the Starlink supporting for our totally changed the experience of the customers. I mean, the real time they can enjoy the— I mean, last time our customer, we don't have any seatback screen. So all the customers doing the preloaded to their tablet something to enjoy the movie or something, right? Right now, real time, the streaming. Also very smoothly. So no need to preparing before. And also, just I told you, maybe they can, they can not enjoying, but they can doing the Zoom meeting even though they're in the air, right? So I mean, maybe higher people, the managing people can join, not enjoy, but can do the Zoom meeting. I mean, maybe all the management people doesn't like to doing that because Before taking the flight, oh, from now, just only the airplane, so this 10 hours cannot connect to something, right?

Adrian Schofield:Yeah.

Yasuhiro Fukada:No more they can use this excuse, right? But anyway, so, and also, this is the most, most important thing, is maybe real-time authorization of the payment. This has totally changed our experiment. I mean, of course, all the airlines doing something about credit card, cloud, or something, right? The real-time authorize has totally changed our world. It means that we can select how expensive items much easier.

Adrian Schofield:Mm-hm.

Yasuhiro Fukada:I do like to let the customers can Purchase the return ticket in the air.

Adrian Schofield:From their seat.

Yasuhiro Fukada:Yes. This is the first concept of us, of the connectivity. Just I told you, connectivity and payment. This is a very, very important area. So they can make it, of course, we can doing some of the systems, so-called RTO or something, right? So that we, and also that this internet, Supported system can change the work style of the cabin crew also, right? Sometimes we do like to— we, we, we, in, in our aircraft, customer can order something like Uber, Uber Eats, just only to their use of their own devices. Tick, tick, tick.

Adrian Schofield:Wow.

Yasuhiro Fukada:And payment, just cabin crew with delivery.

Adrian Schofield:Yeah.

Yasuhiro Fukada:With big boxes? No. But anyway, so it means normally customer can press the call button, cabin crew go down to the customer, can I help you, return back to the galley. After that, bringing the order items, right? It means maybe one order, 2 times round trip from the Cabin crew, right? From us, cabin crew, just only the one round trip to the customer. It means workload of the cabin crew is less. I mean, about half of that, this one, right?

Adrian Schofield:Yeah.

Yasuhiro Fukada:So it means very, very important. Of course, management of people at the airlines. Of course, other things we need, you need to take into consideration, but maybe you can reduce. the number of the flight attendants in the air. That should be very helpful because manpower is a future problem of our industries. Right.

Adrian Schofield:And you were the first airline in Japan and one of the first in Asia to introduce Starlink, weren't you?

Yasuhiro Fukada:Yeah.

Adrian Schofield:Yes. Across your fleet?

Yasuhiro Fukada:Yeah, of course. So actually, we signed to SpaceX, Elon Musk, the 4th airline in the industry. First with JSX US business jets, Yabaltic, Hawaiian. Next one is us. After that, 5th one following us, it may Qatar. So Qatar and us is a very huge 787 users. They're doing the introducing of this Starlink, right? I think, right?

Adrian Schofield:Great. Okay. And following on from Starlink, what other investments or changes is ZIPAIR considering to invest in? What other investments or changes is ZIPAIR considering introducing?

Yasuhiro Fukada:Yeah, actually we do like to introduce some of the change of the concept of the airlines. It means maybe normally, I mean, the historical airline industry bring the customer to giving the totally the Good experience in the air services, right? So, but we do like to be that our airline, ZIPAIR, should be some of the platform to provide the services, other service providers. It means that we can introduce some of the souvenirs, or sometimes they may be giving them something, because maybe this talent enables— Yeah. Customers to connect to the, on the ground. It means they can buy anything. They can register some of the Japan Railway ticket, something, right, of the Japan Railway. Something like this, because as you know, 10 hours something from Australia to Japan. Honestly speaking, Nothing to do, right? So they can preparing for the Japanese experience in Japan, right? So this is very good timing for us, collecting so many information about this one. Right now, we also talking with some of Japanese local city nearby Narita. I mean that maybe normally going to the Outside of Tokyo, normally they do like to fly from Narita to other station, Hokkaido or something, by JETSTAR or something. But as you know, right now in Japan, Narita, Tokyo, only maybe Kaisei or the Skyliner, only within 1 hour to reaching. After that, they can take the Shinkansen, the bullet Right, so into the Niigata or something, the very suburbs, right? Only 2 hours. I mean arriving Narita, after that within 3 hours you can reach the downtown of some of the skirt cities. So we do like pushing some of these products to the overseas inbound market also, right?

Adrian Schofield:Excellent. We're starting to run out of time, but I'm very curious to hear more about Altonex. Which is, you know, the product that you have out in your booth there. Could you tell us about Altonex and what that brings to the industry?

Yasuhiro Fukada:Yes, because Altonex is— I mean, maybe normally this product, most important thing, this product is concept and all the developed by the airlines. This is very, very important right now. Of course, All the system integrated or the development needs something that maybe, how to say, maybe go into the market upgrading, upgrading, upgrading. I mean that maybe we do like to doing the test, but full-service carrier never allowed to the customer to doing the test. So for us, it's of course Japanese airline subsidiary company, something that testbed for the Japan Airlines. So that even though the current Japan Airlines president always asking me, you do first any new ideas, they never claim to us unsuccessful. And in that case, she ordered me, what's the next idea? Next, next, next.

Adrian Schofield:Right.

Yasuhiro Fukada:Until they're successful. If successful, Japan Airlines, consider introducing some new services to their own product. This is something, a role of testbed, is very important for us, right?

Adrian Schofield:Yeah, great. Well, that is all the time we have, and so I'd like to invite Ingrid Picard from Mobility Futures up with her panel. But just before that, please join me in thanking Yasuhiro very much for his—

Yasuhiro Fukada:Thank you very much.

Adrian Schofield:Coming all this way.

Yasuhiro Fukada:Thank you.

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