Japan Airlines which stared at the face of financial ruin not too long ago is fighting back against its fierce competitors, particularly the low cost carriers. In so doing, Japan’s flag carrier is helping to set an example that our own flag carrier Cathay Pacific can emulate.
The two airlines don’t share all the problems that have tarnished their respective earnings track records. But they are both facing mounting competitions from the proliferation of low cost carriers in the short-haul regional routes.
In addition, their dominance in the more profitable long haul flights to destinations in North America and Europe has been eroded by the major middle eastern airlines leveraging on the growing importance of their home bases as transit hubs for international routes.
Cathay is facing the additional challenge from mainland airlines which are aggressively expanding their global networks. In the process, they have undermined Hong Kong’s position as the transit hub for mainland passengers on international flights.
Both airlines have predictably embarked on serious cost cutting campaigns in past years. But there is a limit as to how far airlines like JAL and Cathay which built their reputations on service can go in belt tightening before hurting their brands.
JAL attacked the problem by taking up a stake in the budget carrier Jetstar Japan to compete head-to-head with the many other low cost carriers in mainly regional short haul flights. Meanwhile, it has established its own low cost carrier called TBA for the international market in medium to long haul flights.
In a statement of May 2018, JAL said that the strategy of diversifying into the budget airline business is part of the company’s 10 year plan to “take on the challenge to deliver and meet the needs of diversified customer groups around the world.”
That’s the sort of proactive strategy that investors are waiting to hear from Cathay. Although the Hong Kong carrier’s performance is seen to have improved, thanks to increased air freight business, it has yet to make a more to address the long-term problem arising from intensifying competition.