Japan Air System (JAS), the third-largest Japanese carrier, has announced that it is to restructure up to 30% of its loss-making domestic-route network while considering plans to expand services within Asia.

Although the company operates 100 domestic routes, only one-third of these is profitable. "This puts severe financial pressure on the company-It is vital that we focus on making profits on each route", says president Hiromi Funabiki.

The restructuring measures, which come in the wake of Japan's domestic air-market deregulation, will include outright suspension of some services. "We will primarily target for suspension those routes that are so unprofitable that they cannot even cover direct operational costs," says Funabiki. Other services will run only seasonally, or with fewer frequencies and smaller aircraft. The airline will also increasingly use lower-cost affiliates, such as Japan Air Commuter and Harlequin Airlines, to serve regional cities.

At the same time, the company has said that it is looking to boost its services to China by operating flights from Osaka to Beijing and Shanghai. It now runs flights to Guangzhou, Hong Kong and Seoul. JAS is also looking to re-instate its twice-daily flights to Singapore, which were suspended in 1995.

Airline analysts doubt the ease with which JAS will be able to extract itself from loss-making domestic routes, however. "JAS is far too dependent on routes that have very little economic value-but I think they will find it difficult to suspend these routes altogether", says Paul Smith, airlines analyst at James Capel in Tokyo. He adds that the company will struggle to reach its break-even target after posting further operating losses of ´322 million ($2.8 million) in 1996, given load factors of just over 60%.

Source: Flight International