Japan's Reward Point Market To Exceed Y1tln In FY09

TOKYO (Nikkei)--More than 1 trillion yen worth of shopping points will likely be issued in Japan in the current year through March 2010, with more businesses offering rewards programs for a wider range of products and services.

A reward point card from Yodobashi Camera Co. With more products and services purchasable via reward points, these plastic cards are now as good as cash at many stores and online.

According to Nomura Research Institute estimates, nearly 790 billion yen of points were electronically issued at a minimum in fiscal 2008 by stores, credit card companies, airlines and others. The estimated total reaches roughly 820 billion yen with the addition of point rewards issued by Culture Convenience Club Co. group rental DVD and CD stores, as well as virtual malls run by Rakuten Inc. and Yahoo Japan Corp.

With the government earmarking roughly 290 billion yen for its eco-point economic stimulus measure, the total for fiscal 2009 is expected to exceed 1 trillion yen -- equivalent to about 1.5% of the 72.2 trillion yen in cash in circulation as of June.

Aiming to leverage the popularity of point programs and fence in customers, some companies have tied up with others and made their points more useful.

For example, Yamada Denki Co., a major consumer electronics discount store chain operator, has created a virtual mall by joining forces with Takashimaya Co., Ryohin Keikaku Co., and 220 or so other firms. Shoppers at the virtual mall receive points from both Yamada and the virtual store operators from which they make their purchases.

Yamada has also tied up with All Nippon Airways Co. and other firms to allow one company's points to be exchanged for points from another.

Bic Camera Inc., a major rival of Yamada, lets its points be converted into East Japan Railway Co.'s Suica e-cash.

Yahoo Japan points are expected to become exchangeable for Seven & i Holdings Co.'s nanaco electronic money this autumn.

(The Nikkei July 30 morning edition)

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Singapore Airlines Tops Satisfaction Ranking

TOKYO (Nikkei)--Singapore Airlines won top honors in a Japanese customer satisfaction ranking for the second straight year, taking the No. 1 spot in five out of six categories, according to data released by Recruit Co.

The only category in which the Southeast Asian airline did not receive the best score was entertainment, in which it ranked second after Virgin Atlantic Airlines, the No. 2 airline in the ranking.

Placing third overall was Taiwan-based Eva Airways, while last year's third-ranked Emirates Airlines, based in the United Arab Emirates, plunged to 14th, possibly due to the diminished popularity of Dubai as a tourist destination, according to Recruit.

Japanese airlines scored well in the category of customer service, with All Nippon Airways (ANA) Co. placing second and Japan Airlines (JAL) Corp. third in the subcategory of service offered by flight attendants. ANA maintained its previous year's ranking of fourth overall, while JAL jumped from 13th to sixth.

As for the ranking of service provided by airport staff, ANA took second, while JALways placed third.

Japanese airlines were weaker in food, a category in which none made the top 10.

The survey, which covered 40 airlines, was conducted online from May 22-27, covering a total of 4,000 Japanese passengers selected randomly.

(The Nikkei Marketing Journal July 22 edition)

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ANA, JAL consider resuming fuel surcharges for international flights

TOKYO —Japan’s two major airlines are considering collecting fuel surcharges again on international flights in the October to December period in response to the rise in airline fuel prices, airline officials said Wednesday. Japan Airlines and All Nippon Airways have scrapped fuel surcharges on international flights from July to September in line with declines in fuel prices in the preceding benchmark period, a move seen as successful in spurring overseas trips during the summer holidays despite the economic slowdown.

Industry analysts say that consumer sentiment may again be chilled once JAL and ANA decide to simultaneously collect fuel surcharges. Asked about the surcharge for the three months from October, ANA President Shinichiro Ito indicated in a news conference that the firm may resume collecting fuel surcharges, saying, ‘‘As for the direction we are to take, it is likely that we will get them (fuel surcharges).’’

JAL, meanwhile, is also expected to resume its fuel surcharge system for tickets issued during the same period. JAL has a system of collecting fuel surcharges in the event that fuel prices in the previous three months average more than $60 per barrel, with the prices of tickets for the October-December period decided in line with the average of fuel prices for the May-July period.

© 2009 Kyodo News.

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ANA, JAL Eyeing Return Of Fuel Surcharges On Higher Oil Prices

TOKYO (Nikkei)--All Nippon Airways Co. and Japan Airlines Corp. will likely bring back fuel surcharges in October to reflect higher oil prices.

ANA and JAL reassess such surcharges every three months. Owing to a downslide in crude oil prices from last summer, the airlines sharply reduced their surcharges this past January and April. And they eliminated such charges altogether from July.

The October-December surcharges will be based on the average price of jet fuel during the May-July period. As of July 14, the average price of kerosene in the Singapore market, a benchmark for jet fuel prices, stood at 70.7 dollars a barrel, above the 60 dollar threshold at which the surcharge kicks in. As a result, the airlines are likely to bring back the surcharge to help soften the brunt of their rising costs.

"We are currently exploring the possibility of charging (the fees) from October," ANA President Shinichiro Ito said at a news conference Wednesday.

JAL is also said to be considering a similar move.

Previously, the airlines had charged 7,000 yen to 14,000 yen on round-trip tickets for flights connecting Japan with Europe and the U.S. and 1,000 yen to 3,000 yen for Chinese routes. ANA, however, is unsure about whether to charge the same fees again.

"Because the elimination of surcharges helped fuel travel demand, we are still giving it thought," said Ito, suggesting that the airline might implement a different fee structure.

(The Nikkei July 23 morning edition)

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JAL faces more losses as retirees fight cuts

Two-thirds of former employees must agree to pension reduction

Takahiro Fukushima gets a pension of ¥2.7 million a year from Japan Airlines Corp., where he worked for 35 years. Two months ago, the unprofitable airline sent the former cabin attendant a letter asking his permission to cut it by more than 50 percent.

Pension in full stall?: Japan Airlines planes sit at Tokyo's Haneda airport in April. BLOOMBERG

"The shock was huge," said Fukushima, 67, who joined the carrier in 1966. "In the beginning, JAL even didn't want to hold meetings to explain it."

Fukushima joined with other retirees to oppose the cuts, which need approval by two-thirds of the pensioners to be enacted. The Tokyo-based airline has already factored in a one-time gain of ¥88 billion from reducing the pensions into its annual forecast and failure to cut the payouts may more than double its loss this year.

"Without the gain from a revision of the pension fund, JAL will have a loss of more than ¥150 billion," said Yasuhiro Matsumoto, an analyst in Tokyo at Shinsei Securities Co. "It has little room for further cost-cutting."

As of Friday, more than 3,000 of the approximately 9,000 ex-employees have said they are against the troubled airline's proposed pension reduction, according to a Web site run by the carrier's pensioners. The objections of 3,000 pensioners would be enough to scuttle the plan.

The airline has yet to make a decision, and despite the objections it is still uncertain if the opposing retirees can muster enough support to defeat the plan. According to a company spokesman, the airline, which is focused on getting the necessary two-thirds support, will continue its efforts.

The carrier had ¥95 billion in accrued pension and severance cost liabilities outstanding at the end of March, according to its financial results.

JAL President Haruka Nishimatsu has slashed more than 5,500 jobs from the carrier since taking over as head in 2006 by selling stakes in subsidiaries and offering early retirement. The reductions exceed the 4,300 jobs targeted in the carrier's midterm plan announced in February 2007.

"The retirees need to stomach a cut in pensions," said Shinya Izumi, a Liberal Democratic Party Diet member who chairs the party's aviation panel. "Nishimatsu has done a good job managing JAL."

The airline is predicting a loss of ¥63 billion this fiscal year as sales plummet amid the global recession. The carrier has announced plans to cut operating costs by ¥195 billion. The cost cuts aren't enough to make up for its predicted ¥203 billion drop in revenue.

JAL last month won a loan of ¥100 billion from the state-owned Development Bank of Japan and other Japanese lenders after it laid out plans to reduce costs to cope with the biggest slump in international travel since SARS and bird flu led people to shun overseas trips in 2003.

"It'll be very worrying if JAL doesn't get agreement to cut pensions," said Ryota Himeno, an analyst at Mitsubishi UFJ Securities Co. "They're already burning through shareholders' equity."

The carrier had ¥197 billion in shareholders' equity at the end of March, a drop of 58 percent from the ¥471 billion a year earlier. Smaller rival All Nippon Airways Co. had ¥326 billion in shareholders' equity at the end of March.

The airline is suffering from tumbling demand for international travel amid Japan's deepest postwar recession. The carrier flew 12.4 percent fewer people internationally last fiscal year, its biggest drop in five years.

The carrier has been affected more than ANA from the slump in overseas travel as international travel is the biggest part of JAL's aviation business.

JAL had ¥704 billion in revenue from international travel in the year that ended on March 31, more than double ANA's ¥291 billion. In comparison, domestic passengers at JAL declined 1.8 percent last fiscal year.

The International Air Transport Association last month predicted airline losses worldwide may total $9 billion this year as the swine flu pandemic compounds the effects of the global recession. The drop in travel demand has also caused losses for Cathay Pacific Airways Ltd. and Korean Air Lines Co.

"I've asked JAL for a detailed management plan quickly," transport minister Kazuyoshi Kaneko told reporters last week. "It's the president's responsibility to push through the pension cuts."

ANA, predicting a return to profit this fiscal year on cost reductions of ¥73 billion, is down 22 percent after earlier this month saying it would sell new shares to raise money for planes.

Japan's pensioners also receive payments from the government. The average payout from the state is ¥1.9 million a year, according to figures from the health and welfare ministry. Pensioners at ANA receive average payouts of between ¥3 million to ¥4 million a year, including the government part, according to spokesman Rob Henderson.

"JAL is losing money because of its international routes," Fukushima said. "It's got nothing to do with pensions."

By CHRIS COOPER and KIYOTAKA MATSUDA

Bloomberg

Information from Kyodo added

The Japan Times: Saturday, July 18, 2009

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Kansai airport has worst June since '03

Kansai International Airport, Japan's second-busiest international gateway, had its biggest monthly drop in passengers since 2003 in June.

The airport had an average of 28,600 passengers a day last month, a 34 percent drop compared with a year earlier, its operator said Wednesday. It was the biggest decline since June 2003.

The airport, which cost ¥1.46 trillion to build, is struggling to retain airlines as tumbling demand for cars and electronics has caused Japan's exports to drop by almost half, prompting companies to slash business travel.

All Nippon Airways Co. and Japan Airlines Corp., the airport's biggest users, have cut flights there this year, reducing revenue.

Bloomberg

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ANA, JAL Rushing To Clip Wings At Kansai International Airport

TOKYO (Nikkei)--All Nippon Airways Co. and Japan Airlines Corp. plan further cuts to unprofitable routes at Kansai International Airport, raising concerns about the impact to the operator of the western Japan hub, The Nikkei learned Monday.

JAL will terminate two Chinese routes connecting the Osaka airport with Dalian and Hangzhou, which the airline serves once a day. And ANA this November will end service to Kochi, Matsuyama and Kagoshima lines and cut flights to Fukuoka by half. It now has two flights daily to Kochi and Matsuyama and four to Fukuoka.

Japan's two leading carriers had already streamlined flights at the airport last fall and again this past spring.

The airlines will soon start full-fledged talks with the Transport Ministry, the Osaka prefectural government, Kansai International Airport Co. and other parties that might be affected by the changes.

JAL, which will be placed under the ministry's supervision in exchange for receiving a government-guaranteed loan, is considering deeper cutbacks of domestic flights at the international airport.

Both carriers expect their incomes to improve by about 10 billion yen through these steps.

And while they risk strong local opposition, with earnings deteriorating and passenger numbers declining, "we can't avoid these measures to stabilize operations," says a JAL official.

They are considering scaling back services at other airports as well, but addressing the red ink at Kansai airport is the priority at this time.

Kansai saw a series of major cutbacks in the second half of fiscal 2008. JAL discontinued five domestic flights, while ANA pulled out of the Guam route. And since the start of this fiscal year, JAL has already decided to end five domestic routes and its London service.

Kansai International Airport served 34 domestic cities in 1996, but ANA's planned termination of three domestic routes will bring this to just eight.

The Osaka airport aims to have 114,000 arrivals and departures this fiscal year, down 11% from fiscal 2008, but this goal appears to have grown more difficult to achieve.

(The Nikkei July 7 morning edition)

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JAL, ANA Fundraising Paths Reflect Reform Gap

TOKYO (Nikkei)--Japan Airlines Corp. and All Nippon Airways Co. are set to raise funds using drastically different methods, a divergence that reflects a significant gap in restructuring progress at Japan's two leading carriers.

Last week, the Development Bank of Japan and three megabanks agreed to extend a syndicated loan of 100 billion yen to JAL. In an unusual move, the loan will be partially guaranteed by the government.

After approval was secured, JAL President Haruka Nishimatsu paid a visit to the Ministry of Transport to give thanks for its support in arranging the deal.

In exchange for the government guarantee, however, JAL will be placed under the ministry's supervision. The four banks, for their part, demanded that the company submit a written pledge to heavily restructure its operations.

On the same day the loan accord was reached, ANA said it would raise 150 billion yen through a public offering of new shares. Such a move would leave the firm free of external oversight.

Recent remarks by ANA President Shinichiro Ito and JAL's Nishimatsu reveal the stark differences between the two companies' situations.

"As Narita and Haneda airports will be expanded next year, we decided to spend long-term funds," Ito said.

For his part, when Nishimatsu was asked about his avowed goal of JAL's independent rehabilitation, the president admitted, "It is difficult to define independence."

Now that the financial markets have regained some stability, the corporate fundraising environment has improved. For example, Japanese firms in June issued straight bonds totaling 1.74 trillion yen, an all-time monthly high, as big firms with good ratings like Toyota Motor Corp., Sony Corp. and Honda Motor Co. scrambled to take advantage of cheaper credit.

But a considerable number of companies seem to have been left behind, and are seeking injections of public funds.

Last week, the government decided to provide 140 billion yen to Elpida Memory Inc. Just two years ago, President Yukio Sakamoto had insisted that his firm would not rely on the government.

Under Sakamoto's leadership, Elpida had carried out major investments, and set its sights on becoming one of the world's largest makers of DRAM chips. But then the company fell into a liquidity crunch following the collapse of Lehman Brothers Holdings Inc. last fall.

JAL has also been hit hard by the global financial crisis. Unlike Elpida, however, JAL was in dire straits even before the crisis accelerated last fall.

When Nishimatsu assumed the JAL presidency in 2006, he inherited his predecessor's negative legacy, including operational woes and a running feud among management.

In a bid to improve the firm's weakened financial base, Nishimatsu arranged for a public offering of new stock. Fearing that shareholders would oppose the issuance, JAL announced it after a general shareholders meeting. This move was widely criticized, and the company failed to raise the planned amount of funds.

In contrast, ANA's restructuring has featured the replacement of old aircraft with new, fuel-efficient models, and the selling of hotel operations in order to focus resources on the core business. This turnaround effort, led by current Vice Chairman Mineo Yamamoto, who resigned from the presidency at the end of March, has helped improved market perceptions of the firm.

JAL has also implemented cost-cutting measures. But given the gap in progress between the two carriers, they now find themselves on different fundraising paths.

Meanwhile, President Ito of ANA has revealed that JAL rejected ANA's proposal to jointly call for the government to cut the relatively high fuel tax and airport landing fees. Such reductions would have saved the firms tens of billions of yen.

JAL started out as a nationally supported airline, and thus may be expecting restructuring to bring the reward of additional government aid -- rather than increased independent fundraising opportunities, which are in fact vital for any company.

--Translated from an article by senior Nikkei staff writer Atsushi Nakayama

(The Nikkei July 6 morning edition)

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ANA Plans Y150bn Stock Offering

TOKYO (Nikkei)--All Nippon Airways Co. will raise around 150 billion yen in one of its biggest-ever public offerings of stock, while Orix Corp. is planning to offer about 100 billion yen in shares, The Nikkei learned Tuesday.

ANA's stock offering, its first in three years, is expected to boost its capital ratio to the upper 20% range from 18% as of March 31. Japan Airlines Corp., on the other hand, has a ratio of 10%. JAL has been cleared for a government-backed syndicated loan.

ANA will make an official announcement Wednesday. It will likely offer a total of 500 million shares at home and abroad as early as July, in which case its outstanding shares will increase by about 25%.

Narita and Haneda airports are scheduled for expansion in 2010, which will create more arrival and departure slots. ANA aims to seize this opportunity. It plans to accelerate the introduction of new, fuel-efficient planes, including the Boeing Co.'s 787 Dreamliner. The airline decided that it needs a major capital increase to continue investment over the medium to long term while keeping its financial base strong.

Orix's public offering will be its first in eight years and its largest ever. An official announcement is expected as early as this week.

The offering is equivalent to nearly 20% of Orix's outstanding stock, based on the firm's market capitalization of about 530 billion yen as of Tuesday.

Orix had been holding off on new investments since the financial market meltdown last fall, but has judged that the bottom of the recession is in sight and wants to strengthen its financial standing. The firm sees a growing number of investment opportunities in domestic real estate, small and midsize businesses, and Asian development projects.

Most of the shares offered by Orix will likely be sold to foreign institutional investors, but domestic investors, both retail and institutional, are also expected to have chances to buy. UBS Securities Japan Ltd. and Nikko Citigroup Ltd. are expected to serve as co-lead underwriters.

(The Nikkei July 1 morning edition)

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