Japanese airlines fly under Gulf carriers’ radar – for now

The Middle East's Big Three of Etihad Airways, Emirates and Qatar Airways have not as yet put significant pressure on east Asian rivals such as JAL and ANA but that may change.

All Nippon Airways and Japan Airlines are not perturbed by the presence of Arabian Gulf airlines in the Japanese market. Issei Kato / Reuters
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TOKYO // While Arabian Gulf airlines' expansion has been so dramatic it has spurred complaints from US and European carriers, their presence in the Japanese market does not seem to worry Japan's two major players, All Nippon Airways (ANA) and Japan Airlines (JAL).

The former is concise in its assessment of competition from the Gulf. "For a number of factors including geographical ones, ANA is not affected by the expansion of Etihad Airways, Qatar Airways and Emirates," is all the ANA spokesman Ryosei Nomura says.

JAL, on the other hand, is a little more forthcoming. Jian Yang, the airline’s public relations assistant manager, acknowledges that the Gulf airlines, using the Middle East as a hub, are likely to be targeting Japanese demand.

But, at this stage, east Asia is less affected than the West by the Gulf airlines’ growth, Mr Yang says, although he adds: “There is rather an advantage in performing codeshare or other arrangements to the Middle East and Africa.”

Most of the major airlines today have codeshare partnerships with other airlines, and codesharing is a key feature of the major airline alliances.

ANA has a codeshare agreement with Etihad, while JAL has one with Qatar Airways and another with Emirates.

JAL, in addition, started a joint venture with British Airways and Finnair on the Japan-Europe route in 2014 to take advantage of the London and Helsinki hubs. “By offering a high level of convenience to customers flying between Japan and Europe, we believe we have increased our competitiveness,” Mr Yang says.

In short, ANA and JAL say they do not fear competition from the Gulf carriers, as US and European airlines do. JAL and ANA have commercial links with Gulf carriers through codeshare agreements, which means they do not fly their own aircraft to Doha, Abu Dhabi or Dubai.

Meanwhile, the Japanese outbound market is shrinking, so the Gulf carriers, when coming from Japan, are seeing fewer customers from the country, says the Japan Aviation Management Research principal analyst Geoffrey Tudor, who was formerly the JAL public relations director.

The Japanese outbound travel market peaked in 2012 when 18.4 million Japanese travelled overseas. In 2015, the total had dropped to 16.2 million, Japan National Tourist Organisation figures Mr Tudor provides show. “In 2016, Japan Travel Bureau research estimates that there will be a small increase on last year,” but only by 0.3 per cent, he says.

Mr Tudor says the reasons behind the slowdown include young people being less interested in spending on overseas travel, preffering instead to splash out on the latest technology such as iPhones and the like; the weakening of the yen since 2012 which has made overseas travel more expensive; an increase in Japan’s sales tax from 5 to 8 per cent; and an ageing population combined with fewer children being born.

Vinay Bhaskara, a senior business analyst at the Miami-based Airways News, agrees that, for the moment, the Gulf airlines do not directly compete with ANA or JAL on any Trans-Pacific, Australian, or Asian (excepting Pakistan/India) routes, although they do compete for traffic to the Middle East and Europe.

For the most part, Mr Bhaskara says, only about 10 to 15 per cent of JAL and ANA’s revenue base is realistically open to competition from the Gulf carriers, whereas for the European long-haul carriers, or even airlines in Asian countries such as Thailand or India, the figure can be upwards of 40 per cent.

“And remember, the great circle route to Europe with a connection to a secondary city at a European hub is a lot quicker for Japanese travellers than what is effectively a backtrack on the “southern” route via Dubai/Doha/Abu Dhabi,” he says.

Mr Bhaskara adds, however, that as the aviation world moves towards a mostly “open skies” future (where basically any airline can fly any international route without bilateral restrictions), the Gulf airlines will steadily begin to add so-called “fifth freedom” routes that do not touch their home countries at all.

“The first iteration of this was when Emirates added Milan-New York JFK, and it’s not inconceivable that down the line they could be flying Tokyo-London or Osaka-Los Angeles,” Mr Bhaskara says.

This would increase the competition between JAL,ANA and what Mr Bhaskara calls the MEB3, which stands for “the Middle East Big Three” of Emirates, Etihad and Qatar Airlines. But the Japanese airlines have already had to deal with a variety of airlines serving trans-Pacific routes – for example Narita-Los Angeles is served by Singapore Airlines with an A380 – so they are well positioned and experienced enough to deal with such a situation, he says.

“So, relative to other carriers like Singapore Airlines, Air India, or Thai, the MEB3 are only a moderate threat to Japan,” Mr Bhaskara says.

Although that is true at present, things may become very different in the future, says Haruo Ushiba, the Japan director and senior analyst for the US-based travel research firm Phocuswright. Mr Ushiba worked for more than 40 years at JAL, mostly in planning and international affairs.

Gulf airlines’ planes are mostly new, their hardware and infrastructure are very good and they have a lot of money with hardly any debt or liabilities, so they can easily buy more aircraft, Mr Ushiba says.

Also to their advantage, the Middle East airports the airlines use as bases are relatively cheap regarding landing costs and associated charges especially when compared with airports in Japan. JAL and ANA use Narita and Haneda as home hubs and both are costly. So the Gulf carriers are very competitive on costs, and as such, they can more easily invest in new planes and strongly compete on fares, Mr Ushiba says.

“The US and European companies complain about [Gulf] government subsidies [for airlines], but I think that is not true,” he says.

The Gulf carriers, for their part, have also repeatedly denied their claims.

Another advantage the Gulf airlines have over their Japanese counterparts is English fluency, Mr Ushiba says. The Gulf airlines’ stewardess service is up to international standards, whereas Japanese stewardess service is high only locally, with the weakest point being English fluency.

“[Stewardesses for Japan airlines] can’t speak English much, and if they can’t speak it much, how can they welcome international passengers?” Mr Ushiba says.

“JAL and ANA must upgrade their service in that respect if they want to be competitive with Emirates and the other Gulf airlines.”


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