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Press Release


 Jan 20 2000
 No.

JAL SUBSIDIARY AIRLINES


1. J-AIR

J-AIR is a Japanese regional commuter airline and JAL subsidiary based in Hiroshima, western Japan. The airline has ordered two twin-engine Bombardier CRJ-200 50-seat jets. The aircraft will be used by the airline on local and regional routes and will help to improve the JAL Group's overall competitiveness in the domestic market.

The first of the new aircraft will be delivered in November 2000,followed by the second aircraft in March 2001, and J-Air will start commercial operations with the new twinjets in April 2001.

J-Air flies 12 local and regional services from its operations base at Hiroshima-Nishi (West Hiroshima) Airport, located in the waterfront industrial area of Hiroshima, close to the city centre. The J-Air fleet currently consists of five 19-seat Jetstream 31 aircraft.

J-Air was founded by JAL Flight Academy, a JAL flight training school subsidiary based at Omura Airport, Nagasaki, in April 1991. (JAL Flight Academy was started in August 1989 by JAL mainly for conversion training of flight engineers to pilots, but took on an airline role with the take-over of Asahi Koyo, a commuter carrier serving cities in western Japan.)

In August 1996 J-Air was reorganised, by separating from JAL Flight Academy, and established as an independent company within the JAL Group.

From November 1 1996 J-Air started operations at its present hub, Hiroshima -Nishi Airport.

Hiroshima is an industrial and commercial centre at the western end of Japan's Inland Sea and a major centre for domestic tourist and business traffic. From its base at Hiroshima-Nishi Airport, located close to the centre of Hiroshima City, J-AIR is building up service on smaller-demand domestic routes which larger aircraft could not serve economically

J-Air routes: (Hiroshima=Hiroshima-Nishi)

1 Hiroshima-Niigata

2 Hiroshima-Komatsu

3 Hiroshima-Nanki Shirahama

4 Hiroshima-Tottori

5 Hiroshima-Izumo

6 Hiroshima-Kochi

7 Kochi-Nagoya

8 Kochi-Fukuoka

9 Kochi-Miyazaki

10 Niigata-Hanamaki

11 Niigata-Nagoya

12 Komatsu-Izumo

J-AIR Fleet: JETSTREAM 31 x 5 (19 seat)

J-AIR Passengers flown in FY1998 (April 1 1998-March 31 1999) 124,256

Employees: 60

2. JALways

JALways is the new name for Japan Air Charter, a low-cost subsidiary airline 80 percent-owned by Japan Airlines (JAL). JALways is being transformed into a scheduled carrier and will gradually take over JAL routes to Pacific resort destinations. The first operation by JALways under its new name was from October 1999 on the Tokyo-Kona-Honolulu-Tokyo route.

From April 2000 JALways will start taking over short-range international flights from JAL.

The planned changes to were first announced by JAL in mid-March when the airline announced its latest corporate plan for the period 1999-2001. The conversion will enhance the JAL Group's competitive power in the international airline market.

A formal decision for the change was taken at the Japan Air Charter annual general meeting of shareholders in Tokyo on June 25.

BACKGROUND TO JALways

Established in 1990, Japan Air Charter started commercial charter flights in 1991. The airline was first conceived as a low-cost charter airline to operate tourist flights to Asia-Pacific resort destinations from regional airports in Japan.

It was created in response to a Ministry of Transport policy to expand international airline operations out of regional airports in Japan. Lack of capacity at Narita and Osaka Airports restricted international flight expansion for both Japanese and foreign airlines.

JAL thought that the best way to follow the Ministry's policy was by providing charter flights, and because charter operations were low-yield business, the concept of a low-cost subsidiary - then known as JAZ - was born.

The short term strategy for JAZ was to build up experience of low-cost operations for overseas inclusive tour charters (ITC) from regional airports in Japan to popular over-seas destinations. At that time, there were no airport slots for ITC charter flights at Narita Airport or Osaka's Itami Airport.

OFF-SHORE BASED CREWS - LOWER COSTS

The new carrier obtained its aircraft from JAL. Cockpit crews were hired overseas on a contract basis and are now based in Hawaii. Cabin attendants are hired and based in Bangkok, where JAZ operates a cabin crew training centre. Some cockpit crew and a number of senior cabin attendants have been transferred to JAZ from JAL.

A NEW ROLE

However, while JAZ was being created, the effects of Japan's recession and increasing foreign competition were hitting the parent's business hard. Added to JAL's burden was the strengthening yen, driving up costs. JAL's corporate planners saw a new role for JAZ to help reduce those costs.

WET LEASES FOR JAL

The new, longer term strategy, was to develop JAZ into a sched-uled carrier, operating on a wet-lease basis for JAL on high-density, low yield tourist routes in the Asia-Pacific region, with particular emphasis on Japan-Hawaii service. (Wet-lease operations are the hire of an aircraft complete with crew, to perform services for another airline or contractor)

From February 1992, Japan Air Charter airline has been used by JAL on this basis to fly to resort destinations, mainly Hawaii, on JAL's behalf. The flights are regular, scheduled JAL flights, with JAL flight numbers, but the aircraft, cockpit and cabin crews are provided by JAZ.

JAZ started wet-lease flights for JAL in 1992, operating a weekly flight between Sapporo and Honolulu and two weekly Fukuoka-Honolulu flights. From April 1994 and over the next four years, JAZ wet-lease operations for JAL were expanded significantly.

As of July 1 1999, JAZ was operating up to 49 weekly round-trip flights for JAL on a wet-lease basis. The number changes according to season. Of those 49 flights, 35 were round-trip services between cities in Japan and Hawaii, and there were seven (daily) round trip flights each between Tokyo and Bangkok and Osaka and Bangkok. In addition to the wet-lease flights for JAL, JAZ flew 84 charter flights (one way basis) in the year April 1 1998-March 31 1999.

Passenger traffic

JAZ carried a total of 1,155,452 passengers in FY1998, of which 1,139,460 were on wet-lease flights for JAL and 15,992 passengers -were on charter flights operated by JAZ for regional travel companies in Japan.

JAZ Fleet: DC-10-40: 4, B747: 5

Personnel: 1045: (Cockpit crew: 143, Cabin attendants: 844, Ground staff: 58 -includes management).

(as of January 2000)

3. JAL EXPRESS - JAL's LOW-COST DOMESTIC SUBSIDIARY

JAL Express (JEX) is JAL's solution to an economic problem - the profitable operation of small capacity (150-seat) airplanes.

JAL's cockpit crew pay structure is based on large aircraft operation. Until recently JAL did not use small aircraft. However, now the airline is developing more regional routes where traffic demand needs smaller aircraft, so there is a need to reduce operating overheads. By starting a new subsidiary company, JAL could introduce a lower pay scale and make the operation of the small aircraft economic.

The overhead of JEX is about 20% lower than JAL's. JEX has nothing to do with the new domestic airlines, which only want to fly the busy trunk routes where there is huge passenger demand.

The four key elements of JEX low costs are:

1-restriction of labour costs

2-improvement of operating efficiency

3-improvement of labour efficiency

4-streamlining of service

July 1998 - IN BUSINESS

JAL Express (JEX) inaugurated service on July 1 1998 from Osaka's Itami Airport to Miyazaki and Kagoshima, major cities on Kyushu, southernmost of Japan's four main islands.

Initially JEX operated two flights a day to each destination using 737-400 aircraft. JAL operated the routes up to June 30, 1998, also with 737-400 aircraft.

In July 1999, JEX increased its network from its Osaka hub with flights to Nagasaki, Oita and Kumamoto, all in Kyushu.

During FY2000, JEX will take over more routes from JAL, including flights from Nagoya to Yamagata and Fukuoka. From January 2001, JEX will takeover the Nagoya-Kagoshima and Nagoya-Sapporo routes.

JAL Express is JAL's low-cost response to the regional domestic air travel market, providing the right levels of capacity on low-density, yet important regional routes, at a lower overhead than the present JAL corporate structure provides. JAL estimates cost savings of up to 20 percent should be possible with the new subsidiary, which was incorporated April 1 1997. JEX, capitalized at 400 million yen, is wholly owned by JAL.

JEX cabin attendants are called the JEX 'Sky Cast' and among their duties are cleaning the 150-seat cabin between flights. Cockpit crew includes Japan and non-Japanese pilots. All the new airline's cockpit and cabin crew are stationed at Osaka's Itami Airport.

MAINTENANCE

JAL and Naha (0kinawa) -based Japan Transocean Airlines (JTA), which operates 737 aircraft (JTA is 51% JAL-owned), provide maintenance support for the new airline.

In future the new airline may also perform wet-lease opera-tions for JAL as well as operating its own regional route network, which in future could include short-haul international routes.

Fleet plan

Fleet: as of January 2000 1999 JEX had four 737-400 aircraft. This will increase to eight 737-400 aircraft in total by the end of FY2000 (MARCH 31 2001).

Later in the decade (2005-2010), the JAL Express fleet could include 15 to 20 aircraft, including Boeing 767 equipment, depending on route development.

4. JAPAN TRANSOCEAN AIRWAYS - JTA

Formerly known as South West Airlines, JTA is a 51% owned regional carrier, established to provide intra-island service in the Okinawa island group (the Ryukyus), south west of the main Japanese archipelago. JTA is based at Naha, capital of Okinawa island, the main island in the group.

In recent years. JTA has expanded its horizons and flies from islands in the Okinawan group to regional cities in mainland Japan. This expansion will continue.

Okinawa-Japan mainland routes opened since 1986...

Miyako-Tokyo

Ishigaki-Tokyo

Naha-Matsuyama

Naha-Kagoshima

Naha-Nagoya

Naha-Komatsu

Naha-Okayama

JTA operates also to other Okinawan islands from its Naha hub.

Fleet: B767 X 2, B737 x 10, YS-11 x 5, DHC-6 X 4

5. JAPAN ASIA AIRWAYS

JAL share-holding: 90.5%

Founded: August 8 1995

Capital: 4.3 billion yen

JAA owes its existence to political reality. In September 1972, diplomatic relations were re-established between Japan and the People's Republic of China, and an aviation transportation agreement followed.

At that time, JAL was flying to Taiwan. JAL was semi-government owned, and was the only scheduled Japanese international airline. The Chinese Government did not want to be served by the same Japanese carrier flying to Taiwan.

Direct air service by JAL and China Airlines between Japan and Taiwan was suspended in April 1974, following a political dispute between Japan and Taiwan. JAL inaugurated service to Beijing and Shanghai in September 1974.

Eventually, a formula was developed which allowed a JAL subsidiary to serve Taiwan. Japan Asia Airlines was created for that purpose and was formally established on August 8 1975, inaugurating service to Taipei in September 1975.

JAA became primarily a one-destination carrier, but also for a period added other S.E.Asian points to its route pattern, using traffic rights unused by JAL.

Originally all cockpit and some cabin crew were supplied from JAL. But JAA recruits non-Japanese cabin attendants based in Taiwan. It has always had Taiwanese crew, but the ratio has increased over the years. JAA now recruits its own Japanese cabin attendants directly, rather than 'borrowing' them from JAL.

EMPLOYEES:

Cockpit crew 75

Cabin: 439

Ground staff 318

Total: 832

FLEET:

Boeing 747-200: 3

Boeing 747-300: 1

Boeing 767: 3

Total: 7

(JAA time leases a JAL747F for cargo services)

ROUTES:

Okinawa-Taipei

Osaka-Taipei

Osaka-Taipei-Kaoshiung

Nagoya-Taipei

Tokyo-Taipei

Tokyo-Kaoshiung

Tokyo-Taipei-Hong Kong

Hong Bangkok (wet lease flight for JAL)

PASSENGER TOTAL (FY1998): 1,448,938

CONTACT FOR FURTHER INFORMATION

GEOFFREY TUDOR

JAL PUBLIC RELATIONS

TEL 81-3-5460-3109

FAX 81-3-5460-5910

E-MAIL geoffrey.tudor@jal.co.jp

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