Wednesday, May 14, 2014

Vanilla Air targets CASK of below 7 JPY in 2016.

As Vanilla Air (JW/VNL), a wholly-owned subsidiary of ANA Holdings, continues to improve results, it is also working hard to make cost-cutting measures to reach a CASK (Cost of Available Seat-Kilometer) of under 7 JPY by 2016. Aviation Wire's recent interview of President Tomonori Ishii revealed some of his ambitions and progresses.
The tail and sharklet of Airbus A320-216(SL) JA01VA. (Photo: Aviation Wire)

The Tokyo/Narita (NRT/RJAA)-based LCC's most recent load factors in March saw 80.6% for international, which include Seoul/Incheon (ICN/RKSI) and Taipei/Taoyuan (TPE/RCTP), and 78.0% for domestic flights, which include Naha/Okinawa (OKA/ROAH) and Sapporo/New Chitose (CTS/RJCC). Mr. Ishii, an ANA veteran, is not happy yet, who explains "80% is still not enough for us, especially because of our low prices while still offering a 20-kilogram baggage allowance." Ancillary revenues account for less than 15% of their income, but Vanilla Air plans to launch travel insurance packages as well as advertisement on board to bring that figure up.

Operating only the Airbus A320 but with two different configurations isn't helping either, but they didn't have a choice when building its fleet to match its AirAsia Japan (JW/WAJ) (CoachFlyer JW8541: NRT - FUK on AirAsia Japan's Airbus A320.) days was a priority. While their first three seat 180 and are brand new, the three recently-delivered former All Nippon Airways (NH/ANA) examples retain their 166-seat layout (Vanilla Air's 'LOHACO Jet' enters service.) and are also one of the oldest ranging from 22 to 23 years old. These are stopgap measures, and Vanilla Air will take delivery of three new examples between September and November this year to replace them. While load factors went up and flight completion rate improved to 99.4%, on-time arrival rate was 72.7% for March, again the worst among Japanese airlines. A standardized fleet should help that. A fleet of eight is planned by March 2015, and will be increased to 10 by March 2016.

Mr. Ishii is bullish that they would be able to reduce CASK to under 7 JPY sometime in 2016. Full service carriers ANA and Japan Airlines (JL/JAL) are at 12.9 JPY and 11.5 JPY, respectively (as of April 2013), while Skymark Airlines (BC/SKY) is at 8.4 JPY and Vanilla Air also with a similar figure, and Peach Aviation (MM/APJ) is thought to be around 9 to 10 JPY. All of Vanilla Air's staff help out at flight bank times at Narita, and they try to do everything in-house as much as possible. Turning unused lights off a its headquarters in Narita's Terminal 2 doesn't contribute much to the bottom line, however, Mr. Ishii enthuses "What's important is that low-cost-mindedness." He adds, "Many of our cost-cutting initiatives come from our employees."

Regarding route network, Amami (ASJ/RJKA) will be launched on July 1st (Vanilla Air announces Amami Oshima.), making it the first all-new route after being re-launched as Vanilla Air. Mr. Ishii admits that there would be initial start-up costs there, as the JAL Group has been the only carriers serving the airport. Work is underway for ETOPS (Extended Twin-Engined OPerationS) rating to enable them to launch Guam and possibly Saipan as well. China, including Hong Kong, and the Philippines are also being considered.

Source: Aviation Wire, May 12th. (in Japanese)
Source: Aviation Wire, May 13th. (in Japanese)

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