AIRLINES:Airline boss Shinichi Nishikubo wants to start a fare war on the key routes between Japan and Europe and is using Airbus planes to help him do it. Can he succeed, asks DAVID McNEILL
HE HAS BEEN called Asia’s Michael O’Leary, but Shinichi Nishikubo has also been told he has better manners than the Ryanair boss. Unfailingly polite and soft-spoken, Nishikubo lacks O’Leary’s famously abrasive management style – though certainly not his ambition.
As chief executive and 49 per cent owner of Skymark, Japan’s largest low-cost carrier, the Osaka-born entrepreneur plans to take on the world’s biggest airlines on several key business routes, including Tokyo to London, Frankfurt and Paris. And he says he will do it for half the price his competitors charge.
“What I can say with confidence is that our prices will be lower than the other airlines,” says Nishikubo when we meet in his office near Tokyo’s Haneda International Airport. “And if we succeed, others will have no choice but to follow suit.”
Nishikubo’s surprising tactics don’t end there. His strategy also includes buying four Airbus A380s, the world’s largest passenger plane, and plans to option several more.
In Japan, however, Boeing reigns supreme with over 90 per cent of the market. The American manufacturer’s dominance there has been as much political as economic for some time. Japanese governments have long favoured the US maker, which relies heavily on three Japanese giants – Mitsubishi, Kawasaki and Fuji Heavy Industries – for parts and finance.
Nishikubo says he pays no attention to those issues. “Airlines have to buy planes to do business,” he says. “The A380 is about the same price and size as the Boeing 777 and also has four engines, so I don’t know why the decision has caused such a fuss. I don’t understand the politics of Airbus versus Boeing.”
The core of Skymark’s fleet will still be Boeing 737s, he continues. “We’re simply trying to build an airline business late in the game and what happened before us is not relevant,” he says. “For me it’s about the same as choosing between a Mercedes and a BMW – they’re both good cars.”
So why opt for Airbus? Apart from the news value, the A380 is a “very smooth ride,” he says. “It’s fast and at the technological cutting-edge. I’ve been a passenger and the attention to cabin comfort is very impressive. Once you’ve tried it, other planes pale in comparison. That’s very important in Japan. If you filled the A380 with economy seats you could fit 853 people. We intend to put in half that number, for the sake of comfort.”
Nishikubo says he admires Ryanair’s low-cost no-frills approach, but has no plans to emulate it. “I’ve been on their planes. The people who ride those planes understand that they’re getting the service they pay for: for example, you can’t recline your seat or adjust a service tray. But you can’t adopt that approach with Japanese customers. They want good service.”
The former computer entrepreneur certainly talks a good fight. But the Airbus purchase will set his company back $1.5 billion (€1.1 billion) and he has ordered another 25 planes in addition to the 18 in his company’s existing fleet.
The A380s are scheduled to begin flying the Tokyo-London route from November 2014, competing against Virgin Atlantic, British Airways, All Nippon Airways and Japan Airlines, taking Skymark far from its origins as a modest domestic carrier.
Not surprisingly, some analysts say Nishikubo may be heading for a fall. He says the company is not overreaching.
“It’s true that we’re smaller than the two big Japanese airlines but we’re growing tremendously fast,” he says. “Four years from now, we’ll probably have 40-50 aircraft in our fleet. Our business results are good – we made a profit of nine billion yen last year and we expect to top that next year. We hold eight billion yen as dollar cash reserves. And our share price has since bounced back. We’re not worried about financing.
“Others may have pigeonholed low-cost airlines as focusing only on domestic routes using a single type of aircraft, but we never thought like that at all,” he adds. “We’re just concerned about how to grow our business. If you look at Ryanair and Easyjet in Europe, they’re covering a very wide area. Japan is far too small to sustain a business like that.”
The lack of competition on international business routes in Japan will be key to Skymark’s success, he says. “A full-price ticket from Narita to London is 1.11 million yen (€9,700). We can do that for half: from 200,000 to 500,000 yen. Analysts think that our plans to buy Airbus are out of whack with our small size. But we don’t agree with that at all. Whether we buy Airbus or Boeing, the risks are about the same.
“Of course we understand that there are risks. But I believe these are the kind of challenges that should be taken on by an airline company.”