Oct 9, 2013

JAL, Airbus discuss A350 order at joint press conference

From second from left: Volker Stanzel, German Ambassador to Japan; Hans Dietmer Schweisgut, EU Ambassador to Japan; Fabrice Bregier, president and CEO of Airbus; Yoshiharu Ueki, president of JAL; Christian Masset, French Ambassador to Japan; and Miguel Angel

Yoshiharu Ueki, president of Japan Airlines, and Fabrice Bregier, president and CEO of Airbus, held a joint press briefing on October 7 in light of the decision by the former to introduce A350 aircrafts to serve as the successors of the airline's B777 planes. Ueki claimed that the new aircrafts will be rolled out to JAL's fleet in/after 2019, adding that, "We took a comprehensive account of the performance of the aircraft, including its safety, as well as the quality of its materials, its high economic efficiency, the comfort of our customers and the global environment, among other things." Meanwhile, Bregier considered the new deal as a sign of a breakthrough into the Japanese market that had been so far been monopolized by Boeing.

With regard to the introduction of the A350 aircrafts at JAL's cargo/postal headquarters, Ueki had this to say: "With advanced safety and materials that can endure long-term use, we have such high expectations that we can build a cargo business with these new aircrafts that are able to achieve improved fuel consumption. The A350s offer the same amount of space as the B777s, so we hope to utilize their belly spaces in continuously providing our customers with high-quality cargo/postal transport services."

The number of LD3 containers that can be loaded is the same for the A350-1000 and the B777-300ER aircrafts at 44 units. Now JAL has decided to order 18 units of the A350-900 and 13 units of the A350-1000 aircrafts, with an option to purchase 25 more aircrafts in the future. The aircrafts were purchased at the catalogue price of about Y950 billion.

The first flight of the A350XWB (Extra Wide Body), which is being developed by Airbus, took place in June 14 this year. Of the A350XWB series, the first A350-900 units are slated to be delivered to Qatar Airways in the latter half of next year after the aircrafts obtain the necessary type certification from the European Aviation Safety Agency (EASA) and the Federal Aviation Administration (FAA). The A350XWB uses new materials for more than 70% of its body, including composite materials (accounting for 53% of the new materials), titanium and the latest type of aluminum alloy. The chassis of the aircraft will utilize carbon fiber reinforced plastic (CFRP), thereby boosting fuel efficiency and facilitating maintenance. Pilots will be able to fly the three types of aircrafts with the same license for all three units. Compared to the B777 and B787 aircrafts, the A350 has 25% and 6% better fuel performance, respectively.

As of the end of September this year, orders for the A350-class aircrafts totaled 725 units worldwide, comprising 89 units of the A350-800, 473 units of the A350-900 and 163 units of the A350-1000. JAL owns 46 B777 series planes as of the end of June, which broke down to 13 units of the B777-300ER, seven units of the B777-300, 11 units of the B777-200ER and 15 units of the B777-200.

With regard to JAL, the Civil Aviation Bureau of Japan's Ministry of Land, Infrastructure, Transport and Tourism (MLIT) decided about the action toward the corporate revival of JAL on August 10, 2012, formulating measures to ensure that the reconstruction of JAL steadily progresses in compliance with the general purport of public support. The Bureau vowed to seek reports and monitor the status of new investments and flight launches of JAL under its investment/flight plan on a regular or on an as-needed basis during the period covered by the JAL Group's management plan (for fiscals 2012 through 2016).

Salient points made by the two top executives of JAL and Airbus are as stated below.

[Pres. Ueki]

*With regard to the successors of the B777 aircrafts in our fleet that need to be upgraded one after another beginning 2019, we chose the next-generation A350 aircrafts after taking a comprehensive account of the performance of the aircraft, including its safety, as well as the quality of its materials, its high economic efficiency, the comfort of our customers and the global environment, among other things. This is the first time that we are ordering Airbus planes after the integration of JAL and Japan Air System, while it is also the first time for Airbus to book an order for A350 aircrafts from a Japanese airline company. We decided on the number of aircrafts to be introduced to our fleet and the timing of such rollout based on the business environment surrounding our company, the demand trend among our customers, competition with our rival companies, the market trend for aircrafts and so on. The target is to introduce the aircrafts into our operations by 2019 and for that end, we are advancing the preparations together with Airbus toward the upgrade of our fleet in the next six years or so.

*The introduction of the A350 aircraft is a fleet upgrade that is necessary for any airline company. This is an indispensable business investment.

*We took a comprehensive look at the economic efficiency of the aircrafts, which include their advanced level of safety, the quality of materials used on the planes that can endure long-term use and the support from the manufacturer after procurement of the planes, as well as the timeframe of upgrades on our existing aircrafts.

*At present, we do not own even a single Airbus plane that is bigger than small-size aircrafts. Our entire group has about 220 aircrafts and if we introduce the A350 units, they would account for about 15% of our total fleet. Basically, we plan to have the A350s take over the flights of the B777s. But since the environment also changes, we will determine and announce the flights and courses that these aircrafts will take on at the soonest possible time.

*As regards the paper released by the MLIT on August 10, it certainly contained a report related to investments. We have already submitted our report to the MLIT. However, our basic stance is that we have partner companies in our investments and there are many highly confidential matters, so we are aware that they understand that it is quite difficult for us to consult them in advance. With regard to the concept of right and wrong in relation the restrictions on corporate activities, I do not think that we engage in investments that will receive suppressive judgment even with the presence of reports and monitoring. While it has only been three years since we went under, we thank everybody in the world. However, our recent investment is necessary in continuing our business and we need the A350s to succeed the B777s in our fleet, so we hope you understand this move of ours.

[CEO Bregier]

*I have experienced being posted in Japan, so this recent order has a strong personal meaning for me. It is the start of a new chapter in our relationship with JAL. We will build a bright future for a long period of time. For Airbus, this order from JAL is the largest order we have received so far this year. It also represents the biggest volume of order from any airline company in Japan. We have booked orders for 756 units of the A350 series from 38 customers, so things are going in track for us. We are excited about the time when our A350 planes fly with the JAL logo on them. There is a strong impression in Europe that JAL has rebuilt over such a short period of time from its restructuring process. Now we have received an order from an airline company that values quality and does not compromise on service quality. The relationship of Japan and the European Union (EU) is also a positive factor in this order.

*The Japanese market is an important market as it is one of the 10 biggest markets worldwide. This recent order from JAL is a sign of breakthrough into Japan. It is also a sign that we have the best product.

*(About the lack of orders from Japanese-affiliated airlines thus far) It is difficult to judge about the past. Since I assumed the position of CEO in June 2012, I have endeavored to provide explanations to Japanese airline companies. It is thus understandable that the A350 aircraft was selected because we have the best product around. The A350-900 and A350-1000 aircrafts are the perfect successors for the B777s. In the past, we did not do the thing that we had to do - gaining their trust.

*The world is changing. The competition among manufacturers and airline companies has become open. Airlines have to compete with various other airlines worldwide and for that, they must choose the best aircrafts.

*The European Commission (EC) and the Japanese government are advancing negotiations on Free Trade Agreement (FTA), but the order for the A350 aircrafts is a major signal. It is symbolic of the progress of liberalized trade in the aviation industry.

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