THE ASAHI SHIMBUN
June 1, 2021 at 19:02 JST
Two regional airlines battered hard by the pandemic will merge next year to shed billions of yen in annual costs, but will maintain separate business operations to hold onto key flight slots to Tokyo.
The move by Sapporo-based Airdo Co. and Miyazaki-based Solaseed Air Inc., announced on May 31, is intended to cut costs through joint procurement of fuel and supplies, as well as through streamlining back-office operations, including human resources and financial affairs.
They aim to slash 3 billion yen ($27 million) to 5 billion yen in annual costs within four to five years after the merger, which is planned to take place in October 2022.
“There are limits to what we can do individually,” Susumu Kusano, president of Airdo, said of the difficulty of weathering the health crisis at a news conference in Sapporo on May 31. “The coronavirus pandemic spurred us to start talks (about merging).”
The two carriers will continue to operate under their current names.
They will hammer out details on setting up a joint holding company, including management setup and investment ratio, in talks over the coming months.
But the airlines said they will not work on a joint business strategy for their core operations, such as a network of their services, fares or arrival and departure times.
That is because integrating their business operations could force them to reduce flight slots at Haneda Airport in Tokyo--their cash-cow routes--in a possible breach of government regulations.
“We will continue to have independence as regional carriers,” Kosuke Takahashi, president of Solaseed Air, said at a news conference in Miyazaki the same day.
But it is not clear if the merger can achieve the intended result, according to airline analyst Kazuki Sugiura.
“The positive results could be limited as the scope of their collaborations is limited,” he said.
The two airlines both reported net losses for the fiscal year ending in March: 12.1 billion yen for Airdo and 7.6 billion yen for Solaseed Air. It was the largest deficit growth ever for both airlines.
The Development Bank of Japan, the largest shareholder of the airlines, and regional banks will inject 7 billion yen in funding into Airdo and 2.5 billion yen into Solaseed Air in return for preferred shares issued by the carriers.
Airdo serves 10 routes, many of them linking New Chitose Airport with other cities in Hokkaido and the main island of Japan.
Solaseed Air flies 14 routes, including those connecting major cities in Kyushu with Haneda Airport and Naha Airport.
The two carriers are affiliated with ANA Holdings Inc.
Rival Japan Airlines Co. has announced plans to bolster its investments in budget carriers transporting tourists, anticipating that business travelers will not return anytime soon, even after the pandemic is brought under control, as teleworking takes root.
(This article was compiled from reports by Shinya Matsumoto, Aki Sato and Takehiro Tomoda.)
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