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Japan Airlines SWOT & PESTLE Analysis

ID : 52347553 | Jan 2018

COMPANY PROFILE - Japan Airlines

Business Sector : Airlines

Operating Geography : Japan, Asia

About Japan Airlines : Japan Airlines Co., Ltd. (JAL) is one of the major flag carriers in Japan with main hubs at Tokyo’s Narita International Airport, Tokyo International Airport, Nagoya’s Chubu Centrair International Airport and Osaka’s Kansai International Airport. Operating with a large fleet of narrow and broad aircraft, JAL has a large domestic network with regional and international routes to Europe, Canada, the United States, South America and Australia. It is the flag carrier airline of Japan and the second largest in Japan after formidable All Nippon Airways. It is headquartered in Tokyo, Japan. JAL group companies include Japan Airlines, J-Air, JAL Express, Japan Air Commuter, Japan Transocean Air and Ryukyu Air Commuter for domestic feeder services; and JAL Cargo for cargo and mail services. Its plans to partner with AeroMexico will increase the airline reach to Mexico in 2018.

Japan Airlines Revenue : 1.288 trillion JPY Mar 2017

Competitive Analysis of Japan Airlines

The SWOT analysis of Japan airlines explores the strengths, weaknesses, opportunities and threats of Japan Airlines, one of the flag carrier airlines of Japan. These encompass both the internal as well as external factors which affect the company. The airlines biggest strength is its vast reach across a number of Asian, European as well as American countries which grants it significant competitive advantage over the other airlines operating in the global arena. However, Nippon Airlines, its biggest competitor with a 26.2% market share continues to be a threat:

Strengths
Weaknesses
1. Strong growth in Reinsurance solutions
2. Double-digit growth in earnings per share
3. Strong growth in Data and Analytics service
1. Increase in debt
2. Financial risks due to currency fluctuation
Opportunities
Threats
1. Growth in US homeowners' insurance
2. 'Open architecture innovation' will be acting as a growth driver
3. Integrate Artificial intelligence and Machine learning
1. Increase in the number of natural disasters
2. Reduction in US vehicles insuranace premiums due to Autonomous vehicles

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Detailed SWOT Analysis of Japan Airlines

 

Strength

1. Strong presence in domestic and international market: JAL operates in around 682 routes including the code- sharing of which 143 routes are domestic and 571 routes are International. JAL has a presence in around 56 countries majorly in Japan, USA, China, Australia, Russia etc. It serves around 344 airports in these 56 countries of which 59 airports in Japan and 99 in USA contribute the most.

2. Home market has high affinity for Japanese carriers: In most markets, the domestic population tends to favour domestic airlines. In Japan, this is true in the extreme. The local market has a very high affinity for Japanese carriers that translates to a strong yield premium over foreign airlines. Even if the market receives cost-effective transport options and Japan continues to examine its financial state, this advantage will not diminish, and continues to persist at strong levels.

3. JAL is a member of Oneworld alliance: Japan Airlines code-shares with oneworld partners American Airlines, British Airways, Cathay Pacific, Finnair, Iberia, LAN, Malaysia Airlines, Qantas (including Jetstar), Qatar Airways and S7, and has additional commercial agreements with some 15 other airlines, including Air France, Air Tahiti Nui, China Airlines, China Eastern, China Southern, Emirates, JetBlue, Jetstar, Korean Air, Thai Airways and WestJet. When flying with oneworld alliance partners, members can enjoy reciprocal benefits including use of exclusive check in counters and lounge access depending on their oneworld Tier Status. Members must show their status cards at check in. Frequent flyers can enjoy a wider service offering across all alliance partner airlines. In addition to JAL Group airlines miles, miles earned on oneworld member airlines will also be counted as FLY ON points for the FLY ON Program, giving you more opportunities to qualify for FLY ON status. When your top tier status is equivalent to oneworld Ruby, passengers are entitled to access to Business Class priority check-in, access to preferred or pre-reserved seating, priority on waitlists and when on standby. This gives JAL a greater competitive advantage over its rivals.

4. Domestic Japan is a high yielding market: Local air fares in Japan are some of the highest in the world, and All Nippon Airways derives a disproportionately large part of profit from its domestic network. This provides stability that is likely to continue as the inroads by competitors like Skymark and the more recent LCC entrants have so far been modest. ANA and JAL have flagged long-term domestic capacity decreases. Capacity discipline could address weakened demand.

5. Large fleet portfolio: It has total fleet of around 227 aircrafts of which 84 are international and 143 are domestic. They are present in different sizes i.e. 40 large sized, 70 middle sized, 64 small sized and 56 regional aircrafts. It has 171 Boeing aircrafts of which 31 are leased and 140 are owned by the Company. In addition to this, they own 19 Embraer aircrafts, 25 Bombardier aircrafts and 12 Saab aircrafts. This accounts for a strong fleet strength which Japan Airlines uses quite prudently.

Weakness

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Opportunity

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Threat

1. Fuel price and Foreign exchange is highly volatile: A major concern is the fuel price which is highly volatile. Singapore kerosene has increased from 57.2 usd/bbl to 66.0 usd/bbl. Dubai Crude Oil has increased from 45.6 Usd/bbl to 53.0 usd/bbl. FX rate has also increased from 108.6 jpy/usd to 115.0 jpy/usd.

2. Increasing competition from Competitors: All Nippon Airways is the market leader in Japan with 26.2% market share and then comes Japan Airlines with 20.7% market share. Market share of ANA has significantly increased in the last 5 years whereas JAL’s market share is almost stagnant making this a potent area of concern. Lots of other small airlines also compete significantly by offering reduced competitive prices. Skymark Airlines, Vanilla Air, Peach Aviation etc. are some of the other competitors. Japan's ambitious inbound tourism goals are accompanied by increasingly liberal aviation policies. Several open skies agreements have been concluded with near neighbours and the US and more will be needed to encourage the sort of growth needed. Until Japan Airlines is able to improve its inbound marketing and sales capabilities these moves will work to support foreign airline entry, undermining All Nippon Airline's growth strategy. China’s airways are also coming up with significant global potential and will increasingly transfer to 6th freedom traffic flowing structure from Japan's long-haul markets as their range of foreign spots improves.

3. Political tensions between Japan and China: Relations between China and Japan, the world’s second and third largest economies, have remained sour by a long drawling dispute over a constellation of islands under Japanese control, and the surrounding waters. These islands are of special interest for abundant oil, rich natural gas resources, rich fishing grounds and significant shipping ports. The US Energy Information Administration predicts that the East China Sea has between 60 and 100 million barrels of oil, whereas Chinese investigations claim that untapped resources could run as high as 70 to 160 billion barrel. These disputes is a major threat to JAL and the airlines are facing challenges in flying over the East China sea to ferry passengers.

The Challenges faced by Japan Airlines are explained in detail through this PESTLE/PESTEL analysis. The macro environmental factors as well as micro environmental features are discussed here and include the political, environmental, social, economic, technological, legal and environmental aspects which affect the company’s growth and operations. As countries like India, China and Vietnam continue to exhibit growth, Japan Airlines can use the opportunity to increase market share. Its target focus on elderly people is also an important strategy that it follows. Find below the competitive analysis of the external environment for Japan Airlines presented in a matrix followed by the complete Pestle Analysis report:

Political
Economical
1. MLIT certified 27 regional airports as Inbound Promotion Airports.
2. Clashes between North Korea and Japan affected Airline Industry
1. Developing Economies are showing considerable growth
2. Oil price in the future are going to rise.
3. Sino-Japanese tensions in the East China sea
Social
Technological
1. Tokyo Olympics and Paralympics in 2020
2. Ageing Population
1. Easy to use Apps
2. Target Older Consumers
3. Wi-Fi and Stan Streaming to enrich Customer Experience
4. Investment in advanced technology
Legal
Environmental
3. Investment Restrictions have been lifted1. 2016 Earthquakes
2. JAL Group carbon offsets.
3. JAL led the way for forming INAF
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Detailed PESTLE Analysis of Japan Airlines

 

Political

1. MLIT certified 27 regional airports as Inbound Promotion Airports: MLIT (Ministry of Land, Infrastructure, Transport and Tourism) certified 27 regional airports as Inbound Promotion Airports in July 2017. MLIT will provide these airports with financial incentives as it seeks to encourage inbound tourists to visit new regional areas. These include discounted landing fees and financial support for expansion in facilities and route slots. MLIT is particularly keen to encourage Japan Airlines to offer more international flights to and fro from these regional airports, in order to ease the pressure on major international airports such as Narita and Osaka.

2. Clashes between North Korea and Japan affects Airline Industry: In August 2017 North Korea announced a plan to launch ballistic missiles over Japan into waters near the U.S. Pacific island of Guam. In the summer holiday period the number of passengers on flights of Japan Airlines reduced by almost 3%. It is clearly evident that a missile threat from North Korea has reduced the passengers from coming into Japan. People may refrain from travel if tensions between both the countries increase.

Economic

1. Developing Economies are showing considerable growth: India is growing at a rate of 7.1%, China’ economy is growing at a rate of 6.9%, Vietnam is growing at a rate of 6.2% etc. These figures clearly show that there is so much scope in these developing nations. Increasing presence over here will help Japan Airlines to gain a substantial global market share and gain a competitive advantage. Asia is posed to be the biggest growth market for the airline industry; analysts predict 41,000 new global aircraft purchases for the term of 2015-2034, amounting to $2.83 trillion.

2. Oil prices are going to rise: This will increase the airfare cost for passengers and will force them to think on alternative modes of transportation especially in domestic airlines. Singapore kerosene has increased from 57.2 usd/bbl to 66.0 usd/bbl. Dubai Crude Oil has increased from 45.6 Usd/bbl to 53.0 usd/bbl.

3. Sino-Japanese tensions in the East China sea: Relations between China and Japan, the world’s second and third largest economies, have remained sour by a long drawling dispute over a constellation of islands under Japanese control, and the surrounding waters. These islands are of special interest for abundant oil, rich natural gas resources, rich fishing grounds and significant shipping ports. The US Energy Information Administration predicts that the East China Sea has between 60 and 100 million barrels of oil, whereas Chinese investigations claim that untapped resources could run as high as 70 to 160 billion barrel. These disputes will impact JAL and face challenges in flying over the East China sea to ferry passengers.

Social

1. Tokyo Olympics and Paralympics in 2020: Japan Airlines will benefit from expansion at Haneda Airport ahead of the Tokyo Olympics and Paralympics in 2020, with an increase in departure and landing slots. On the whole, this will result in the airport gaining an estimated seven million international additional passengers annually, of which three million will be inbound tourists. The allocation of these additional slots will be an advantage to the increase in Japan Airlines Market Share, particularly in terms of daytime slots. JAL in particular is likely to push for slots, as it was unable to capitalise on the airport's previous expansion in late-2010 due to constraints over investment following its bankruptcy. The airline will thus be keen to make up lost ground in terms of its share of international flights.

2. Ageing Population: Japan makes the elderly an increasingly important target group. Older consumers also have more free time and fewer financial concerns than working age adults and are thus more likely to spend on travel. There is an increase in no of people over age 65 by 4.3% y-o-y. So this makes older population an important segment to target. Japan’s population of 127 million is predicted to shrink by about one-third in the next three decades. Japan's birth rate also has long been significantly below the 2.1 per woman that is needed to sustain growth, it currently stands at about 1.4 per woman and the deficit isn't made up by significant levels of immigration like it is in some other nations. Nearly 33.33% of all Japanese citizens were older than 65 in 2015. Research from the National Institute of Population and Social Securities Research suggests that this number will rise to 40% by 2050.

Technological

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Legal

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Environmental

This section is available only in the Complete report on purchase.

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Japan Airlines SWOT and PESTLE analysis has been conducted by Anshul Nagar and reviewed by senior analysts from Barakaat Consulting - an Ezzi IT and Business Consulting venture.

Copyright of Japan Airlines SWOT and PESTLE Analysis is the property of Barakaat Consulting. Please refer to the Terms and Conditions and Disclaimer for usage guidelines.