Hokkaido International Airlines, which plans to launch low-fare domestic services in Japan in 1998, has revealed bullish profit projections in only its second year of operation.
The airline plans to start operations at the end of April 1998 with a single Boeing 767-300, flying three daily services from its base in Sapporo to Tokyo's Haneda Airport. A further two daily flights to Osaka and an additional 228-seat 767-300 would be added in the following November.
Based on a projection of 60%load factors, the start-up carrier forecasts that it will accumulate losses of around ´1.7 billion ($15 million) over the next couple of year, before turning an operating profit in the financial year to March 2000 - its second year of services. It says that the start-up losses should be wiped out by 2005.
Financial analysts, however, believe that the projections may prove over optimistic. "Its cheap rates, combined with the fact that it has only been allotted three slots at Haneda Airport, mean that it will be very difficult for it to reach its target," says Naoko Matsumoto at the Merrill Lynch securities house in Tokyo.
The airline had earlier stated that it needed at least six slots at over-crowded Haneda Airport to make a profit.
Meanwhile, the airline says that it will boost its capitalisation from its current ´54 million to ´1.6 billion by the time services start in a year's time, with borrowings of an additional ´800 million, to finance operations.
Japan Airlines (JAL) has confirmed that it is likely to strike a deal with Hokkaido shortly over aircraft maintenance "and possibly other services such as ground handling". A JAL official says that the links may be "strengthened" further in future.
Source: Flight International
