Aloft on Northern Zephyrs
Chapter 55
The fate of several companies changed significantly when the Hokkaido Development Bank avoided bankruptcy. One such company was just about to spread its wings.
"Please proceed with the ribbon-cutting!"
Smiling, I participated in the ceremony at New Chitose Airport, cutting the ribbon in front of me. Next to me was a yellow mascot from a local TV station, holding scissors and making a hissing sound... wait, how can it even hold scissors?
The ceremony celebrating the launch of the budget airline "AIRHO" on the Chitose-Haneda route was held grandly with members of the Hokkaido business community in attendance.
The Chitose-Haneda route is renowned worldwide for its high profitability. However, the high fares resulting from the Japanese airlines' monopoly led to discontent within Hokkaido, prompting the establishment of a low-cost airline venture. While the procedures progressed smoothly thanks to the government and Hokkaido locality's support as part of deregulation initiatives, funding was a major issue. Banks, already preoccupied with bad debt issues, were reluctant to lend capital.
In the aviation industry, success requires massive capital investment, primarily because airplanes are extraordinarily expensive, costing at least 10 billion yen each. Although AIRHO planned to operate by leasing aircraft, a price war with other major airlines forced them into a competition of endurance, eventually leading to financial difficulties. I decided to intervene in AIRHO’s case by using Ichijou and Tachibana to apply for financing from Keika-in Bank.
"It's not a bad idea, but the major airlines will soon lower their prices to compete. If it turns into another battle of endurance, we’re sure to lose."
"So, should we decline this loan application?"
Ichijou’s confirmation was met with a shake of my head as I sipped the grape juice on the table and spoke.
"I don’t want to crush the budding new industry in Hokkaido. Akamatsu Trading has connections regarding aircraft, right? With the Asian financial crisis, there should be aircraft that were canceled for Southeast Asian countries. Buy those models. If business improves, we can buy them outright. Even if we withdraw, Akamatsu Trading can resell them."
These canceled planes can often be purchased at significantly reduced prices. Akamatsu Trading would buy the aircraft and then lease them to AIRHO, which will allow us to control the cash flow.
"The main point is to lower prices, right? It’s better to join forces rather than go solo. At this point, we can sell it to a major airline for a high price. Propose a code-share* agreement to various airlines."
[T/N- A code-share agreement is a partnership between two or more airlines where one airline (the marketing carrier) sells seats on a flight operated by another airline (the operating carrier) under its own airline designator and flight number. This allows airlines to offer more destinations and flights without having to operate the aircraft themselves.]
Code-sharing means operating joint flights. For us, it means using the sales channels of major airlines, while for them, it means utilizing the scarce Haneda Airport slots.
Additionally, aligning our sales systems and boarding procedures with the major airlines would make things much easier.
"And we’ll enter the cargo business sooner or later. Delivering Hokkaido products to Tokyo quickly is very appealing. Don’t forget to pitch to travel agencies. Arrange for them to create packages allowing customers to enjoy Hokkaido resorts at a slightly lower price using AIRHO."
Since AIRHO’s hub was in Chitose, planes needed to be flown to Haneda early in the morning, often with empty passenger and cargo spaces.
By targeting the Teisei Department Store Group with fresh produce and specifying shipment destinations, Hokkaido producers could confidently send their goods.
While individual efforts might be tough, a coordinated plan could work.
"Ojou-sama. I contacted Akamatsu Trading, and they mentioned four new American aircraft are available. However, one of them..."
In the hangar at New Chitose Airport, accessible only to authorized personnel, I looked up at the brand-new AIRHO aircraft.
"Oh, a business jet, huh?"
AIRHO established a code-share and business partnership with the major airline Imperial Aviation and began operating the Chitose-Haneda route at 30% lower prices. With that, Imperial Aviation gained the ability to handle budget airlines, and we secured the support of a major airline.
Sales and maintenance were outsourced to Imperial Aviation, resulting in fully booked flights, with even waiting lists on all routes. The waiting passengers could be accommodated on Teikoku Air flights thanks to the code-share.
"Yes, according to Akamatsu Trading, it was a custom order for a Southeast Asian tycoon, canceled due to the Asian financial crisis. We negotiated the price down to 35 billion yen from 50 billion yen for four planes."
Climbing up the steps, I entered the aircraft. The interior was unlike any plane I had ever seen.
"Wow. This isn’t like any plane I know."
Ichijou and Tachibana, following me, smiled wryly. Ichijou gestured further inside, and as I moved forward, I found a lounge area, and in the back, there was a rest chamber.
"This aircraft’s range allows it to fly directly to the East Coast."
Sleeping in the onboard bed and waking up to the skies of Europe or America—how luxurious.
"But the maintenance must be quite expensive, right?"
"Yes. It might be tough for even you, Ojou-sama, to maintain it individually."
"However, I believe it’s worth holding onto for Ojou-sama. We have several invitations from Silicon Valley through the 'Moonlight Fund'. It could also be used for entertaining them."
Tachibana expressed concerns, while Ichijou gave a positive evaluation of the aircraft. I understood why their opinions were divided, and they sought my decision.
"Alright, we’ll keep it. Can it be used for cargo?"
"It doesn’t seem to have been modified for that."
"Apply for a cargo license for Chitose-Narita."
"Isn’t it a waste to use it as regular cargo?"
Tachibana responded to my query, and Ichijou raised a concern this time. I jumped onto the luxurious, soft bed like a child.
"We’ll use a different plane for cargo. But it’s a hassle to come all the way to Chitose just to use this. Since Haneda slots are full, only Narita can accommodate this type of business jet. We’ll secure the Narita slots with cargo flights. Hopefully, renting it out can recover some costs."
Unexpectedly, due to the presence of a financial and aristocratic society, its demand was already high, and as soon as we started renting it out, it was fully booked. The elites would fly by helicopter to Narita and then enjoy this flying hotel to Europe or America..
If I'm not mistaken, Runa probably heard "Watch out for football, the kickoff is approaching" live.
【AIRHO】
At this time, it will collapse a few years after its launch. The survival of low-cost airlines heavily depends on financial backing. Although its inaugural flight is set for the end of 1998, setting it up for a launch before Golden Week with smooth funding.
【Local TV station Mascot】
Naturally, Keika-in Group, or rather Runa, is the title sponsor.
【This time’s aircrafts】
Boeing 737-700. There is a business jet type, so it was decided on this. Apparently, Air Do also owns one in reality.
6/24
After feedback, the business jet is changed to the 737-700ER type. Probably, its modification led to the creation of the ER type, thus avoiding a timeline inconsistency.
【Imperial Aviation】
A blue airline company. Of course, Runa knows that JAS will be absorbed by JAL, which will then go bankrupt.