WEST Japan Railway (JR West), which operates a 4196km conventional 1067mm-gauge rail network in western Honshu and two standard-gauge Shinkansen lines totalling 812.6km, recorded a 3.8% increase in revenue and a 13.1% rise in operating revenue for the six months ending on September 30 2017 and is forecasting continuing growth for the year ending March 31 2018.

KIJIMA“The reasons for the growth in the first six months of the fiscal year include increased usage in response to the effect of the Kumamoto earthquake that occurred last fiscal year and increased revenue thanks to the timing of Golden Week and Obon holidays landing on fortuitous days of the week,” explains Mr Tatsuo Kijima, JR West’s president and executive officer. “Demand from both domestic and overseas tourists, and the continued effect of measures to improve the value of line sections also contributed to the increased revenue.”

JR West in cooperation with JR Central launched its Smart EX app in November which allows visitors from Australia, Hong Kong, Singapore and the United States to purchase tickets and reserve seats up to four minutes before departure for up to six people for services on the Sanyo and Tokaido Shinkansen. “With the start of the Smart EX Service, improvements to our internet reservation system, and activities promoting the use of the Sanyo Shinkansen, we forecast our highest-ever transport revenue since our company was inaugurated of Yen 864bn ($US 7.7bn) for the 2017 fiscal year,” Kijima reveals.

JR West was formed in 1987 following the breakup of Japanese National Railways and was first listed on six Japanese stock exchanges in 1996.

JR West is coming to the end of its 2013-2017 medium-term management plan which set some important strategic goals. “For our company and its core business of railways, safety is our most important management strategy,” Kijima says. “Therefore, in addition to financial indices and targets related to shareholder return, we have set objectives related to safety, as well as customer service in order to aim for customer-driven management.”

The plan includes five safety objectives:

  • zero train accidents leading to customer death or injury
  • zero industrial accidents leading to death
  • a 30% decrease in personal injuries on platforms
  • a 40% reduction in accidents at railway crossings, and
  • a 50% reduction in transport accidents caused in-company.

While Kijima says JR West is “seeing the fruits of our efforts” from implementing the plan and that steady progress is being made to achieve the 40% reduction in railway crossing accidents and the 50% reduction in transport accidents caused in-company, JR West has failed to meet its target of zero industrial accidents leading to death.

“A death was unfortunately caused by contact with a train during the period of the medium-term management plan,” Kijima says. “We will review our efforts and implement the required improvements. We are also not making much progress towards achieving our objective of a 30% decrease in personal injuries on train platforms, and will further focus on efforts to improve safety on platforms.”

On a brighter note, customer satisfaction is growing. “We have set a target score of 4.0 or above in a customer satisfaction survey with a maximum score of 5.0, in order to understand customer needs and expectations, and increase the value of what we provide,” Kijima says. “Our customer satisfaction has improved for four consecutive years to 3.91, from a score of 3.67 when the current medium-term management plan started. We aim to achieve our goal by further improving the quality of our transport and the information we provide on train delays, for example. We have also achieved our performance targets for the Hokuriku Shinkansen.”

Financial performance

As far as JR West’s financial performance is concerned, its consolidated operating revenue for fiscal 2017 under the management plan is expected to be Yen 14.2bn compared with Yen 13bn for fiscal 2016, while consolidated Ebitda is expected to grow from Yen 2.92bn in fiscal 2016 to Yen 3.3bn in fiscal 2017. “These figures have been reviewed based on progress in the plan and changes in the management environment that occurred in 2015, which is the third year since the plan started,” Kijima explains. “Regarding financial indices, we have achieved all of these ahead of schedule and are aiming to achieve even higher levels.”

The five-year medium-term management plan called for total equipment investment of Yen 984bn. “This figure can be broken down into Yen 279bn for growth investment and Yen 705bn required to sustain our current business, of which Yen 489.5bn is safety-related investment,” Kijima explains.

“Since the efforts of our current medium-term management plan are producing steady results, we plan to maintain the same basic management policy in the next medium-term management plan, and to aim for continuous growth in the long term.

“Specific strategies are currently being formulated based on changes in the external environment and the progress of efforts defined in the current medium-term management plan. Investment is also at the planning stage.”

The 230km Hokuriku Shinkansen opened between Nagano and Kanazawa in March 2015 as a continuation of the 117km Nagano Shinkansen from Tokyo, and high-speed services are operated jointly by JR East and JR West. Revenue for fiscal 2015 was forecast at Yen 30bn while the actual result was Yen 45.9bn. However, revenue has levelled off in the subsequent two years at around Yen 42bn. Compared with the previous conventional train service, the Hokuriku Shinkansen carried 295% more passengers between Joetsumyoko and Itoigawa in its first year of operation.

According to the Japan Railway Construction, Transport and Technology Agency, construction of the Kanazawa - Tsuruga extension to the Hokuriku Shinkansen is currently focusing on tunnelling and long-span bridge construction, and is on track for completion in late fiscal 2022.

Looking to the future, Kijima says JR West has been enhancing its digital technology in various areas. “We are not yet reaping the rewards at the current stage,” he admits. “But we plan to utilise the data and technologies offered by the rapidly developing digital revolution to generate value, including but not limited to solving future company issues we may face such as an insufficient labour force.”