THE 1067mm-gauge conventional network, the standard-gauge Tokaido Shinkansen, which generates 80% of our operating profit, and the superconducting maglev Chuo Shinkansen now under construction. Our market area covers the main part of Japan including the three metropolitan cities of Tokyo, Nagoya and Osaka which account for approximately 60% of Japan’s population and GDP.
The Tokaido Shinkansen is a very safe transport system and a lot of passengers use it for its high standard of frequency and punctuality. Before the Covid-19 pandemic, we operated an average of 378 Shinkansen high-speed trains per day, transported 168 million passengers annually and raised operating revenues of Yen 1.292 trillion ($US 11.36bn) in fiscal year (FY) 2019. However, due to the pandemic, which led to Japan’s state of emergency and an increase in working from home, we saw passenger numbers fall drastically. As a result, passenger numbers in the first half of FY 2021 were only 30% of pre-pandemic levels compared to FY 2018 and our accounts are estimated to be in debt for FY 2021.
Though we were hit financially by Covid-19, we will do our best and figure out ways to recover from this difficult situation this year. I believe the current restrictions on meeting people in person will be lifted in the near future, but I imagine the social changes in lifestyle such as tele-working will remain. We will work to re-enforce our management strength to survive these changes.
We introduced a new style of travelling called off-peak travelling in July 2020 during the pandemic. This allows passengers to choose less busy times, locations and activities, which will offer a chance to discover something new, such as visiting the popular Kiyomizu temple at the early opening time of 06.00, or enjoying Washoku, authentic Japanese dishes in a tucked away restaurant on a small street in Tokyo. As Japanese holidaymakers tend to take holidays and move at the same time, we think this proposal might stimulate demand for travel.
Off-peak travelling allows passengers to choose less busy times, locations and activities, which will offer a chance to discover something new.
We will take on the challenge of increasing our revenue with a new perspective and flexible mindset. For example, in April 2021 we promoted a business plan package for the Tokaido Shinkansen and hotels along the Tokaido line in response to a new work style nicknamed “worcation.” We also started special business-friendly services for tele-working passengers such as providing an “S work car” in Tokadio Shinkansen trains and workspaces at big stations so that passengers can work comfortably anywhere.
Currently, through our EX internet booking service, you can book tickets online and enjoy ticketless travel. Furthermore, we will introduce a new Mobility as a Service (MaaS) service in summer 2023 so that passengers can book and pay for Shinkansen, hotels, regional transport and other plans seamlessly via the EX app and website. In addition, this MaaS initiative will provide content with special services such as entry tickets for out-of-hours admission and fast track tickets for popular facilities.
Considering the current difficult business environment, we aim to achieve annual cost reductions of Yen 80bn, which is equal to 10% of the company’s total costs over the next 10-15 years. We will try to make our business more efficient by making use of IT or other technologies, such as introducing AI and image recognition to optimise maintenance. We will continue to achieve sound business operation through these efforts.
We are promoting the Chuo Shinkansen project using the superconducting maglev system developed by JR Central to mitigate future risks such as ageing infrastructure, which has been operated on for more than five decades. We are also mitigating the risks of large-scale natural disasters, to which the Tokaido Shinkansen is more susceptible, due to the location of the line.
The opening of the Chuo Shinkansen will have a huge impact on Japan’s economy. The transformation of three metropolitan areas into one super mega region will have a significant effect, just as the Tokaido Shinkansen did in 1964.
The Chuo Shinkansen will cover the 286km between Tokyo and Nagoya in just 40 minutes compared with the current 94 minutes by the Tokaido Shinkansen. The drastically shortened journey time will bring about further convenience and development.
In July 2009, the Maglev Technological Practicality Evaluation Committee (MTPEC), a government body, acknowledged that “the technologies of the superconducting maglev have been established comprehensively and systematically, which makes it possible to draw up detailed and technological standards for revenue service.” We started construction work after the construction implementation plan was approved by the Ministry of Land, Infrastructure, Transport and Tourism in October 2014. As of September 2021, we have acquired approximately 50% of the necessary land and construction has started on terminal stations and tunnels. We will continue working to ensure safety, environmental preservation and cooperation are upheld.
On the other hand, some people say the project should be reassessed considering the advances in IT. However, I think this project will strengthen connections with people and bring about new transport demand and technological innovation. Some people may decide to move to a local area in response to a shift to tele-working, but it will be based on the assumption that they can use a transport service that is accessible to a city centre. IT and transport services complement each other, and the Chuo Shinkansen will provide people with various lifestyle choices and contribute to realising a more affluent society.
First, the railway is more energy efficient than other modes of transport and has less impact on the environment. The Tokaido Shinkansen consumes an eighth of the energy and emits one twelfth of CO₂ emissions of an aircraft. As the Tokaido Shinkansen has an environmental advantage, it will lead to global environmental conservation if many people choose to use the railways, thus lowering the overall environmental impact of the entire transport sector.
We have electrified nearly three quarters of our operational network. About 95% of our CO₂ emissions are indirectly emitted when electricity is generated and the remaining 5% is emitted directly by diesel trains.
In order to reduce our environmental burden, we are actively developing and introducing energy-conserving rolling stock. On the Tokaido Shinkansen, we introduced the Series 300 in 1992, the series 700 in 1999, the series N700 in 2007, the series N700A in 2013 and N700S in 2020. We consumed around 32% less energy at the end of FY 2020 compared with FY 1990 by improving energy consumption efficiency.
A new type of conventional commuter train, series 315 built by Nippon Sharyo, will replace the current series 211 at the end of FY 2021. The new train will reduce energy consumption by approximately 35% compared with its predecessor.
To further reduce our CO₂ emissions, we are going to introduce a new conventional line train, series HC85 also built by Nippon Sharyo, in FY 2022, which employs a hybrid system using batteries. Series HC85 will reduce diesel consumption and CO₂ emissions by 30% and NOx emissions by 40% compared with series 85, by using electric power charged batteries for accelerating and stopping.
In addition, we continue to make effective use of recycling and reuse of aluminum from disused Shinkansen rolling stock. For example, at Tokyo station, recycled aluminium is used for building pillars and shop front decorations along the concourse. We also provide British cosmetic brand The Body Shop with recycled aluminum for their interior furniture at Takashimaya department store in Nagoya station. Since recycling aluminum reduces 97% of CO2 compared with producing new aluminum, we can reduce our environmental impact. We are also working to reduce food waste by installing vending machines in our station buildings that sell food nearing its expiry date.
We will promote these efforts and continue to contribute towards a sustainable society.