INTRO: As the second JR company to achieve a listing on the Tokyo stock market, JR West is beginning to sever the links that tie it to government control. Chairman Masataka Ide was interviewed by Murray Hughes in Okayama
When JR WEST was listed on the Tokyo stock market on October 8 last year, it became the second of the three JR companies on Honshu to loosen its ties with government. Meeting JR West President Masataka Ide in Okayama just before his elevation to Chairman on April 1, I asked him what benefits the listing had generated and how the first step into the private sector would affect JR West’s future.
Ide said that the stock market listing was ’a natural milestone’ that had now been passed, and that JR West ’is on the way to becoming a mature private sector company.’ There were two important effects: ’The first is psychological; the Tokyo stock market is very prestigious, and our listing has conferred a higher status on our staff. The second is practical - we have more freedom to fund our own projects.’
There are other effects too. As an organisation that was part of Japanese National Railways until 10 years ago, ’we were protected by the government. Now we are no longer dependent on that protection, and we are demonstrating our ability to operate in the private sector.’
In terms of greater funding freedom, Ide said that JR West was ’using a framework of depreciable assets to improve the company’s finances’, and was now able to take advantage of lower interest rates.
Freedom to manage, for example by setting fares levels, was another matter. ’Actually, the government has complete control’, said Ide, ’and we are still using a rate based on distance travelled. The government conducts a periodical review, and puts costs into its own calculations.’
’For example’, continued Ide, ’if the company had 10000 employees, the government might say that this could be cut to 9500. Where is the freedom to manage in that?’
Warming to his theme, Ide pointed out that consumption tax was being raised from 3% to 5% on April 1. Far from simply allowing JR West to add the tax to the fare, the government was suggesting that the railway already covered its costs well and could in fact apply a fares cut of 20%. ’So we already have price capping’, was Ide’s conclusion. He pointed out that he was leading a campaign to try and change the government’s view.
Spending plans
Asked about investment priorities, Ide said that 40% of JR West’s revenue was generated by the Sanyo Shinkansen, 40% from urban lines, and just 6% from regional and local routes. On the shinkansen, JR West planned to develop an ultra-high-speed train in the medium term - it became the first JR railway to run commercial services at 300 km/h on March 22 using the first of a small fleet of Series 500 trains. What were the aims of the ultra-high-speed project?
Ide said that he ’was not looking at anything fundamentally new - we have to extend the technologies we have at the moment. Under the JNR umbrella, our engineers said that 350 km/h was the highest possible operating speed; if we went over that limit, there would be serious adhesion problems. Meanwhile JR Central has achieved 443 km/h, so there is clearly potential to go beyond a commercial operating speed of 350 km/h, perhaps even to 500 km/h.’
Ide admitted that speeds much in excess of 300 km/h were bound to give rise to serious environmental problems. ’In Japan it is essential to remain environmentally friendly, and one of the most difficult problems to crack has been the sonic boom generated by trains entering tunnels.’ He said that this ’in practice limits speed to a maximum of 330 km/h’. He felt there was scope to increase speed to this ceiling in the medium term. Beyond that, he foresaw the day when trains would run ’at 400 or 500 km/h, but I don’t know when that will be, maybe 10 or 15 years from now.’
Super-Kodama
What were JR West’s plans to develop another generation of Kodama trains?
Ide felt that ’quality of service on Kodama trains in the past has not been good. There was a feeling that passengers on Kodama trains were less important than those on Hikari services because they were only travelling short distances. Now many people are trying to live in quiet areas away from large cities, and commuter traffic to or from office or school is increasing, with many season ticket passengers. For this reason we have to design and develop good rolling stock for commuters.’
What was the priority for investment on JR West’s conventional lines?
’Given the source of our revenues, we think it is natural and wise to spend on our urban routes’, said Ide. The biggest project for some time has been the Tozai line in Osaka which opened on March 8 (map RG 3.97 p142). JR West cannot fund everything itself, and the ´340bn cost excluding rolling stock was shared with Osaka prefecture (25%), the Osaka municipal government (25%), and the Kinki region business enterprise community. JR West’s own contribution was 25%.
Regional routes
If all the available funds were concentrated on the Shinkansen and on urban lines, did this mean that the regional and local lines were being ignored?
Ide replied that a further distinction had to be made. ’There are important inter-city routes such as Osaka - Kanazawa, and on these corridors JR West is developing and introducing new trains. The real problem lies in the really rural lines.’
For these routes Ide said that a threshold of 200 passengers/day had been set - anything less ’could not really survive as a railway. If the number of passengers falls below this level, then maybe we have to abolish the service if there is a consensus to do so among the local community. The difficulty is that the users are the socially weak, so it is not easy to withdraw services for those who need them most. The answer is to minimise the cost.’
How did he propose to do this? Ide cited an example of how changes had already been made to reduce costs at divisional and local level thanks to multi-skilling of staff. Track maintenance workers, he said, could not work early in the morning because no possessions were possible, so they were being employed to sell tickets. At the same time signalling and electrical staff were being retrained to help track maintenance staff, helping to cut possession times. ’In this way the number of staff on regional routes can be cut to one-third of previous levels’, he said. By 2005 JR West is planning to reduce its payroll to around 34000 compared with the present figure of 47000. o
CAPTION: Longest nose, fastest timing. The 300 km/h Series 500 has a 15m nose for the best possible aerodynamic performance. Chairman Masataka Ide believes that Series 500 will give JR West a competitive edge over the airlines between Osaka and Hakata
CAPTION: Opening of the 12·5 km Tozai line in Osaka on March 8 was marked by special ceremonies. The route is used by 13 trains an hour in each direction at peak periods
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