Every railway company must review its business structure in the wake of the novel coronavirus epidemic, which has rocked the operations of firms in the industry.
Four listed companies of the Japan Railways Group and 15 major private railway companies posted consolidated net losses for the April-June period. A sharp decline in passenger demand has resulted in a total deficit exceeding 500 billion yen.
East Japan Railway Co. (JR East), the biggest railway company, posted its biggest quarterly loss, with sales less than half of what they were in the same period last year. Central Japan Railway Co. saw its revenue decline by 70% after a huge drop in demand for its mainstay Shinkansen bullet train service.
Major railway companies in urban areas had been viewed as recession-proof because they have a steady stream of revenue from commuters and students, but the environment has changed drastically as people refrained from traveling due to the spread of infections. The impact could be long-lasting.
Railways are a key part of infrastructures that support people's lives. It is hoped that railway firms will closely examine future demand forecasts and implement structural reforms to rebuild their businesses.
Firstly, it is important to reduce costs. Fixed costs such as labor, vehicle purchases, and maintenance are high in the railway business. It is hoped that the companies will accelerate labor savings through the use of digital technology and other measures while taking all possible measures to ensure safety.
Due to an increase in the number of people working from home, the number of full-capacity trains has been low even after the lifting of the state of emergency. Passenger numbers on the Yamanote Line during commuting hours in late July were only 60% of the figures seen before the outbreak, according to estimates.
Although the unpopular crowding on commuter trains has been eased, it has taken a heavy toll on the businesses. JR East and West Japan Railway Co. are considering new fare systems depending on travel time, in which higher fares are charged when trains are crowded.
It is important to devise a fare system that will strike a balance between avoiding congestion and making profits while gaining the understanding of customers.
It might also be necessary to rearrange train schedules, such as moving up the time of final trains, as long as convenience is not compromised.
Thorough measures must be taken to prevent infections so that passengers can ride trains with peace of mind. JR East has launched a smartphone app to notify passengers of crowded conditions on trains. It is also important to try to make train passengers aware of the importance of wearing masks and refraining from talking.
It is worrisome that the coronavirus epidemic has hit commercial facilities and hotels operated by JR and private railway companies as part of efforts to diversify their businesses.
The number of foreign visitors to Japan has fallen sharply, and there is no prospect of a recovery. Railway companies should develop new enterprises outside of their core businesses that can thrive amid the epidemic.
Can companies make effective use of suburban stations and real estate holdings to support telework? Expanding business by taking advantage of the customer base of electronic money services such as Suica could also be a promising opportunity.
-- The original Japanese article appeared in The Yomiuri Shimbun on Aug. 23, 2020.
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