The Indonesian flag carrier had sought to fly to U.S. destinations on its own for the past few years, but an inability to obtain landing slots at a Japanese airport for a stopover en route to the U.S., and subsequent financial constraints, thwarted its plans. Garuda already has a code-sharing deal with Delta Airlines of the U.S. on a route to Los Angeles via Haneda Airport, and with China Airlines for a route to San Francisco via Taiwan Taoyuan International Airport, near Taipei.
The new code-sharing arrangement with JAL will expand Garuda's U.S. business, with the deal taking effect Oct. 28. JAL will fly Garuda passengers from Jakarta to New York and Los Angeles via Narita Airport. The agreement also includes shared flights between Indonesian and Japanese cities that will give the two airlines greater access to each other's markets. The cities covered under the arrangement are Jakarta, Denpasar, Surabaya and Yogyakarta in Indonesia; and Tokyo, Fukuoka, Nagoya and Chitose (Sapporo) in Japan.
JAL said in a news release that Garuda and JAL will "ultimately pursue a joint business structure" in their respective markets.
"For Garuda, the partnership with Japan Airlines is a sign of a commitment from us to develop the traffic ... not only between Japan and Indonesia but also to the U.S. market," Garuda CEO Pahala Mansury said at a news conference on Sept. 6.
Mansury said 150,000 passengers fly every year between Indonesia and the two U.S. cities. Although Garuda's current code-share with Delta already serves the Los Angeles route, he said the new partnership with JAL is expected to give passengers more options regarding schedules and service.
Both Garuda and JAL hope to benefit from rising air travel demand in Indonesia, and Japan, in recent years, has seen a boom in visitors from Indonesia. Japan has become one of the top overseas destinations for Indonesian tourists, with the number of visitors to Japan rising 30% on the year in 2017, to 350,000. Japan remains one of the largest sources of foreign visitors to Indonesia.
For JAL, which currently operates flights from Tokyo to Jakarta only through Narita, Garuda's Jakarta-Haneda route will allow it to better serve business passengers.
"More than 1,500 Japanese companies have expanded their business in Indonesia. No doubt Indonesia is a very attractive market for our industry," said JAL Executive Vice President Tadashi Fujita. He added that with the number of Asian visitors to the U.S. growing, JAL also hopes to increase its market share for U.S. flights through the code-share with Garuda.
Mansury said that despite the agreement with JAL, Garuda will "for the time being" maintain its code-share with JAL's rival, All Nippon Airways. He said the three airlines had a combined 63% market share for the Japan-Indonesia route, and both arrangements are expected to increase this share.
The deal with JAL follows closely Garuda's announcement that it plans to end its nonstop service to London. Mansury told the Nikkei Asian Review that London is a "tough" market, and that he is considering expanding Garuda's code-share with Dutch airline KLM to serve European markets instead, in addition to Garuda's "popular" direct flight from Jakarta to Amsterdam.
Mansury, who became Garuda's president in April last year, and previously served as finance director of top state lender Bank Mandiri, has halted his predecessor's aggressive expansion plans, which were partly blamed for the airline's financial losses. Instead, Mansury has done away with money-losing routes, preferring instead to increase the frequency of profitable ones, in addition to seeking new routes to Chinese and Indian cities.