West Japan Rail to Double Bullet Trains

West Japan Railway Co. (9021) has spent 30 billion yen ($388 million) to double the number of bullet trains on its most profitable route to compete with airlines serving the island of Kyushu.

The company will add 10 new locomotives on its only bullet- train line by the end of March, Managing Executive Officer Tatsuo Kijima said in a Nov. 10 interview in Tokyo. The trains will make the 933 kilometer (580 mile) trip from Osaka, the biggest city in western Japan, to Kagoshima in the south using an extension that opened in March.

“We are now in the position to rival the airlines,” Kijima said. “Increasing the number of trains will make the journey even more convenient.”

JR West aims to boost its share of travelers between Osaka and Kagoshima by 10 percentage points to 50 percent, helped by the new track cutting an hour off the rail trip, Kijima said. Demand on the line and a quicker-than-expected travel recovery following Japan’s March earthquake have already caused the company to twice raise its annual profit forecast.

“After the earthquake, we were pessimistic and thought the effects would last till the end of the fiscal year,” Kijima said. “But now we think there will not be much of an effect in the second half.”

Profit Forecast

JR West fell 0.9 percent to 3,275 yen as of the 11 a.m. break in Tokyo trading. The Osaka-based company has risen 7.9 percent this year, compared with a 7.8 percent decline for East Japan Railway Co. and 16 percent drop for the benchmark Nikkei 225 Stock Average.

JR West expects to post net income of 40 billion yen in the year ending March 31. Sales may rise to 1.28 trillion yen. The rail operator doesn’t have any lines in eastern Japan, so its operations weren’t directly affected by the March quake and tsunami.

“If JR West increases its high-speed train fleet and adds to the ease of use, they should be able to increase their market share as well,” said Ryota Himeno, an analyst at Mitsubishi UFJ Morgan Stanley Securities Co. “In the past, Central Japan Railway Co. managed to grab market share from the airlines” by adding stops and boosting the frequency of services, he said.

The company charges 21,600 yen for reserved seats on its fastest train from Osaka to Kagoshima, a trip that takes 3 hours and 45 minutes, according to a statement. Airline tickets cost an average of 26,800 yen for a journey that takes 3 hours and 10 minutes from the center of Osaka to the center of Kagoshima, according to JR West.

To contact the reporters on this story: Cheng Herng Shinn in Tokyo at Hcheng52@bloomberg.net; Kiyotaka Matsuda in Tokyo at kmatsuda@bloomberg.net

To contact the editor responsible for this story: Neil Denslow at ndenslow@bloomberg.net.

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