Large jetliners have flown most of the nation’s domestic routes for years, but this is about to change.

Ahead of expanded capacity at domestic airports, the nation’s major carriers, Japan Airlines Corp. and All Nippon Airways Co., are ready to add smaller aircraft that can flexibly meet passenger needs.

“Operating a large-aircraft fleet is effective when demand is high,” but lacks flexibility when demand slackens, said Iwao Kawai, senior manager of ANA’s corporate planning section.

Out of ANA’s domestic fleet of 170 aircraft, 55 are small jetliners, with a seating capacity of about 150. It plans to raise the number of smaller jets by 2010, though it is still unsure by what amount, Kawai said.

JAL has 65 small jetliners out of 142 plying its domestic routes. It also plans to expand its fleet of small aircraft toward 2009, in line with the expansion of Haneda airport in Tokyo.

About three or four decades ago, passenger demand for trunk routes — those between major airports such as Haneda and Osaka’s Itami — increased in line with the nation’s economic growth. To meet the growing demand amid limited airport capacity, airlines used larger planes to carry as many passengers as possible per trip.

But airport capacity will be expanded in the next five years.

The Central Japan International Airport is slated to open near Nagoya in February and Kobe airport will open in March 2006. Haneda’s fourth runway is due to open in 2009, expanding the airport’s capacity by 40 percent.

Haneda’s expansion will allow airlines to increase their slots, thereby raising the number of flights they offer. Carriers do not want to miss this opportunity because airport slots are vested interests.

However, they are not expecting as much of an increase in demand as in the past, making it necessary to operate smaller aircraft to maintain profitability across the greater number of slots.

JAL and ANA have set up subsidiaries that focus on small-jet operations to minimize costs.

ANA in August set up Air Next Co., which will start serving domestic routes based at Fukuoka airport next June, using 133- or 126-seat Boeing 737-500s leased from ANA.

The low-cost carrier plans to operate seven aircraft by the end of 2008 and will take over Fukuoka- or Okinawa-based domestic routes currently operated by Air Nippon Co., a group firm.

ANA hopes the spinoff saves it 10 billion yen in expenses over the next few years.

“As we planned to increase the number of small planes, we felt the need to establish a low-cost small-fleet carrier to handle them to compete against our rivals,” Kawai said, referring to JAL Express Co., a subsidiary of JAL.

Osaka-based JAL Express, established in 1997, serves such routes as that between Itami airport and Sendai, using eight Boeing 737s.

JAL and ANA said they set up the subsidiaries mainly because they are an easy way to slash personnel and operating costs while improving efficiency.

Altering labor contracts and salary levels at the existing companies would be difficult due to strong opposition from unions, aviation critic Kazuki Sugiura said.

JAL said that by establishing the subsidiary, it was able to slash operating expenses by about 10 percent.

Pilots at the subsidiary are paid less. Between trips, flight attendants must do jobs, such as cleaning, that are usually done by other staff.

The leaner JAL Express has also maximized operations by trimming the duration each plane spends at an airport to between 20 and 25 minutes, up to 15 minutes less than aircraft from the parent company, said Fumio Tsuchiya, senior vice president of JAL Corp.

The shorter stays allow more frequent flights. JAL planes make about three round trips per day compared with four for a JAL Express aircraft of the same size, allowing the subsidiary to operate more flights at a similar cost, Tsuchiya said.

JAL Express plans to expand its operation by having four 163-seat MD-81 models transferred from group firms by the end of March 2006.

“We need to establish a cost structure to earn profit from the small-plane business,” serving routes to smaller airports, Tsuchiya said.

Sugiura said the use of subsidiaries to cut costs demonstrates the giant carriers’ desperate desire to improve earnings.

“In the past, the loss from unprofitable local routes was covered by earnings raised from serving trunk routes,” he said. “But today, as competition intensifies among the two carriers and startup airlines, JAL and ANA are compelled to make every local route turn a profit.”

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