Operating Results by Business Segment

Our Transportation Network contributes to the Development of the Community We Serve.

Transportation Operations

OOPERATINGperating RRESULTSeSULTs JR-West’s Transportation Operations segment consists of railway operations Billions of yen Billions of yen and small-scale bus and ferry services. Its railway operations encompass 18 1,000 200 prefectures in the western half of ’s main island of Honshu and the northern tip of Kyushu, covering a total service area of approximately 104,000

800 150 square kilometers. The service area has a population of approximately 43 million people, equivalent to 34% of the population of Japan. The railway

600 100 network comprises a total of 1,222 railway stations, with an operating route length of 5,012.7 kilometers, almost 20% of passenger railway kilometerage in Japan. This network includes the Sanyo , a high-speed intercity 400 50 railway line; the Urban Network, serving the –– metropolitan

～ area; and other conventional railway lines (excluding the three JR-West branch 0 07 08 09 10 11 0 offices in Kyoto, Osaka, and Kobe). In fiscal 2011, operating revenues in this Operating Revenues Operating Income (right) segment were up 1.1% year on year, to ¥806.4 billion. While demand for domestic tourism declined following the Great East Japan Earthquake, which occurred on March 11, 2011, this decline was more than offset by the revenues generated due to the strong economic recovery trend seen up until the earth- quake, which contributed to an overall rise in revenues. Operating income also increased, rising 35.3%, to ¥61.1 billion. This was largely attributable to the significant decrease in personnel expenses as a result of the completion of the amortization of net retirement benefit obligation at transition of approximately ¥30.0 billion.

18 WEST JAPAN RAILWAY COMPANY Tokyo

Shin-Kobe Nagoya Kyoto Shin-Osaka tranSportation revenueS Osaka TRANSPORTATION REVENUES Sanyo Shinkansen Billions of yen / Millions of passengersBillions of yen / Millions of passengers

Hakata 400 80 ()

350 70 Kumamoto

300 60

250 50 Kagoshima-Chuo

～ ～ 0 07 08 09 10 11 0

Transportation Revenues Sanyo Shinkansen Number of Passengers (right)

The services on the Sanyo Shinkan- Fiscal 2011 Results sen include the Group’s , , In fi scal 2011, the Company was forced and services, which it has to face the effects of the Great East offered for some time. Of particular Japan Earthquake, which occurred in interest are the direct Nozomi services March 2011. However, its impact was operated by Central Japan Railway offset by the benefi ts of a number of Company (JR-Central), which link Tokyo initiatives implemented earlier in the Station and Shin-Osaka Station. These fi scal year. These included the launch of The Sanyo Shinkansen is a high-speed Nozomi services allow passengers to direct services between the Sanyo intercity passenger service between travel on the Tokaido Shinkansen from Shinkansen and Shin-Osaka Station in Osaka and Hakata Tokyo or Nagoya to the major railway lines, which accompanied the com- Station in Fukuoka in northern Kyushu. stations along the Sanyo Shinkansen— mencement of operations on all lines of The line runs through several major cities Okayama, Hiroshima, and Hakata—with- the Kyushu Shinkansen, as well as in western Japan, including Kobe, out having to change trains. In addition, promotional campaigns highlighting the Okayama, Hiroshima, and . following the March 12 commencement comfort of traveling on the new N700 It has a total operating kilometerage of of operations on all lines of the Kyushu Series along with the convenience and 644.0 kilometers and has 19 railway Shinkansen, JR-West launched the price advantages of the Express Reser- stations, including Shin-Osaka Station. and Shinkansen services, vation and EX-IC systems. Additionally, JR-West owns the entirety of the railway which travel directly between the Sanyo there was growth in revenues due to the facilities related to the existing Sanyo Shinkansen and Kyushu Shinkansen absence of the new infl uenza epidemic, Shinkansen, and with the exception lines. These new services enable cus- which caused a decline in revenues of Shin-Osaka Station (owned by tomers to travel between Shin-Osaka during the fi rst half of the previous fi scal JR-Central), operates all of the other and Kagoshima-Chuo in as little as 3 year. As a result, total passenger-kilome- 18 railway stations. hours and 45 minutes. ters for the Sanyo Shinkansen increased 4.9% year on year, to 15,546 million kilometers. Likewise, transportation revenues were up ¥11.4 billion, or 3.7%, to ¥323.9 billion.

Annual Report 2011 19 Operating Results by Business Segment

¥ Urban N¥etwork$ Service£

society. We recognize that redoubling our station displays and in-car displays to efforts to prioritize safety and regaining provide information for passengers. We that trust is one of our highest manage- also conducted campaigns to raise ment priorities. awareness of efforts to prevent groping. Further, the renovation of Osaka Additionally, as part of the renovation Station—the largest JR-West-operated of Osaka Station, we opened a portion of terminal station—that we undertook in a structure built over the tracks for 2003 reached completion, and we were passengers to use when changing trains

tranTRANSPORTATIONsportation REVENUESRevenues subsequently able to hold the grand in November 2010. This structure was UrbanSanyo NetworkShinkansen Service opening of Osaka Station City on May 4, fully completed in April 2011. Billions ofof yen yen / /Millions Millions of of passengers passengers 2011. Osaka Station serves as the gate- In February 2011, we concluded a 350 1,500 way to the as well as the comprehensive partnership agreement gateway into Osaka itself. For this reason, with . Under this agree- 300 1,400 we hope that Osaka Station City will serve ment, we will promote initiatives geared as a new landmark in Osaka, a landmark toward deepening the extent of our 250 1,300 that embodies a sense of flair and so- “coexistence with local communities,” phistication befitting its role as a gateway. through such efforts as fostering the

200 1,200 This strong desire was a key factor in our development of urban areas around train naming of Osaka Station City. Further, it is stations. ～ ～ our wish that it will come to be loved by all In fiscal 2011, we saw revenue in- 0 07 08 09 10 11 0

Transportation Revenues who visit it as a “city” that is both highly crease as a result of absence of the new Number of Passengers (right) relaxing and convenient. influenza epidemic, which caused a decline in revenues during the first half of Fiscal 2011 Results the previous fiscal year. In addition, The Urban Network provides passenger In transportation operations, we revised JR-West worked in cooperation with local services for the densely populated our timetables in consideration of the governments, travel agents, and other JR metropolises and surrounding areas of opening of Osaka Station City in March companies to stimulate demand for Kyoto, Osaka, and Kobe. It has an 2011, increasing the number of rapid domestic tourism through various pro- operating route length of 622.0 kilometers services connecting directly to Osaka motional campaigns such as the Nara (943.0 kilometers including the three Station and beginning operation of Destination Campaign. However, the JR-West branch offices in Kyoto, Osaka, special rapid services using trains with 12 persistence of the overall slump in railway and Kobe), forming a comprehensive cars on weekends and public holidays. usage was compounded by the impact network stretching across the entire In marketing initiatives, we worked to of the Great East Japan Earthquake, Kyoto–Osaka–Kobe region. further enhance railway convenience by which occurred in March 2011. As a The Urban Network area includes launching the ICOCA direct commuter result, total passenger-kilometers for the the section of the pass service in cooperation with Keihan Urban Network (including the three between Tsukaguchi Station and Amaga- Electric Railway Co., Ltd. JR-West branch offices in Kyoto, Osaka, saki Station, the location where JR-West In customer service initiatives, we and Kobe) decreased 0.2% year on year, caused a terrible accident on April 25, bolstered efforts to help passengers use to 28,047 million kilometers, while trans- 2005, resulting in a substantial loss of the the railway more safely and more com- portation revenues were down ¥1.7 trust we have built with customers and fortably, including the use of video on billion, or 0.6%, to ¥284.4 billion.

20 WEST JAPAN RAILWAY COMPANY Boundary Stations between JR-West and Other JR Companies

Omishiotsu Shinkansen Line (Bullet Train) Intercity Lines Regional Lines

Maibara JR Kobe Line (Osaka–Himeji) Tanigawa JR (Osaka–Kyoto) Yamashina Kusatsu (Kyoto–Nagahama) Kyoto JR Tozai Line (Kyobashi–) Kameyama Shin-Osaka JR Yumesaki Line (Nishi-Kujo–Sakurajima) Aioi Himeji Kakogawa Tsuge JR Takarazuka Line (Osaka–Sasayamaguchi) Shin-Kobe Kyobashi (Kyoto–Sonobe) Amagasaki Nara Kobe Gakkentoshi Line (Kyobashi–Kizu) Nishi-Akashi Osaka Tennoji Oji Nara Line (Kyoto–Kizu)

Takada Yamatoji Line (JR-Namba–Kamo) Kansai Airport (Tennoji–) Kyoto–Osaka–Kobe Area (Hineno–Kansai Airport) “Urban Network” (Hanaten–Kyuhoji) Wakayama

¥ ¥ $ £

Other Conventional Lines

the areas it serves. However, considering duction of new-model trains with excep- that this network plays a role as a feeder tional safety and comfort on limited for Shinkansen services as well as express services that connect Osaka and functions as a vital part of the overall Kyoto to the northern Kinki region. JR-West railway network, we are working In sales initiatives, we worked to to provide more community oriented stimulate demand for tourism through the services and undertake other manage- Japanese Beauty Hokuriku campaign as ment efforts, while placing priority on well as various other promotional cam- JR-West’s other conventional lines ensuring safety. paigns conducted in cooperation with comprise intercity transport provided by local governments, travel agents, and and express services, Fiscal 2011 Results other JR companies. regional transport for commuters and In transportation operations, we imple- However, the decline in rail-side students in and around regional hub cities mented several measures geared toward populations coupled with the impact of such as Hiroshima and Okayama, and improving the convenience of train the Great East Japan Earthquake resulted local lines with low transport density. The services, such as the November 2010 in the total passenger-kilometers for other other conventional lines have an operat- introduction of the Hamakaze limited conventional lines decreasing 0.6% year ing route length of 3,425.7 kilometers. express and the December 2010 introduc- on year, to 9,020 million kilometers, while The operating environment for other tion of new train services in the suburbs of transportation revenues were down ¥1.7 conventional lines continues to be the Kyoto–Osaka–Kobe metropolitan billion, or 1.4%, to ¥119.6 billion. difficult due to the declining population of area. Other initiatives included the intro-

Annual Report 2011 21 Operating Results by Business Segment

¥ ¥ $ £

Bus and Ferry Services

The Transportation Operations segment held special events to commemorate the also includes bus and ferry services. In first anniversary of our ferry operations, bus services, we enhanced convenience marketed our ferry service to travel for customers through revised timetables companies, and took other steps to and more-flexible fare schedules. increase revenue. In ferry services (the Miyajima Line), we

future Initiatives in transportation operations

In railway operations, following the and faithfully reporting information. In railway operators nationwide. We will also commencement of services on all lines of addition, we will work to coordinate with implement other measures to enhance the Kyushu Shinkansen in March 2011, local organizations, promote regional customer service, including strengthening JR-West will establish convenient time- exchange, generate demand for tourism efforts to incorporate customer feedback tables incorporating direct-service through such means as attracting foreign in management strategies, fostering a operations on the Sanyo Shinkansen and visitors to Japan, and bolster our informa- strong customer service mindset among Kyushu Shinkansen lines. It will also tion infrastructure. In regard to transpor- employees, improving the quality of the launch the online reservation service tation IC cards (smart cards), JR-West customer service provided, as well as “e5489,” and continue to take other steps will expand alliances with private railway working in conjunction with local govern- to enhance the competitiveness of its operators and address the issues standing ments and other organizations to make Shinkansen services by ensuring the in the way of the development of services our stations more accessible with provision of high-quality customer service that are can be used reciprocally between “barrier free” facilities.

ICOCA IC Card tickets, reaching an agreement that aims to further enhance Use of the ICOCA non-contact IC card, a service introduced in railway passenger convenience by better coordinating services. the Urban Network area in November 2003, has steadily increased, Also, to coincide with the February 2006 launch of the with the number of cards issued reaching 6.01 million within the J-WEST Card, we began issuing the SMART ICOCA IC card, first seven-and-a-half years of its launch. In August 2004, we which allows cardholders to add money to their IC card without began offering reciprocal use with the IC card, issued by using cash. With the ICOCA electronic money (e-money) East Japan Railway Company (JR-East), and in January 2006, service launched in October 2005, we are working to further we began offering reciprocal use with the PiTaPa IC card, expand the number of stores in cities and towns where the issued by the Surutto Kansai Association, an organization service can be used, such as in major convenience store and composed of public and private railway operators in the Kansai restaurant chains. Previously, in March 2008, we began recipro- region. We have also steadily broadened the geographical area cal use with JR-East’s Suica e-money service, and in March in which the ICOCA IC card can be used, introducing it to the 2010, we commenced reciprocal use with JR-Central’s TOICA Okayama and Hiroshima areas from September 2007, and IC card. Further, in March 2011, we began offering ICOCA offering interoperability with Central Japan Railway Company services that can be used reciprocally with Kyushu Railway (JR-Central)’s TOICA IC card from March 2008. In addition, in Company (JR-Kyushu)’s SUGOCA service. These measures December 2009, we began discussions on tie-up services with are designed to enhance ICOCA IC card user convenience in the Surutto Kansai Association utilizing IC card passenger combination with promoting usage on railway services.

22 WEST JAPAN RAILWAY COMPANY Non-Transportation Operations

OOPERATINGperating RRESULTSeSULTs JR-West’s Non-Transportation Operations segment comprises three operations: Billions of yen Billions of yen Sales of Goods and Food Services, Real Estate Business, and Other Businesses. 500 50 Those operations contribute to the sustainable growth of the Group as a whole by vigorously taking advantage of their assets, improving services for customers using 400 40 railway services and customers in areas alongside railway lines, as well as providing high-quality services that are safe and reliable to further increase the appeal of 300 30 railway stations and earn the increased trust of customers. The Railway Operations

200 20 Headquarters and the Business Development Headquarters will increase the value of its railway belts through initiatives that entail collaboration with local communities to 100 10 develop individual railway stations and their surrounding areas. In development initiatives, our basic approach is to clarify management responsibility in order to 0 07 08 09 10 11 0 accelerate operational development and pursue development through Group companies. Operating Revenues Operating Income (right) In accordance with that approach, we will develop commercial facilities in and around railway stations as well as areas between railway stations, and conduct operations that use idle land for the development and sales of condominiums. Also, in order to foster earnings mainstays for the next generation, JR-West is furthering initiatives to create new businesses through collaborations both inside and outside the Group.

¥ ¥ $ £ Sales of Goods and Food Services

JR-West’s retail services, centered on outlets and restaurants in Osaka Station railway passengers, consist of conve- and following station nience stores, specialty stores, and food renovations, as well as the integrated and beverage outlets located in and development and opening of shops around station buildings, as well as the inside , including the small- JR Kyoto Isetan department store. scale convenience store Daily-In as well as the cafe and bakery THIRD. Fiscal 2011 Results However, regardless of these efforts, OOPERATINGperating RRESULTSeSULTs Throughout fiscal 2010, West Japan operating revenues in Sales of Goods Billions ofof yenyen Railway Isetan Limited, the main operator and Food Services were down 0.3% year, 250 10 of the new JR Osaka Mitsukoshi Isetan to ¥201.3 billion. The decrease was department store in the newly opened primarily attributable to the decline of 200 8 North Gate Building, continued to ad- revenues in its wholesale operations.

150 6 vance preparations for the store’s May Conversely, operating income was up 2011 opening. We also continued efforts 13.0%, to ¥3.5 billion, as a result of such 100 4 to make our stations even more attrac- factors as lower personnel expenses. tive. This included opening new retail 50 2

0 07 08 09 10 11 0

Operating Revenues Operating Income (right)

Annual Report 2011 23 Operating Results by Business Segment

¥ ¥ $ £ Real Estate Business

JR-West’s Real Estate Business consists In regard to the Osaka Station Develop- of the management of shopping centers ment Project, we advanced preparations in station buildings and other facilities, for the May 2011 grand opening of Osaka the operation of large station buildings at Station City. As part of these preparations, terminal railway stations, the develop- we opened the South Gate Building in ment of commercial facilities near railway March 2011. Also, provisions were made station areas and underneath elevated in the North Gate Building to prepare for tracks, and real estate sales and leasing the opening of the LUCUA specialty shop OOPERATINGperating RRESULTSeSULTs operations for residential and urban zone. Further, we worked in cooperation Billions ofof yenyen development focused on railway lines. with local businesses around Osaka 100 30 Station in order to promote better area Fiscal 2011 Results management, with the goal of invigorating 80 24 In fiscal 2011, JR-West advanced devel- the area surrounding the station. Also, we

60 18 opment projects in its stations and their encouraged the development of condo- surrounding areas, including opening miniums on the former sites of company 40 12 the JR Oji Station NK Building, which housing. In the Hiroshima area, we primarily contains restaurants, and merged two consolidated subsidiaries in 20 6 the JR Tamatsukuri Station NK Building, April 2010, which operate shopping which houses several health clinics. centers, in the hope of further boosting 0 07 08 09 10 11 0 Additionally, we opened the VIERA Nara their competitiveness and increasing the Operating Revenues Operating Income (right) commercial facility located underneath overall strength of these operations. the elevated tracks at ; the As a result, operating revenues in the PLiE restaurant and gift centers, which Real Estate Business increased 6.8%, to are below the elevated tracks at Himeji ¥75.7 billion, while operating income fell Station; and the new Rinto fashion store 1.2%, to ¥22.2 billion. in the Kanazawa 100bangai fashion shopping zone at .

24 WEST JAPAN RAILWAY COMPANY ¥ ¥ $ £ Other Businesses

JR-West’s Other Businesses consist of improving the convenience of this system the travel agency business operated by while also expanding our lineup of Nippon Travel Agency, the hotel business products that utilize our railway networks. centered on the Hotel Granvia Kyoto, In addition, we began accepting applica- an advertising agency business, mainte- tions for the Osaka Station City J-WEST nance and engineering services, and Card, and took other steps to increase other businesses to facilitate the smooth the number of cardholders. In regard to and efficient operation of the mainstay our ICOCA e-money service, we com- OOPERATINGperating RRESULTSeSULTs railway business. menced reciprocal use with JR-Kyushu’s Billions ofof yenyen SUGOCA card. Also, we worked to 150 15 Fiscal 2011 Results increase the number of opportunities for In the hotel business, we renovated this service to be used around town, 120 12 restaurant facilities, held various making it usable at major convenience

90 9 promotional events, and implemented store chains as well as for purchasing other initiatives geared toward increasing tickets to events and tourist attractions. 60 6 revenues. In the travel agency business, As a result, operating revenues in we targeted sales growth by enhancing Other Businesses increased 8.6% year 30 3 our lineup of travel packages sold on year, to ¥129.9 billion, while operating through its online sales system and income was up 43.8%, to ¥9.6 billion. 0 07 08 09 10 11 0

Operating Revenues Operating Income (right)

future Initiatives in non-transportation operations

In Sales of Goods and Food Services as areas—while also invigorating the area area around Osaka Station. In regard to well as Real Estate Business, JR-West between stations—we will strive to create the J-WEST Card, JR-West will increase will implement measures to further communities centered on stations offering the number of J-WEST Card cardholders, enhance the value of our railway belts, comprehensive services and develop expand the number of stores where the with the railway division working in surrounding areas providing ample ICOCA e-money service can be used, cooperation with local governments and convenience and an attractive place to live. and take other steps to enhance conve- communities to maximize asset efficiency. Further, we will also work to bring out nience for customers in conjunction with In addition, with the aim of utilizing the full the full potential of Osaka Station City their use of the Company’s railway service. potential of stations and their surrounding and conduct area management for the

Annual Report 2011 25