TokyoTomo Travel Guide

Japan Airlines Corporation. (JALS), Japan Airlines International Co., Ltd (JALI) and JAL Capital Co., Ltd (JLC) submitted the rehabilitation plan on August 31 to the Tokyo District Court. The rehabilitation plan includes the business plan implementing Japan Airlines’ effective fleet plan and its complete withdrawal from the money-losing routes. At the press briefing held later on the same day, Kazuo Inamori, Chairman of Japan Airlines Corporation said, “We regret that we, Japan Airlines have caused enormous concerns to the shareholders and financial institutions.” “Today is the start of Japan Airlines’ restructuring,” continued Chairman Inamori, citing, “We must strive to work hard with untiring efforts according to the business plan and we must even post better results than we are targeting.” He also emphasized, “Japan Airlines must struggle to proceed with the proposed rehabilitation plan so that it should never end up as ‘a pie in the sky’.”

The business plan formulated includes the complete pullout from the unprofitable routes, changes of the cost structures, concentration of the managerial resources on the air transportation business, personnel downsizing, increase of the route profitability, organizational reform and capability to deal with event risks such as the financial crisis and the outbreak of the H1N1 new influenza seen during the past year. Japan Airlines endeavors to realize early rehabilitation of business by aiming for an operating profit as early as in 2010, which is the initial year of the airline’s rehabilitation plan, and by eliminating its excessive liabilities.  Read more…

Following the application filed on January 19 by Japan Airlines Corporation, Japan Airlines International and JAL Capital for under the Corporate Rehabilitation Law, the Enterprise Turnaround Initiative Corporation of Japan (ETIC) announced an outline of its restructuring plan for Japan Airlines. The plan focuses primarily on the airline’s safe and stable flight operations on the premise that credits for commercial transactions and leasing fees obligations are protected. The other protections include the frequent flyer mileage and the complimentary coupons issued to its shareholders. The restructuring plan also includes the continued support by the government and the financial institutions. In terms of strategy for the turnaround plan, listed by the ETIC are “Further safety enhancements,” “Aircraft downsizing and Improving operational efficiency,” “Streamlining of workforce and organizational structures and Drastic improvement in flexibility” and “Establishing organizational structures allowing for prompt on-site decision-making.” By implementing these strategies, the ETIC, Enterprise Turnaround Initiative Corporation of Japan, aims for JAL’s major turnaround by March 2012, forecasting operating revenue of 1,358.5 billion yen with operating income of 90.4 billion yen to be achieved in March 2013.

Commenting on Japan Airlines’ present situation, Toshio Nakamura, Representative Director and CEO, the ETIC, pointed out that the airline had failed to make adjustments for its scale of business operations and organizational structures in response to the sluggish market demand due to “Excess fleet of large aircraft,” “ Unprofitable routes,” “Surplus workforce,” “Inflexible organizational structures” and “Delays in decision-making.”

With awareness of these burning issues, Japan Airlines aims, under the rehabilitation plan, to address downsizing of aircraft, withdrawal from the unprofitable routes, pursuit of the alliance benefits, streamlining of the workforce and build-up of organizational structures focusing on the on-site business operations. In regards to downsizing of aircraft fleet, the airline will retire all Boeing 747-400s together with aging aircraft MacDonnell Douglas MD-90s, replacing them with cutting-edge small and midsized aircraft including regional jets. A proactive introduction of new state-of-the-art aircraft will help improve fuel-efficiency and provide flexibility in aircraft availability.

While JAL will pull back “drastically” from the unprofitable routes, it will inaugurate new services on profitable routes. Overall, however, the routes will be substantially slashed. Compared to April 2009, the international routes will be reduced from 93 to 79 while the domestic routes will be decreased from 136 to 119 by April 2011. On the other hand, by leveraging the alliance benefits, JAL aims to secure its route network.

The JAL Group has approximately 52,000 employees in total including non-regular and temporary staff. In streamlining the workforce and the organizational structures, the airline will slash its present workforce to some 36,000 according to a decrease in overall capacity offer. Personnel costs will also be cut by reviewing drastically various allowances and the seniority-based wage system. Under the improved organizational structures allowing for the on-site decision-making, JAL endeavors to address build-up of an organization which allows flexible, timely and appropriate decision-making to meet any changes in the business environment. In order to support the new structure, JAL will invest in IT systems. The airline will also improve its personnel system in such a way that employees who achieve visible results will be promoted.

Also, the pending volume incentive scheme and kickback for travel agencies will be protected as commercial transaction credits which include verbal contracts concluded regionally by respective branch offices. In addition, also protected are credits for sales commission payable by JAL’s subsidiaries including JALPAK and JAL TOURS. During the course of the rehabilitation plan, the existing contractual relationship will be scrutinized, however.

Meanwhile, in order that Japan Airlines is able to concentrate on its core business, it will sell and liquidate the subsidiaries with the exception of aviation-related business including hotel and travel services and focus its corporate resources on aviation service which is the core business. As far as the pension scheme is concerned, now that two-third of the plan participants and pension recipients agreed to the revision of the pension system, Japan Airlines will revise the provisions therein and reduce the benefits according to the agreement reached subject to a final approval by the Ministry of Health, Labor and Welfare.

Source: Travel Vision

Travel Vision Inc. provides information on the travel industry in Japan via "Daily Travel Vision", a Japanese-language e-mail newsletter, and the "Travel Vision" website. There are nearly 110,000 people working in the Japanese travel industry, and Travel Vision is proud to be bringing travel news to more than 30,000 people through Daily Travel Vision.

Japan Airlines Corporation, Japan Airlines International Co. Ltd. and Co. Ltd. submitted the application on January 19 for court protection under the . Following the court-led bankruptcy proceedings, the Enterprise Turnaround Initiative Corporation of Japan (ETIC) immediately decided on its support for JAL’s rehabilitation. The ETIC and lawyer Eiji Katayama were named as bankruptcy trustees. The ETIC is to ensure the necessary supports on the premise that all the credits related to the general commercial transactions including the leasing fees obligations are to be protected under the same payment conditions, all the flight tickets are to be honored without any restrictions, the frequent flyer mileage can be used as before and the complimentary coupons issued for the shareholders are to remain valid. The ETIC sets to provide additional loans totalling 600 billion yen to ensure these items. The Enterprise Turnaround Initiative Corporation of Japan (ETIC) is to formulate JAL’s restructuring plan by the end of June.

JAL President and CEO Haruka Nishimatsu stepped down later on the same day (January 19) to take responsibility. The airline’s new management structure will be inaugurated early in February after Kazuo Inamori, Chairperson Emeritus of KYOCERA Corporation will take up a position as Japan Airlines’ new Chairperson and CEO on February 1. Meanwhile, Masato Uehara, the airline’s Senior Vice President, will be responsible for its uninterrupted business operations as a temporary group COO, Chief Operating Officer.

Commenting on the court-led restructuring at a news conference held later on the same day, Hideo Seto, Chairman of ETIC Committee Members, said, “With a transparent and fair procedure through the court-led restructuring, we can deal with JAL’s negative legacy from its glorious past, minimize any risk in the injection of public funds and block possible upcoming contingency liabilities.” “Joining forces with all employees and the new management of Japan Airlines, we endeavor to address the rehabilitation of the company step by step. We shall be grateful to you for your continued generous support for JAL employees who are just about to start with new challenges,” Seto added.

Meanwhile, Haruka Nishimatsu said at the news conference, “I sincerely apologize to all our shareholders, the financial institutions and the creditors for the great inconvenience and concern we have caused,” adding, “I firmly believe that each and every employee of the JAL Group is nevertheless highly motivated even through this time of severe trial to address the company’s restructuring under the leadership of new Chairperson and CEO Inamori in efforts to ensure daily flight operations, capitalizing on JAL’s high quality products and services.”

Nishimatsu also added, “Today, we see that Japan Airlines has been given the last chance to be reborn as a new airline thanks to the Japanese government, the financial institutions, our shareholders and the public support. By formulating the rehabilitation plan as quickly as possible and, at the same time, implementing it steadily, I am fully confident that Japan Airlines shall re-emerge as Japan’s leading and powerful airline.” “We must do our utmost to be of service to our valued customers and, by so doing, we must continue to contribute to the prosperity of our country,” concluded Nishimatsu, outgoing President.

Source: Travel Vision

Travel Vision Inc. provides information on the travel industry in Japan via "Daily Travel Vision", a Japanese-language e-mail newsletter, and the "Travel Vision" website. There are nearly 110,000 people working in the Japanese travel industry, and Travel Vision is proud to be bringing travel news to more than 30,000 people through Daily Travel Vision.