The Yomiuri Shimbun (Jan. 20, 2011)
Real battle for JAL starts now, one year on
Wednesday marks the passage of one year since Japan Airlines filed for court-administered bankruptcy protection under the Corporate Rehabilitation Law.
During that time, JAL has striven to streamline its operations through various measures, including reducing the number of its flight routes and employees. The airline is facing a crucial juncture as it seeks to become a listed corporation again at the end of 2012.
Given the massive amount of taxpayers' money used to implement its bailout plan, JAL will no longer be allowed to operate in a laid-back manner, as it did in the past.
The airline must grow out of its old tendency to rely on the government and politicians whenever it faces a crisis. This is its last chance, one JAL should not miss as it seeks to transform itself into a corporation that can best serve customers' interests.
JAL's rehabilitation plan went into full swing in late November, when the Tokyo District Court gave the go-ahead to the scheme.
The airline was given a 350 billion yen injection of public funds from the Enterprise Turnaround Initiative Corporation of Japan (ETIC). It also received a 520 billion yen debt waiver from its major creditor banks.
These measures must be viewed as exceptionally generous assistance that would be unthinkable for ordinary failed corporations. If the bailout plan does not come off, it means the public will have to shoulder a new financial burden. JAL's executives and employees must take this to heart.
Bringing costs down to earth
A certain measure of progress is being made in rectifying the high-cost structure of JAL's operations, a primary task to be tackled in the company's rehabilitation.
The airline has taken such steps as withdrawing from 45 domestic and international routes and cutting personnel by about 16,000. All this has brought JAL's operations down to two-thirds of their previous scale.
The airline's streamlining efforts helped secure 130 billion yen in operating profits during the April-October period, far exceeding JAL's estimate.
It is too early to celebrate, however. The improvement in JAL's profits must be attributed to such temporary factors as declining fuel costs and a surge in the value of the yen. The recovery cannot be regarded as an indication that the airline's business will remain profitable from here on out.
More worryingly, it is not clear what kind of distinctive services and operations JAL wants to offer to survive and prosper.
Competition is expected to become even more intense among airlines this year, due to deregulation of the airline industry and a considerable increase in the number of low-cost carriers.
Airlines around the world are desperately attempting to differentiate themselves from rivals, with some trying to provide upscale in-flight services targeting businesspeople and others boasting of low fares made possible by curtailing operational costs.
We feel JAL has yet to break with its old ideas about the quality of in-flight services and airfares, despite the reduction in its business scale.
Getting a new crew on board
In December, JAL invited officials from several institutions--including the ETIC and Kyocera Corp., from which JAL Chairman Kazuo Inamori hails--to join its management.
We hope JAL will create a daring business strategy unfettered by the accepted wisdom of the airline industry.
Another task facing JAL is eliminating the antagonism between its labor and management.
A group of about 140 pilots, flight attendants and other personnel is set to file a suit against the airline, insisting they were unduly dismissed as part of the company's restructuring efforts.
Efforts must be made to bridge the divide between JAL's labor and management. Doing so will be essential to avert turmoil within the airline, prevent customers from going elsewhere and ensure safety comes first in flight operations.
In another issue to be addressed in connection with JAL's revival program, the government should hasten to fundamentally reconsider its civil aviation policy.
Measures must be taken to increase the international competitiveness of domestic airlines.
To this end, the government needs, first and foremost, to help reduce landing fees at domestic airports that are higher than those charged overseas. It also must scrap the aircraft fuel tax, which has no counterpart abroad.
(From The Yomiuri Shimbun, Jan. 19, 2011)