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Wednesday, March 17, 2010

JAL restructuring updates

It has been almost two months since Japan Airlines filing for bankruptcy protection. The new JAL CEO Kazuo Inamori and COO Masaru Onishi held a joint press conference in Tokyo today to update the press of their restructuring plan. They answered the question in a lot of people's mind including when will JAL become profitable again, when will JAL start cutting the routes, etc. And Inamori made some pretty harsh comments on JAL staff too :(

Below is the summary of 3 articles from Nikkei, all on today's press conference.

So when will JAL become profitable again?
Inamori said they are aiming for early Autumn. JAL is still bleeding money every day right now but he plans to make JAL profitable on a monthly basis from early Autumn, regardless of the economic conditions! The reason behind this is JAL has to secure loans from financial institutions. And to do this, they need to turn back into the black.

''Unless we are back into the black by around that time, we will not be able to receive financing in the future, not only from the government but also from our traditional mega-banks,'' Inamori said. ''We need to carry out major restructuring including massive downsizing of costs.''

Turning into profit by Autumn regardless of economic conditions is a pretty bold statement to make. Hopefully the mighty Inamori can deliver :)

What does Inamori think of JAL employees?
Inamori made a comment about JAL staff lack senses of crisis before. Today he made similar harsh comments once again. Inamori said JAL employees lack "any sense of business" and the company has "too few people who base management on profits and losses" This doesn't sound very good. But if the management team and employees have a good sense of business, JAL would have failed in the first place. Hopefully Inamori will spot the right talent and his famous amoeba management system will make the employees more aware of costs and profits.

"I see there are few people in JAL capable of doing earnings-oriented management thinking, or willing to make such efforts," Inamori said. "I have an impression there are few employees full of entrepreneurial spirit."

"I think I have to create a company in which people filled with such spirit can fully display their skills," Inamori added.

So where do I turn in my resume? I probably have a better sense of business LOL

When will the route suspensions and frequency reduction happen?
Onishi said JAL plans to start the route scale back and frequency reductions from early autumn!!! JAL will "drastically review" both of domestic and international networks and submit its plan to the Tokyo District Court by end of June. For now, JAL has taken measures to lower goods procurement costs to reduce its daily loss.

So the cut will be effective when the winter schedule starts (October) and announcement will come in June or July. Ironically October is the month Haneda plans to open its 4th runway and is supposed to be the month of expansion for ANA and Skymark. JAL will get some international slots from Haneda too. So will this expansion offset the cut? And why is it taking so long to cut the routes? They started looking at restructuring in June 2009 and we won't see the major cut until Oct 2010! And please don't cut my LAX and HKG flights, JAL!

For the N-th time, is JAL going to withdraw from international flights?
NO!!! There is no plan for JAL to withdraw from international flights. Inamori believes the international network can be profitable by itself and it is the largest revenue source of the JAL Group. JAL will turn around while maintaining its international network!

"I think it will be more than possible to achieve profitability on international routes," said Inamori, also the founder and honorary chairman of Kyocera Corp. "JAL does not exist if it withdraws from international routes."

"We have to proceed with drastic restructuring, including cost cutbacks," Inamori told reporters. But at the same time, "JAL without international passenger services is absolutely not something that is on my mind," as revenue from such services is the biggest component of its business.

When will they stop asking this question?

How is JAL going to reduce the cost?
Some of announced plans are 5% pay cut, no holiday bonuses, early retirement scheme (which by the way is extended to pilots now), etc A new measure JAL is considering is to forge hiring fresh grads this in spring 2011. If this is implemented, it will the first time since the JAS merger that JAL forgoes new graduates recruitment.

So much for the most popular company list. No matter how high or how low you rank, it means nothing if you are not hiring.

Is American Airlines helping?
Yes! Inamori said AA is offering JAL helping in various areas including systems (only one example is given :P) and JAL will prepare to accept the offer (AA's help)

Please don't accept AA's help on cabin crew training, cost cutting, etc I hate to see grumpy grannies serving me on my flights. Just give JAL more passengers :P

Source: Nikkei (article 1, article 2, article 3)

Related Posts:
JAL extends early retirement scheme to other employees
Rumor: JAL proposed 5% pay cut and no bonuses this year
JAL wants to sell off 49 old planes ahead of schedule (Updated)
JAL considers moving headquarter to Haneda

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