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Tuesday, August 31, 2010

JAL filed restructuring plan with Tokyo District Court

After months of delay, speculations, rumors and leaked information, Japan Airlines (JAL) has finally filed its restructuring plan with the Tokyo District Court on August 31 2010, barely meeting the end of August deadline. There aren't many changes to the original plan announced earlier in the year and most of them have been leaked in the recent news reports. Below are the highlights of the business plan


Reduce the aircraft models
- Retire 103 aircraft including all 747-400's A300-600's, MD-81's and MD-90's
- Deploy small and medium-sized aircraft
- Excluding regional jets, JAL will reduce from 7 (737, 747, 767, 777, A300, MD81, MD90) to 4 (737, 767, 777, 787) aircraft types

Route network optimization
- Domestic network will emphasize on more frequent service with smaller aircraft
- International network will focus on the major US and European cities and on Asian routes which the future growth will be.
- Specialize in Honolulu and Guam routes for resort routes (Sorry BKK and SYD)
- Increase low cost carrier operations in domestic network
- Hope for Haneda expansion can deliver some higher-yield demand
- Consider launching LCC for international flights

Corporate reform to reduce expenses
- Improve regional air transport subsidiaries efficiency by operating only a single aircraft type and making them more closely tied to the local communities (whatever that means)
- Sell and liquidate subsidiaries and concentrate managerial resources on the core air transport business (bye bye JAL Hotel, JAL Cargo, etc)
- Major downsizing of self-operated airport facilities, e.g. return unused terminal space, request to lower fees for joint facilities shared with other airlines, reduce real estate-related fees by returning cargo warehouse, etc
- Thoroughly review office space usage aimed to reduce real estate-related fees
- Overhaul of wage and benefit systems which are heavily criticized as being too generous
- JAL Group employees will reduce from 48,714 in FY2009 to 32,600 in FY2010 (faster and more than originally announced)
- More clear cut responsibility for profit and loss.
- New department will be responsible for cash flow on individual route
- Monthly meeting to track status and help management teams to gain awareness of the current status and upcoming issues
- IT system upgrade to improve productivity
- Centralized procurement
- Lobby for lower aviation fuel taxes, landing fees and other taxes and public charges
- Japan Airlines Corporation (JALS) Holding company for the JAL Group, Japan Airlines International, Co., Ltd. (JALI) Core business entity for the JAL Group, JAL Capital Co., Ltd. (JLC) Subsidiary handling the financial divisions of the JAL Group, JALways Co., Ltd. (JAZ) International aviation subsidiary for the JAL Group, and JAL LIVRE Co., Ltd. (AAZ) Subsidiary handling the accounting divisions of the JAL Group will merge and JALI will be the surviving entity and be renamed as Nihon Koukuu Kabushiki Kaisha (English name will be “Japan Airlines Co., Ltd.”) on April 1 2011


Aggressive utilization of alliances
- Aggressively utilize alliance benefits, from customers, managerial know-how, facilities, IT systems, to other tangible and intangible assets
- ATI with AA
- Strengthen bilateral partnership with other airlines

Elimination of excessive debt
- Eliminate excessive liabilities by end of March 2011
- 350 billion yen investment from ETIC
- In excess of 180 billion in net assets will be secured by the end of March 2013

Response to crisis
- Implement a structure to discover signs of risk events such as the financial crises and H1N1 outbreak. Develop appropriate system, adjust flight structures and emergency measures

Ballets will be sent out on September 10 to voting rights holders of the restructuring plan and the voting deadline is November 19. For more details of the restructuring plan, you can refer to the official press release from JAL (I didn't cover the details of how the merge will go and the handling of claims, etc)

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