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Thursday, Sept. 2, 2010

EDITORIAL

JAL revival plan takes flight

Japan Airlines Corp. and its bankruptcy administrator, the state-backed Enterprise Turnaround Initiative Corp. of Japan, submitted a rehabilitation plan to the Tokyo District Court on Tuesday. This marks the start of JAL's full-scale efforts to reconstruct itself.

But the environment surrounding the airline is severe, including the dim world economic outlook. Both management and labor of the airline must do their best to build a company that can turn a profit consistently while giving priority to flight safety.

The rehabilitation plan features a ¥521.5 billion debt waiver from major creditor banks and a ¥350 billion investment by ETIC using public funds. The JAL group will also cut some 16,000 jobs, or some 30 percent of its workforce, by the end of fiscal 2010. But only about half of that target has been achieved.

While the job cuts will strengthen JAL's bottom line, it will have side effects. Some corporate clients who appreciated services by veteran JAL employees have complained about the departure of these employees and have switched to All Nippon Airways. The job cuts could lower employee morale. JAL must ensure that the operation and maintenance skills of workers who leave will be adequately handed down to younger employees.

JAL will retire 103 old aircraft, including jumbo jets, and switch to aircraft with higher fuel efficiency. It will also abolish 45 money-losing domestic and international flight routes by the end of fiscal 2011. As of the end of fiscal 2012, JAL will have 65 international flight routes (10 fewer than at the end of fiscal 2009) and 109 domestic flight routes (39 fewer).

During the Bon holiday period from Aug. 6-15, the JAL group suffered more than a 10 percent drop in the number of passengers using JAL domestic services compared with the same period in 2009. If JAL's cost cutting is causing negative effects, its management must consider ways to overcome the problem.

Entry of low-cost carriers into Japan is one of the difficulties JAL faces. JAL management should diligently implement the rehabilitation plan so that it can gain the trust of creditor banks and receive new, necessary loans from them.



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