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Sunday, Sept. 13, 2009

MEDIA MIX

ANA looks to sky as JAL hangs head


In a TV commercial aired all last summer, airline passengers are shown relaxing when the pilot comes on the PA to make the usual announcement about travel times and weather. Nobody seems alarmed when they learn that the skipper is teen golf sensation Ryo Ishikawa, who isn't old enough to drive a car much less a commercial jet.

In fact, they seem impressed. And so am I, not because Ishikawa is at the controls, but because All Nippon Airways, which operates the flight, was able to afford him. Ishikawa is one of the hottest properties in advertising right now, and the fact that ANA snagged him says something about their confidence in these financially troubled times.

To put the matter into perspective, ANA's competitor, Japan Airlines, which once set the standard for sophisticated TV commercials, appears to have withdrawn from broadcast advertising. According to the airline's Web site, its newest "commercials" can only be seen on JAL flights, thus rendering them pointless. The company can't afford air time. This past summer alone, JAL sold its stake in Hokkaido Air Systems, reported a quarterly group loss of ¥99 billion, announced that it will cut 10 percent of its workforce by 2012, suspended or reduced flights on 16 different international and domestic routes (26 since Jan. 1), begged its retired employees to give up part of their pensions, and switched from glass wine bottles to plastic ones — but only in coach. Some things just can't be compromised.

JAL still may feel it has a reputation to maintain. ANA has always toiled in the shadow of its predecessor, second best in the hearts of Japanese fliers. ANA tried harder because JAL had an unfair advantage: it used to be Japan's national airline — not just the one the kokumin (citizens) identified with, but the one actually owned and operated by the government. JAL employees were civil servants, and when you asked a little girl what she wanted to be when she grew up, she said "stewardess," which meant a JAL stewardess. Salaries were comparable to those in the bureaucracy, even after JAL was privatized in 1987. That's why the company is having such a hard time trying to convince its ex-employees to give up some of their pensions. Payments are based on salaries, and JAL's were generous. The average monthly payout to JAL retirees is ¥500,000 a month.

And now that JAL has been bailed out by the government, it is, for all intents and purposes, a national airline again. Japan guaranteed a ¥100 billion emergency loan to JAL. It is the third time since 2001 that the airline has needed a quick transfusion of cash to say aloft, and it seems likely that it will require another one as early as this autumn, according to the weekly business magazine Toyo Keizai.

In June, at the company's stockholders meeting, the president of JAL projected that the airline's operating loss for the year will be ¥63 billion and said that the company had to make a profit "at any cost," but didn't actually put forth ideas to that end. In order to cut pensions, they need approval from two-thirds of all pensioners, current and future, and the company's labor union is fiercely opposed to any cuts.

JAL's troubles stem from circumstances beyond its control — the worldwide recession, the fluctuation of fuel prices, the swine-flu epidemic — but also from its own efforts in keeping up appearances. According to Toyo, JAL bought too many jumbo jets, which are expensive to maintain and limited in usage. JAL's merger with Japan Air Systems made it much bigger at a time when it should have been restructuring.

ANA, however, sold off its hotel chain and bought new aircraft that fit its needs rather than its ego. Obviously, ANA flies in the same air that JAL does but has managed to ride out the current economic turbulence without government assistance. One explanation is that ANA operates fewer revenue-sapping international flights than JAL does. That was, of course, JAL's supreme boast in its heyday, during which ANA was simply a lowly domestic carrier.

The land ministry said that the government had no choice but to save JAL because it's one of the country's "flagship companies." However, the ministry can also be held at least partly responsible for JAL's problems. For decades it has persuaded local governments to build more regional airports without having a "grand scheme," according to a report broadcast on TV Asahi's "Hodo Station" last summer. These airports were constructed without any real understanding of whether there was a demand for them, and JAL, as the national airline in spirit if not actually in fact any more, was pressured into utilizing these airports even though they might lose money in the process.

Meanwhile, South Korea was positioning its new Incheon International Airport near Seoul as northern Asia's main international hub for both cargo and passenger traffic. Two Korean carriers, Korean Airlines and Asiana Airlines, have since set up between them 32 routes that connect these underutilized regional airports to Incheon. Thus, South Korea is becoming the preferred international gateway even for Japanese passengers since JAL and even ANA have cut connecting flights to Narita and Kansai International that aren't profitable. Of course, Japanese airlines' profitability problems when it comes to international flights can be blamed on the high yen as well as on Narita's and Kansai's expensive landing fees, but it can also be blamed on the lack of planning on a national level.

So maybe the government and JAL deserve each other. Both have hubris to burn and neither displays much common sense when it comes to adapting to a changing business environment. ANA's use of Ishikawa sends an optimistic message: He has a bright future, and so do we. JAL just has the government, and glass wine bottles in first class.



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