Andrew Mollet/TOKYO
Further senior management casualties are in prospect at Japan Airlines (JAL) after the airline's announcement that it is to draw on its reserves to the tune of about ´155 billion ($1.2 billion) to write off accumulated losses. The company's president has already agreed to go.
The write-offs, which will be included in the group's 1997/8 results to the end of March, are to cover ´97 billion in extraordinary losses linked to ill-fated overseas projects and nearly ´58 billion carried over from previous years.
The scale of the write-off has already provoked senior resignations. JAL chairman Susumu Yamaji has agreed to step down and president Akira Kondo is expected to follow, with senior managing director Isao Kaneko tipped as a likely successor.
The bulk of the write-off will come from the group's capital reserves. At ´130 billion, this is due to be the heaviest such charge ever made by a publicly quoted Japanese company, close to twice the size of the previous record set a year ago.
A large slice of JAL's financial woes have come from an ´80 billion write-off against the value of its shareholdings in subsidiaries and loans made to the units. A host of such write-offs have been made by Japanese corporations and financial institutions in the wake of falling real estate prices and negative currency swings.
For JAL, the problem was compounded by its ill-fated expansion outside its core airline business, including the fallout from the aggressive forays into the overseas hotel and tourist resort businesses in the second half of the 1980s.
The provisions and a tail-off in international passenger traffic, spearheaded by the economic crisis in Asia, have left JAL with a sharp revision of its likely year-end performance.
The group had hoped to come close to breakeven for 1997/8, but has now lowered its forecast to a loss of ´70 billion.
Financial analysts, however, are relatively upbeat about the airline's underlying progress in its long-running restructuring plan, including revisions in its route network and staff cuts.
JAL argues that the cleaning up of its balance sheet is part of this process and points to the expected benefits of the alliance with American Airlines in the wake of the US-Japanese bilateral deal.
Source: Flight International
