Japan Airlines (JAL) is stepping up its cost-cutting efforts and axeing more jobs as part of a three-year corporate plan to be consistently profitable after years of wide swings between profit and loss.
Asia's largest airline said in detailing its medium-term corporate plan for the next three years that 1,400 more jobs would be cut. These will be in addition to previous plans for 4,500 job losses by the end of the 2006/7 fiscal year to March 2007. "By March 2008, the total number of ground jobs will be 5,900 lower than in April 2002," says JAL. "This reduction will be managed by suspending new hiring, not replacing retiring staff and by natural reduction."
The carrier also plans to increase outsourcing, "including moving more activities overseas, notably maintenance". In addition, it will reduce the size of its various boards and axe directors' retirement bonuses.
The aim is to reduce costs by ¥75 billion ($720 million) a year by the end of the 2007/8 fiscal year and by more than ¥100 billion a year in the longer term – and produce profits on a consistent basis. It hopes to post a consolidated operating profit of ¥100 billion in fiscal year 2007/8.
JAL says many cost-cutting targets have already met, and it will produce profits for the 2004/5 fiscal year. With the company on course to meet its targets, long-serving chief executive Isao Kaneko will step down in April to be replaced by company veteran Toshiyuki Shinmachi (see story page 79).
Shinmachi will be tasked with merging group holding company JAL Corporation with main operating arms JAL International and JAL Domestic by the end of fiscal year 2006/7. The companies were formed after its acquisition of former rival Japan Air System (JAS) but JAL admits the structure is too complicated and there is too much internal duplication.
"The JAL Group will aim for simplification in various ways, including adopting a slimmer group management structure through integration," says the carrier. "Amid this difficult environment, the JAL Group will build a business structure that can produce profits in any environment, through reforms of business structure and to build a strong corporate constitution that ranks with the airlines of Asia and is capable of growth."
Its biggest challenge over the years has been to remain consistently profitable and one of its strategies was to acquire JAS – primarily a domestic operator – in 2002. Before the takeover, JAL earned much of its revenue from more volatile international operations but the enlarged JAL Group now controls nearly half of the stable domestic market in terms of passenger numbers.
Network development plans in the years ahead will focus on growth markets, mainly those in Asia, in particular China. Operationally, JAL plans to accelerate the expansion of lower-cost international subsidiary JALways, which by 2007 should account for 27% of the group's overseas flight operations, or 180 weekly flights. JALways currently operates 120 weekly flights with Boeing 747s and McDonnell Douglas DC-10s, accounting for 20% of the group total.
On the domestic front, JAL Group will expand the fleet of lower-cost unit JAL Express over the three-year period, to 19 aircraft from the current eight.
NICHOLAS IONIDES SINGAPORE
Source: Airline Business
