Japan Airlines (JAL) to Slash Routes and Aricrafts in Hope of Profit

Japan Airlines Corp, an air flight company whose business path has been quite troubled in recent years and has been bailed out by the government in January, has released its plan to turn the economic tides in its favor and seek profit: JAL will retire two-fifths of their aricrafts, cut one in eight overseas flights and slash a quarter of its home routes. As they have identified a stringent need to compete with, JAL is also planning to create its own low-cost division.

The team developing this turnaround plan is backed by the state and they have submitted their pledge to the Tokyo District court today. The pledge states 10 international flights will be halted, along with 39 domestic routes. The plan will lead JAL to an operating profit margin of 9.2 percent by March 2013.

“JAL’s flop has caused a lot of trouble to shareholders and financial institutions,” said Chairman and Chief Executive Kazuo Inamori at a news conference in Tokyo.
“Today is a new start for us,” said Inamori, the 77-year old founder of electronics maker Kyocera Corp, asked by the government to run JAL for three years after it filed for bankruptcy.

In order to put the submitted turnaround plan in practice, Japan Airlines will receive 350 billion yen which is $4.14 billion from the government and a 521 billion yen debt waiver from banks such as Mitsubishi UFJ Financial Group and Mizuho Financial group.

According to industry analysts quoted by ABC news, Inamori’s plan is solid:

Aviation analysts applauded Inamori’s fleet changes, which amount to the elimination of 103 aircraft.
“This is a massive shutdown in a very short amount of time, and generally only happens when airlines are shut down, not when they restructure,” said Shashank Nigam, head of Singapore-based airline industry consultant SimpliFlying Pte.
“We are likely to see a very much smaller and more regional Japan Airlines come out of this,” he said.

airline, bailout, domestic flights, international flights, JAL, Japan Airlines, turnaround plan
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