Japan Airlines Corp. will cut 4,300 jobs over three years starting in April to help return to profitability, the airline announced Tuesday.
JAL plans to cut 700 of its 53,100 workers, mainly ground staff, through an early retirement program, and the rest by attrition.
The struggling carrier’s medium-term restructuring plan also includes restructuring its domestic and international flight services, and selling some assets and shareholdings to boost earnings.
JAL is hoping the changes will bring it a consolidated operating profit of 88 billion yen in its 2010 business year, a big jump from its forecast of 13 billion yen for the current business year to March.
“We must do this,” JAL President and CEO Haruka Nishimatsu said. “We must keep in our minds that unless we do this there will be no more chances for revival.”
Nishimatsu said he would step down if the carrier fails to pay dividends to shareholders in 2010. The airline will not pay dividends again this year, the second year in a row.
Aircraft problems and executive bickering in 2005 drove people away from the nation’s flagship carrier. The airline had a group net loss of 47.2 billion yen in the 2006 business year.
The job cuts will mean that personnel costs in the 2009 business year will be reduced by 50 billion yen from 2006, JAL said.
A 10 percent cut in base pay, which began last April, will remain in place in 2007. Reductions in bonuses and retirement fees will be up for negotiations. Executives’ pay will be cut by 45 percent to 60 percent in the business year starting in April.
JAL will start terminating flights on 10 unprofitable domestic routes beginning in April. These include seven a week between Nagoya and Kitakyushu; Nagoya and Nagasaki; Kobe and Sendai; Kagoshima and Naha, Okinawa; as well the Fukuoka-Aomori route, which flies four times a week.
At the same time, the airline will increase flights on its profitable routes, including service between Osaka and Sapporo, and Osaka and Fukuoka. It will also introduce seven flights a week between Kobe and Okinawa’s Ishigaki Island.
JAL said restructuring its domestic flights will improve earnings by 6 billion yen.
Passengers will be able to fly first class on JAL’s profitable Tokyo-Osaka and Tokyo-Fukuoka flights beginning in December to increase per-flight profit.
For international service, JAL will also up service in profitable areas, including its Tokyo-New York route, which will increase to 13 times a week from 10, and its Tokyo-Paris route, which will get another four flights added to the current schedule of 10 per week.
The Narita-Zurich and Narita-Hong Kong summer-only service will either be reduced or cut completely.
The changes to its international schedule will increase earnings by 7 billion yen, according to the airline.
JAL also plans to cut annual fuel costs in the 2010 business year by 8 billion yen from the figure in 2006 by introducing more fuel-efficient aircraft, including the Boeing 787, to its fleet.
The restructuring plan also includes selling some of shares in its subsidiary trading house JALUX Inc., to general trading house Sojitz Corp.