Japan Airlines was relisted on the first section of the Tokyo Stock Exchange on Sep. 19 as it has succeeded in strongly improving its business performance during the past two years and seven months of rehabilitation. This is only the first step to full recovery for the airline. JAL achieved its comeback with massive government support. Given harsh competition, JAL needs to make every effort to survive and grow on its own.
JAL applied for the Corporate Rehabilitation Law, seeking court protection, in January 2010 and was delisted the next month. The Enterprise Turnaround Initiative Corp. of Japan (ETIC), jointly set up in 2009 by the government and the private sector, saved the carrier.
On the day of JAL’s relisting, ETIC, which sank ¥350 billion in JAL, sold all its shares in the airline and earned ¥648.3 billion. The balance will be added to state coffers. In the business year to the end of March 2012, JAL achieved a record consolidated net profit of ¥186.6 billion, about 6.6 times that of JAL’s rival All Nippon Airways. JAL’s combined operating profits are more than twice ANA’s.
JAL’s speedy rehabilitation is worthy of praise. But it has to take into consideration the criticism that handsome support from the government distorted competition and market conditions for the aviation industry. JAL now has to sink or swim on its own.
Mr. Kazuo Inamori, honorary chairman of Kyocera Corp., who became JAL’s chairman after it applied for court protection, carried out rigorous restructuring. JAL laid off about 16,000 JAL group workers, withdrew from unprofitable air routes, and reduced salaries for current workers and pensions for retired workers. It also carried out strict cost control at each small operation unit.
But it must not be forgotten that a large amount of public money given to JAL through ETIC and other forms of government support have helped the carrier with its restructuring. Banks were forced to forgive more than ¥500 billion in JAL debt. The airline may also continue to enjoy corporate tax breaks for seven years, even if it is in the black. An ANA executive complained that because of government support, JAL has succeeded in reducing its interest-carrying debt on a consolidated basis. As of the end of March 2012, such debt of JAL amounted to less than a quarter of ANA’s.
The Liberal Democratic Party is calling on the government to ensure fair competitive market conditions. The transport ministry will continue to monitor JAL operations and management through March 2017. Since JAL has rehabilitated itself, there will be strong pressure to reopen air routes to all areas of the country. JAL and the government need to make decisions by carefully considering JAL’s financial health as well as a need to increase convenience for users and to help local economies. JAL at the same time should not forget the most important thing — ensuring the safety of its flight operations.