Japan Airlines, the nation’s largest international carrier, is attempting to escape from its negative legacy and get off to a fresh start under new President Isao Kaneko.
In the last business year, which ended in March, the carrier used 150 billion yen in internal reserves to write off its accumulated deficits and special losses of its affiliated companies in the hotel and resort business.
“We made a very important decision to use 130 billion yen in capital reserves, which we receive from shareholders. We are starting from scratch now,” said Kaneko, 60, who officially assumed the position at a shareholders’ meeting last week.
Kaneko’s first priority as president is to offer a dividend to shareholders this business year. The carrier has been unable to pay shareholders for the last six years. “My first target is to restore dividends. We have to maintain our quality as an airline, and especially maintain safety, though this is nothing new,” he said.
Kaneko stressed that after six years of hard work on restructuring and cost-cutting, JAL is ready to compete against strong American and European carriers as well as low-cost Asian airlines. “Some people may complain that our cost-cutting efforts are still insufficient. But we have done what we can, though we might have taken a little longer than our Western counterparts,” Kaneko said.
JAL could only carry out the restructuring step by step because in Japan, management attaches importance to securing jobs for laid off employees, claimed Kaneko, who has spent most of his career in labor management.
Since 1992, JAL has reduced overall costs by 23 percent and personnel costs by 35 percent. Through further restructuring, the airline plans on raising personnel cutbacks to about 40 percent by the end of the business year, he said.
JAL decreased its staff by about 4,000 between fiscal 1993 and fiscal 1997 through an early retirement program and curtailing recruitment. The carrier plans to trim some 1,500 additional employees for four years starting in fiscal 1998.
Other cost-cutting efforts include transferring part of the maintenance operation to low-cost countries such as Singapore and China as well as hiring foreign and part-time employees and selling corporate assets.
Last March, in an attempt to become competitive in the global market, the carrier drew up a four-year management plan in which it targeted an overall cost cutback of 10 percent. This target is based on an exchange rate of 126 yen to the dollar, Kaneko noted. “Under the current exchange rate, of around 140 yen (to the dollar), we are coming close to the cost level of Western carriers. We can compete against them at the current exchange rate,” he said.
The aviation industry is growing, but JAL needs to maintain its efforts and approach the government with necessary questions, Kaneko said. “We are not competing in a zero-sum game. If we offer good products at proper prices, we will surely stay (in the market).”
As a former college basketball player and long-term basketball buff, Kaneko is interested in the leadership skills of former Chicago Bulls coach Phil Jackson, who led the team to its third straight NBA championship last month. “The Bulls are an attractive team and Jackson is a good leader. Of course, the Bulls have great players, such as (Michael) Jordan and (Scottie) Pippen. But Jackson brings out the best in his reserve players, Kaneko said, adding that the coach also even managed to bring out the best in enigmatic Dennis Rodman.
When asked which NBA team corresponds to JAL, Kaneko paused at length and declined to comment, saying it was a difficult question. “I guess we have to create a company like the Bulls,” Kaneko said.
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