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Japan Airlines System Corp. will reduce its workforce by about 8 percent, or 4,500 employees, by the end of March 2007, with net losses expected amid sluggish demand.

The holding company of Japan Airlines Co. and Japan Air System Co. said Tuesday that the cuts will affect ground staff rather than flight attendants. The plan incorporates part of a 3,600-employee reduction slated for the 2003-2005 period.

JAL said the move is in line with the upcoming merger of the two carriers in April, as it seeks to streamline operations.

In a new three-year business plan released Wednesday, the nation’s largest carrier said it aims to cut 32 billion yen in personnel costs in fiscal 2005.

As the carrier saw a huge loss in profit due to the Iraq war and the outbreak of severe acute respiratory syndrome, it must cut costs to increase its international competitiveness amid the harsh business environment, JAL group chief executive Isao Kaneko said.

The new fiscal 2004-2006 business plan sets out the goal of posting a net operating profit of 145 billion yen in fiscal 2006, compared with 10.5 billion yen in fiscal 2002. JAL and JAS integrated their operations in October 2002.

The JAL group revised downward its earning projections for the year to March, showing a net loss of 89 billion yen rather than the initial forecast of a 65 billion yen loss released in November.

The carrier attributed the negative outlook to a lack of demand in international flights. The firm’s international passenger numbers recovered slightly in the October-December quarter, but SARS and the bird flu outbreak are having a harmful psychological impact during the final quarter, it said.

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