Japan Airlines Co. and Japan Air System Co. integrated their operations in full Thursday, solidifying their position as Japan’s No. 1 airline for both international and domestic routes.
The merger between the two airlines, controlled by holding company Japan Airlines System Corp., which was formed in October 2002, is aimed at fending off the challenge posed by archrival All Nippon Airways Co.
JAL and JAS were reorganized into Japan Airlines International Co. and Japan Airlines Domestic Co. after the airline group united the two companies’ flight services under the JAL brand name.
Computer systems used for reservations, ticketing and traffic control, among other things, have also been integrated before the merger program is completed by changing the name of the holding company to Japan Airlines Corp., pending shareholder approval in late June.
Throughout the process, the management of the group has been trying to lay the groundwork to make JAL a household name as one of the world’s leading airlines.
“We would like to let the whole world know the integrated JAL brand name,” Japan Airlines System President Isao Kaneko said. “My mission is to make this company grow into a top airline in the world.”
Kaneko is due to hand the mantle of leadership to the president appointee and executive vice president, Toshiyuki Shimmachi, after the shareholders’ meeting. But Kaneko will retain the post of chief executive officer to keep his clout as the main architect of the reorganization.
Not all is bright for the reinforced JAL group, which enjoys pole position within the Japanese aviation industry.
In March, Japan Airlines System announced a plan to cut 4,500 jobs in its group workforce of 57,400 by March 2007 as part of a three-year business plan aimed at improving profitability.
At the time, the holding company also lowered its earnings outlook for the year that ended March 31, forecasting a group net loss of 89 billion yen as its business was bludgeoned by international terrorism, the recurrence of the SARS epidemic and outbreaks of bird flu.
ANA is playing catchup with its own plan to enhance brand power after being dethroned as the leader for domestic routes.
Transport ministry data show that the October 2002 integration of JAL-JAS management led the group to capture a 49.1 percent share of domestic routes in terms of the number of passengers for the fiscal first half.
ANA held a 47.8 percent share in the same period.
In January, ANA said it will use the ANA brand name for flights run by smaller group firms, including Air Nippon and AirNippon Network, in an apparent effort to counter the full integration of JAL and JAS flights under the unified JAL code.
Hajime Hitotsuyanagi, a transport industry analyst at Daiwa Institute of Research, said JAL is expected to focus midterm on building a solid footing domestically, given that its presence on international routes is overwhelming among Japanese airlines.
“It’s likely that the airline industry will see JAL continue to increase its share domestically by optimizing economies of scale,” Hitotsuyanagi said, giving an upbeat company earnings outlook for the year to next March.