Japan Airlines Corp. will not relegate itself to a regional or low-cost carrier even as the once-proud flagship sharply streamlines its operations under a court-led turnaround plan, its new president said.
Masaru Onishi, appointed JAL president on Monday, said the company will choose its U.S. alliance partner — American Airlines Inc. or Delta Air Lines Inc. — by midmonth, a decision that will be a pillar of its efforts to boost revenue.
“As to what kind of a carrier we are going to aim for, it is unlikely to be a low-cost carrier or a regional airline specializing in Asia,” Onishi said in his first interview with the media.
“Our customers find the greatest value in the fact that we are a network carrier,” he said.
But Onishi admitted JAL will need to take steps to address market needs for low-cost tickets to resort areas as travelers flock to budget airlines amid tough economic conditions.
With Japan’s top carrier filing for court protection on Jan. 19 with total group liabilities topping ¥2 trillion, debate has been simmering in the government as well as in the airline industry on whether there is a need for Japan to have two megacarriers — JAL and All Nippon Airways Co.
Onishi, 54, has been tapped to run the crippled airline with Kyocera Corp. founder Kazuo Inamori, who was appointed JAL chairman.
Together they face the painful task of pushing through massive restructuring of the workforce and money-losing routes as well as dealing with aging aircraft as the government pumps in public funds to keep the carrier flying.
Onishi said they first need to explain and obtain employee support for the rehabilitation plan being compiled with the government-backed Enterprise Turnaround Initiative Corp. of Japan, which is sponsoring JAL’s turnaround.
“We should have been more sensitive to being a private company,” Onishi said, acknowledging JAL had become complacent about its weak financial standing due to repeated access to emergency loans from the government-owned Development Bank of Japan.
“For us to be self-reliant, we need to become a financially robust company,” Onishi said, promising to create a leaner management.
As part of its efforts to increase revenue, sources have said, ETIC is eyeing a business tieup by JAL with Delta, the world’s largest carrier, and a switch to the Delta-led SkyTeam global airline alliance from the current oneworld grouping led by American Airlines.
While Onishi said a decision is expected by mid-February, he added the current business plan, which sees JAL’s return to profitability in fiscal 2011 through March 2012, is based on JAL staying with oneworld.
The turnaround body estimates that an alliance with Delta in SkyTeam would likely provide JAL with an annual benefit of ¥17.2 billion, three times more than the estimated ¥5.4 billion in benefit from its existing partnership with American Airlines in oneworld.
The appointment of Onishi to replace Haruka Nishimatsu, 62, is part of a move to bring in a younger management team, and a rare selection of a president whose main career background has been in maintenance operations.
Onishi joined JAL in 1978 and spent the first six years of his career being trained as a mechanic. He later rose through the ranks mainly doing maintenance and aircraft planning and was appointed president of Japan Air Commuter Co. last June.
“I don’t need to look back on and rethink safety issues inside my head because they’re deeply ingrained,” Onishi said. “There can’t be a revival without safety.”
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