Japan Airlines Corp. submitted its rehabilitation plan Tuesday to the Tokyo District Court, including a request for a ¥521.5 billion debt wavier, paring 16,000 jobs, retiring fuel-guzzling airplanes and shedding 49 unprofitable routes.
“Submitting this plan is the start of JAL’s reconstruction. . . . We will surely do our best to proceed with this plan,” JAL Chairman Kazuo Inamori told a news conference.
Inamori also said he is thinking of stepping down in two years, citing his age and JAL’s rebound in its mainstay business in recent months.
“Initially, I said I would stay at my post for around three years, but I would like to be relieved in two years,” he said, indicating he would depart in February 2012.
The airline is undergoing a three-year rehabilitation process under the supervision of the government-backed Enterprise Turnaround Initiative Corp. of Japan.
According to the plan, the carrier will ask for a ¥521.5 billion debt waiver mainly from financial institutions, reduce its workforce to 32,600 by the end of fiscal 2010 from 48,714 at the end of fiscal 2009, and aim to withdraw from 10 unprofitable international and 39 domestic routes by the end of fiscal 2012.
JAL will retire its large fuel-inefficient planes, including Boeing 747-400s and Airbus 300-600s, and replace them with midsize and smaller planes.
The plan calls for the company to post a ¥64.1 billion operating profit in fiscal 2010 and ¥117.5 billion in fiscal 2012.
Asked how JAL can make such a drastic recovery from the first year of rehabilitation, Hideo Seto, an ETIC trustee, said the company’s optimism is warranted.
“We know that we’ve been receiving criticism that the estimation is optimistic, but so far JAL has been making a profit at a pace that will exceed the estimated figure (of ¥64.1 billion in operating profit),” Seto said, adding that an increase in customers, healthy cargo operations and cost-cutting contributed to the good result so far.
The court is likely to approve the plan by the end of November. JAL had planned to submit the rehabilitation plan a couple of months ago but postponed it to come up with more persuasive points.
Earlier in the day, the government approved the plan at a meeting of ministers, including transport minister Seiji Maehara and Finance Minister Yoshihiko Noda.
Maehara said the ministers gave good marks to the rehabilitation plan, particularly for its reassessment of routes.
“I believe JAL can implement (the revival plan) in terms of changing its aircraft and pulling out from unprofitable routes . . . what is very important for JAL is to follow through on personnel cuts as scheduled,” he said.
Still, the company faces challenges. For instance, JAL and the banks have put off negotiations over the new requests for loans worth ¥319.2 billion to September or later.
Mitsuru Miyazaki, chief analyst at SMBC Friend Research Center, slammed the rehabilitation plan for lacking specifics and feasibility. He added that the plan’s direction is not very different from midterm management plans drafted in the past.
“For instance, the plan says the route network will be optimized, but it doesn’t say how to achieve this,” said Miyazaki, adding it is also questionable whether JAL can really cut 16,000 jobs.
He said customers have been shifting from JAL to rival All Nippon Airways Co., according to monthly business data.
He added that while it is true JAL’s management improved from last year, it is “hard to imagine” that the airline can really post ¥64.1 billion in operating profit for fiscal 2010.
JAL filed for bankruptcy in January under the Corporate Rehabilitation Law in the biggest nonfinancial corporate failure in the postwar period with an estimated ¥2.3 trillion in debt.
Information from Kyodo added
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