Japan Airlines Corp. will decide by the end of this year whether it will go ahead with a plan to boost its capital by ¥50 billion from private institutions, JAL Chairman Kazuo Inamori said in a recent interview.
“As we can do well without the ¥50 billion now, we will take one year to think about the matter,” Inamori said, suggesting it’s possible the plan will be withdrawn because the struggling airline is having difficulty finding investors.
“I was a bit optimistic and thought entities such as financial institutions would offer (investment), but it was totally not the case,” Inamori said, adding he thinks it is now impossible to receive investments from financial institutions.
In October, Inamori said the airline, which filed for bankruptcy protection under the corporate rehabilitation law last January, planned to boost its capital by another ¥50 billion on top of the already set ¥350 billion investment by the government-backed Enterprise Turnaround Initiative Corp. of Japan.
“I had thought that ¥350 billion from ETIC would fall slightly short” of what JAL needed, Inamori said.
If the airline decides to go ahead with the plan, the capital increase will be conducted by the end of this year, he said.
Meanwhile, Inamori, a charismatic entrepreneur who founded major technology business Kyocera Corp., showed a negative view about setting up a low-cost carrier, although JAL said in its rehabilitation plan that it would study the creation of a budget airline.
Having a low-cost carrier “is like a double-edged sword,” Inamori said. While they can be a weapon against competitors, there is also a high possibility of the airline hurting itself, Inamori said, citing failures of budget carriers launched by major U.S. airlines.
“We may suffer further damage” if JAL sets one up and fails at a time when the airline is still undergoing restructuring, Inamori said.
Instead, JAL is aiming to offer quality services to avoid price competition, he said.
“We will treat premium customers with premium prices” and not just try to lure passengers by lowering fares, Inamori said. “The only way for us to survive is offering better services than other airlines that would satisfy customers.”
To improve profitability, JAL has engaged in cost-cutting efforts, while it is planning to introduce in April a system that shows the balance of each route, enabling the airline to find out which routes are profitable and which are unprofitable, Inamori said.
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