The drama started Feb. 10, when four board members of Japan Airlines Corp.’s international operations unit visited JAL President Toshiyuki Shinmachi with a petition carrying the signatures of some 50 managers. They urged him and two other executives to take responsibility for the JAL group’s poor business performance by stepping down.
Since then, about 400 managers have signed the petition calling for the trio’s resignations. JAL announced March 1 that Mr. Shinmachi will become chairman without the right to represent the company and the two other executives will step down. Vice President Haruka Nishimatsu, regarded as a compromise choice between the camp close to Mr. Shinmachi and the camp demanding his removal, will become president in June.
Despite the top-level reshuffle, it will not be easy for the holding company of the nation’s top airline group to heal the wounds caused by internal strife. The infighting has taken place at a time when JAL has performed poorly amid soaring fuel prices and declining numbers of passengers — the latter factor exacerbated by a series of safety problems.
JAL reportedly has long been plagued by factional disputes between sales and administrative executives. Mr. Shinmachi’s background in the air freight division — regarded by many in the firm as outside the mainstream — might have prevented him from exercising his leadership to the best advantage.
In an airline company, safety must be given top priority. To this end, a sense of unity among executives, managers and workers is indispensable. All sectors of JAL must demonstrate such unity so that the group can regain the public’s trust and improve its business.
A comparison with rival All Nippon Airways highlights just how poorly JAL is performing. JAL reported a group net loss of 23 billion yen for the first three quarters of fiscal 2005, and expects to see a net loss of 47 billion yen for the year ending in March. JAL is also saddled with debts amounting to 2 trillion yen. In contrast, ANA posted 29.9 billion yen in net profit for the first three quarters of fiscal 2005 and raised its earnings projections for the year.
Last November, JAL announced plans to implement an average 10-percent wage cut for some 22,000 employees from January. It later postponed the start of the measure to April. JAL’s largest union has accepted the wage cut, but the remaining eight unions have not yet done so. In contrast, a 5 percent wage cut has been in force at ANA since April 2004.
In a move aimed at improving their international competitiveness, the former Japan Airlines Co. and Japan Air System Co. integrated in 2002 under a single holding company. A reorganization of aircraft operations followed. Since April 2004, Japan Airlines International Co. and Japan Airlines Domestic Co. have been under the wings of the holding company, JAL.
The holding company plans to merge with the two companies in October to complete the integration. The integration should enhance efficiency in overall management and aircraft operations as well as safety. But it appears that reform to improve safety has been slow and difficult management problems remain unresolved.
A spate of safety problems involving JAL group aircraft operations has raised both public and government concerns. The Ministry of Land, Infrastructure and Transport issued an operation improvement order to JAL in March 2005. When problems continued to occur, the ministry again ordered JAL to submit a program to improve the airline’s safety, this time by the end of January. Problems included two wheels coming off a plane’s nose-landing gear during a landing, thrust reversers failing to deploy twice during landings, and a plane taking off with a faulty door latch. These safety problems did not result in accidents; still, under less lucky circumstances, they could have triggered disasters leading to many deaths.
In December, an advisory committee made up of outsiders issued a report to JAL. Pulling no punches, it identified a bystander-like attitude among executives and management, and a lack of communication and mutual understanding among different sections as factors contributing to the group’s poor performance. JAL must compete not only with ANA but with airlines from other Asian countries like South Korea and Singapore. While making efforts to restore the group’s profitability, JAL executives and employees must first and foremost remain steadfast in working to prevent a disaster like the 1985 crash of a JAL Boeing-747 jumbo jet into Mount Osutaka — which killed 520 people — from ever happening again.
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