In 2008, Japan Airlines appeared to be heading toward successful reconstruction by increasing its capital by ¥150 billion with funds from banks and trading firms. But Japan's flag carrier is now in trouble. For the business year ended March 31, it suffered a consolidated loss of ¥63.1 billion and may suffer a similar loss in the current business year.
The firm has secured ¥100 billion in loans from the Development Bank of Japan, the Japan Bank for International Cooperation and three major banks, with government guarantees for 80 percent of the loans. In connection with the loans, the government in an unusual move said the transport minister will oversee the improvement of JAL's management. The firm must live up to transport minister Kazuyoshi Kaneko's call for "drastic and painful reform."
In the past year, JAL has faced severe obstacles such as a steep rise in fuel prices, the spread of the H1N1 influenza and the global recession triggered by the U.S. financial crisis. The JAL group saw the number of passengers on its international and domestic air routes decline by 19.8 percent and 13.4 percent, respectively, in May from a year before. In light of these negative conditions, JAL must implement measures to sharply reduce its costs.