With its fourth annual loss in five years looming, Japan Airlines Corp. is struggling to stay afloat, and the reduction of company pension benefits has become a crucial issue. For its reconstruction efforts, the cash-strapped airline desperately seeks public funds. But because JAL retirees get fatter pensions than the average retiree, transport minister Seiji Maehara has emphasized that the public will not stand for JAL's using any public funds to pay for the higher level of benefits.

Thus, pension reform has become key to reconstructing Japan's biggest airline. It is imperative that management work to gain the cooperation of JAL retirees and workers to realize the reform.

JAL management wants to reduce company pension benefits (apart from public pension benefits) for some 9,000 retirees by about 30 percent, and for some 16,000 current workers by about 53 percent. At present, the yield on pension funds is set at 4.5 percent. Management hopes to reduce the yield to 1.5 percent. Because the actual market yield has been smaller than 4.5 percent of late, JAL itself has had to make up for the gap. Moreover, its pension reserve funds are more than ¥300 billion short.

JAL cannot easily push its pension reform plan because, to protect workers, strict rules on reducing these benefits are in force. The company must get consent from two-thirds of its retirees and current workers before it can reduce the benefits, which are reported to be worth on average around ¥250,000 per month per retiree. The calculated amount of the monthly reduction, if the plan is approved, would be about ¥80,000. Management is holding a series of meetings with retirees. It will need to give a precise explanation.

If JAL fails to get approval from the retirees and workers, the government is considering legislative action for a mandatory reduction in pension benefits. But this move could give rise to questions about whether property rights are being violated. For that reason, JAL would do better to resolve this issue on its own.