JAL Will Run Low-Cost Flights
“Japan Airlines Corp. (JAL), the largest airline in Asia, called, early this year to be placed under bankruptcy protection, announced Government officials in Tokyo.
The company, which carried at least 45 million passengers last year, will continue to run flights and will restructure under a government plan, which provides debt relief, eliminates unprofitable operations and allows access to new investment. JAL will also drop to 15,600 jobs under the restructuring plan.
Founded in 1951, “Japan Airlines” recorded in the first half of fiscal year ending in March, losses of 131 billion yen, due to the decline in air traffic worldwide and the competition with domestic rival “All Nippon Airways Corp.
Under the plan, JAL will get at least 900 billion yen ($ 10 billion) in the form of loans and new capital from Enterprise Turnaround Initiative Corp.., A company backed by Japanese rule, but also from a government credit. The amount mentioned above, the Enterprise Turnaround “will inject the airline 300 billion yen. However, Enterprise Turnaround “and” Development Bank of Japan “JAL will provide a credit line of 600 billion yen. In addition, the airline will be erase debt of 730 billion yen.
The Japanese Government decided not to grant unconditional financial support company, after having secured four rescue packages over nine years.
Delta Air Lines Inc. and American Airlines, the world’s largest airlines, have launched rival bids to invest in JAL, or a restructured entity, wishing to gain access to routes in China and Japan. Both companies have announced that JAL bankruptcy determined not to abandon the idea of Japanese investment in air transport operator. Sources close to JAL, cited by foreign media, say that Japanese society would be interested to join the Sky Team alliance.
JAL restructuring will be led by Kazuo Inamori as executive director. Inamori, aged 77 years, is founder of “Kyocera Corp. JAL president, Haruka Nishimatsu also resigned from office.
In current conditions, JAL expects to achieve an operating profit of 115.7 billion yen and sales of 1.359 billion yen in the fiscal year ends in March 2012.
But Japan Airlines Corp. wants to bounce back up. The company filed in January this year for bankruptcy and is now trying to set up low-cost airplane fares, as part of their turnaround plan. Japan’s Transport Minister Seiji Maehara said at a briefing in Tokyo that the company, or JAL, as the airline is also known will file their restructuring proposals to the Tokyo District Court later today. “If we don’t create this new company inside the group, it will become more fragile,” he said, referring to the low-fare airline.
JAL is slashing staff, retiring planes and cutting flights. The airline last month reported its first profitable quarter in almost two years and promised to further reduce personnel, fuel and other costs as part of the turnaround.
The airline plans to cut its operating costs by 374 billion yen ($4.4 billion) to 1.29 trillion yen this fiscal year, compared with the 1.67 trillion yen it has estimated for the business year ended March 31, according to a plan released in January. The company hasn’t announced annual earnings for last fiscal year.
At the end of March 2009 JAL’s four biggest lenders were Mitsubishi UFJ Financial Group Inc., Sumitomo Mitsui Financial Group, Mizuho Financial Group Inc., and the Development Bank of Japan. They were owed a total of 429 billion yen.
The Enterprise Turnaround Initiative Corp. of Japan has agreed to invest at least 300 billion yen into the carrier. Japan Airlines Corp. may start a discount carrier, Nikkei English News reported, citing a business turnaround plan being prepared by the airline.
As Nikkei reported, JAL wants to increase revenue from international flights to 440.8 billion yen ($5.2 billion) in the year ending March 31, 2013, from this fiscal year’s projected 419 billion yen. JAL would use added slots at Tokyo’s Haneda Airport.
Japan Airlines has also decided to give up its fleet of McDonnell MD81 Douglas until September this year, and also until February 2011, they will sell all Boeing 747-400 aircrafts they own.
JAL has received the first Boeing 747-100 in 1970.11