Name : Yodia PertiwiNIM : 090110022Semester : 2 (two)Department : Health of societySTIKES Banten 2009/2010

Solve Problems for Japan Airline (JAL)

Name of industry : Japan Airline

History:

Japan Airlines International Co., Ltd. (JAL) (株式会社日本航空インターナショナル Kabushiki-gaisha Nihon Kōkū Intānashonaru?), is an airline headquartered in Tokyo, Japan.

Its main hubs are Tokyo's Narita International Airport and Tokyo International Airport, as well

as Nagoya'sChūbu Centrair International Airport and Osaka's Kansai International Airport.

The airline and four of its subsidiaries (J-Air, JAL Express, JAL ways and Japan Transocean

Air) are members of the oneworld airline alliance.

JAL group companies include Japan Airlines for international and domestic services; JAL ways

for international leisure services; JAL Express for international and domestic low-cost services;

Hokkaido Air System, J-Air, Japan Air Commuter, Japan Transocean Air and Ryukyu Air

Commuter for domestic feeder services; and JAL Cargo for cargo and mail services. JAL group

operations include scheduled and non-scheduled international and domestic passenger and

cargo services to 220 destinations in 35 countries worldwide, including codeshares. The group

has a fleet of 279 aircraft. In the fiscal year ended March 31, 2009, the airline group carried over

52 million passengers and over 1.1 million tons of cargo and mail.

JAL was established in 1951 and became the national airline of Japan in 1953. After over three

decades of service and expansion, the airline was fully privatized in 1987. In 2002, the airline

merged with Japan Air System, Japan's third-largest airline and became the sixth largest airline

in the world by passengers carried. The airline filed for bankruptcy protection on January 19,

2010, after losses of nearly ¥100 billion in a single quarter.

Problem:

Bankruptcy

Japan Airlines went bankrupt, Tuesday, with 26 billion dollars of debt in one of the country's biggest ever corporate failures, beginning a painful overhaul involving more than 15,600 job cuts. Japan Airlines' jets taxi past one another at Haneda Airport in Tokyo. Japan Airlines has gone bankrupt with 26 billion dollars of debt in one of the country's biggest ever corporate failures, beginning a painful overhaul involving more than 15,000 job cuts.

JAL, a once-proud flag carrier now worth less than a jumbo jet, reassured passengers its flights would not be interrupted during the bankruptcy, which is similar to the process used to revive ailing US auto giant General Motors. Asia's biggest airline, which carries more than 50 million passengers every year, will slash 30 percent of its workforce and receive almost 10 billion dollars of public funds and emergency loans under a three-year turnaround plan.

JAL said it aimed to "be reborn as a leading airline group".

But transport minister Seiji Maehara warned the government would not keep bailing out JAL indefinitely, saying it would have pulled the plug on the group if it were not such an important company.

Once-proud JAL victim of Japan's economic decline

"JAL will have to fly on its own after three years," he said. "Looking to the future for the aviation industry, we have to determine if two mega-carriers should exist or not."

Japan's top carrier has fared much worse than smaller rival All Nippon Airways in recent years. Its shares plunged to an all-time low of just three yen (three US cents) at one point earlier Tuesday, reducing the market value of the group to about 90 million dollars -- far less than even the cost of a new Boeing jumbo.

The stock will be delisted from the Tokyo Stock Exchange on February 20 or earlier, a move expected to wipe out shareholders' investments. Even so, analysts said bankruptcy appeared to have been the best option.

The approach of the four-month-old government contrasts with the approach of previous conservative administrations which simply "threw money at JAL to keep it afloat", he said. The ups and downs of Japan Airlines JAL made no announcement regarding its tie-up talks with American Airlines and Delta Air Lines, which are in a bidding war for a slice of the Japanese carrier, eyeing its lucrative Asian landing slots. Delta said it and the SkyTeam airline alliance "fully support Japan Airlines and stand ready to provide assistance and support in any way possible", Delta said Tuesday.

"With JAL's bankruptcy, people are becoming increasingly gloomy about the economy," Hideharu Seiyama, a 43-year-old regular JAL passenger, told AFP at Tokyo's Haneda Airport.

JAL went bust with debts of about 2.32 trillion yen (25.7 billion dollars), becoming one of the highest profile victims of Japan's long economic malaise. It is the country's biggest ever bankruptcy outside the financial sector. The airline is expected to post a massive operating loss of about 2.9 billion dollars in the current financial year to March, according to the state-backed body overseeing its turnaround efforts.

Solution:

The challenges and opportunities Reducing enterprise costs and generating new revenue opportunities will remain a main focus for IT investments in the airline industry in 2010, says Toby Tucker, Director Flight Operations at SITA. “There is a move towards virtualization and service-orientated architecture where airlines can run systems in a more virtual environment, whether it is outsourced or within the airline’s own data centre,” he explained. The latest SITA/Airline Business industry survey found that 34 per cent of airlines rated aircraft operations as a major investment area going forward, while investments in passenger processing and services topped the list. On the sales and revenue generating front, online distribution is set to become the most significant sales channel, with airlines expecting to increase the proportion of tickets sold through online channels from 26.7 to 41.4 per cent by 2012.

Airline investment in IT&T reached a new low this year as the aircraft operators focused on managing record financial losses. According to Mike Moore, a Director at Travel Technology Research (TTR), the total size of the IT-airline market stood at US$12 billion (€8.5bn) in 2009, a value that includes in-house services. Passenger service systems (PSS) were 14 per cent of that spends. “We see the total marketplace growing only marginally over the next three years. We see infrastructure investments going down,” Moore said. He expects the primary areas for IT&T investments in 2010 to again include PSS, covering reservation and inventory systems, ticketing, fares, departure control and in-house websites.

"Restructuring" 

Prime Minister Yukio Hatoyama's four-month-old Democratic Party-led government signals a shift from previous governments under the long-dominant Liberal Democratic Party, which had authored the previous JAL bailouts.  Hatoyama's government said it would provide the necessary support for JAL during its restructuring. 

Following similar bankruptcies by overseas airlines such as Delta Air Lines and United Airlines, JAL plans to cut about a third of its 47,000 workforce and erase about two dozen unprofitable routes, sources said.  The ETIC will support the carrier with about 300 billion yen in capital and a 600 billion yen credit line. 

Fuel hedging contracts may also be affected by a bankruptcy filing. JAL uses mostly in Brent forward contracts and about 40 billion yen is estimated to be exposed in the event of an automatic termination, a source familiar with the matter said.  JAL needs to do what it has long put off: Focus on its main business and cut operations it doesn't need, said Andrew Miller, chief executive officer of CAPA Consulting. 

JAL will also need to make a decision about competing aid offers from Oneworld alliance partner American Airlines and rival Delta, which wants to woo JAL to its SkyTeam group. The carrier has spent two decades trying to recover public trust following a 1985 crash that became the world's worst single aircraft disaster in history, claiming 520 lives. Kazuo Inamori, the 77-year-old founder of electronics maker Kyocera Corp, was tapped last week to become JAL's new chief executive officer to oversee its restructuring. JAL's restructuring plan also calls for increasing the fuel efficiency of its fleet, replacing 53 bigger jets with 33 small jets and 17 regional ones. 

"I think a revival of JAL will be good for manufacturers such as Mitsubishi Heavy industries which is developing new regional jets," said Shinsei's Matsumoto. ($1=90.43 Yen) 

MIND MAPPING

STRENGTH

WEAKNESS

THREAT

OPPORTUNITIES

Japan Airlines' problems partly reflect the carrier's own difficulty in controlling its costs.

After over three decades of service and expansion, the airline was fully privatized in 1987.

In 2002, the airline merged with Japan Air System, Japan's third-largest airline and became the sixth largest airline in the world by passengers carried.

Japan's top carrier has fared much worse than smaller rival All Nippon Airways in recent years. Its shares plunged to an all-time low of just three yen (three US cents) at one point earlier Tuesday, reducing the market value of the group to about 90 million dollars -- far less than even the cost of a new Boeing jumbo.

JAL plans to cut about a third of its 47,000 workforce and erase about two dozen unprofitable routes, sources said.  The ETIC will support the carrier with about 300 billion yen in capital and a 600 billion yen credit line. 

Conclusion

Japan Airlines' problems partly reflect the carrier's own difficulty in controlling its costs. But they are also a reminder of the fact that aviation can be a very difficult industry. In the US, some of the biggest airlines have been into and emerged from a bankruptcy procedure in recent years including Delta and United. So Japan Airlines is joining some big names by going through this process.

Despite its troubles, it is the focus of a contest between two of the leading global airline alliances. JAL is a member of the One World alliance, which includes American Airlines and British Airways. But Skyteam, whose members include Delta and Air France, are keen to recruit JAL, to add the routes they can offer to customers. For all the problems facing many airlines, there is a real advantage in attracting passengers to be able to connect with a very wide range of destinations. And for that, both alliances have been offering financial help to a bankrupt airline.

JAS merger

A Japan Air System (JAS) Airbus A300-600Rwith JAL logo on the fuselage

In 2001, Japan Air System and Japan Airlines agreed to merge; and on October 2, 2002, they

established a new holding company called Japan Airlines System (日本航空システム Nihon Kōkū

Shisutemu?), forming a new core of the JAL Group. Aircraft liveries were changed to match the design of

the new JAL Group. At that time the merged group of airlines was the sixth largest in the world by

passengers carried.[19]

On April 1, 2004, JAL changed its name to Japan Airlines International and JAS changed its name to

Japan Airlines Domestic. JAS flight codes were changed to JAL flight codes, JAS check-in desks were

refitted in JAL livery and JAS aircraft were gradually repainted. On June 26, 2004, the parent company

Japan Airlines System was renamed to Japan Airlines Corporation.[20][21]

Following the merger, two companies operated under the JAL brand: Japan Airlines International (日本航

空インターナショナル Nihon Kōkū Intānashonaru?) and Japan Airlines Domestic (日本航空ジャパン

Nihon Kōkū Japan?). Japan Airlines Domestic had primary responsibility for JAL's large network of intra-

Japan flights, while JAL International operated both international and trunk domestic flights. On October

1, 2006, Japan Airlines International and Japan Airlines Domestic merged into a single brand, Japan

Airlines International.[20][22]