LIFE AFTER SQ006 - Orient Aviation

c o u n t r yf o c u sJAL was in bad shape when a new president was appointed in 1998.Hard decisions had to be made, but they have paid dividends — literallyKANEKO’STOUGH LOVEThe 1990s were turbulent times for flagcarrier Japan Airlines (JAL), but sinceIsao Kaneko became its president inJune 1998 there has been a dramatic transformationat Japan’s largest operator.He immediately read the riot act. Speedydecision-making was required, dithering wasout, he demanded. He chopped the number ofboard members in half to make it easier.The job was a big one. Kaneko inheritedan airline in disarray. It called for a no-nonsenseleader who could make tough decisions.In the seven years prior to Kaneko’s arrival JALaccumulated losses of US$334 million, withdebts and over-evaluations of associated hotelsand resorts accounting for another $560million. Shareholders received no dividendsfor six years.In 2001, they will be handed their thirdpay out in a row with JAL expecting net profitsof US$273.5 million for the year ending March31, on total consolidated revenues of around$14.4 billion. This represents a 1.9% return onincome, roughly in line with a consistent 2%being targeted by Kaneko.Getting there has not been easy, althoughshareholders, on the day he took over, approveda US$894 million debt write-off, thelargest against capital reserves in Japanesecorporate history. It allowed the new presidentto start with a clean sheet.The 62-year-old airline chief has takenfull advantage of that starting over, pushingthrough reforms and restructuring to thepoint where JAL is firmly back in the black.“Our aim is to have stable growth. Wewant consistent profitability, somethingwhich has been lacking in the past,” Kanekotold Orient Aviation.Question marks may hang over economicconditions, but the groundwork for a betterfuture has been laid. Unit costs have beenslashed by 38% since 1990, unit labour costsare down 48% and costs per ATK are 63 yen,compared with around 91 yen in 1990.Japan Airlines president Isao Kaneko: “We have finally caught up. We can now becompetitive with the major American and European airlines as far as cost is concerned”These gains reflect well on the bottomline. JAL’s mid-term operating income for thesix months to September 30, 2000 was thesecond highest the airline had recorded; up88.4% to US$484.6 million on a 7.7% increasein revenue to US$5.5 billion.“We have finally caught up. We can nowbe competitive with the major American andEuropean airlines as far as cost is concerned.Our labour efficiency, our productivity, is muchhigher than other major carriers in the world,”said Kaneko.Given local airport charges three timeshigher than the world average, present fueltaxes and traditional labour norms, it is nomean achievement. With the board halvedfrom 30 to 15 members for faster decisionmaking,his blueprint concentrates on thecore air transport business and centralisationof services, resources and use of aircraft formaximum efficiency.Divisions have been established tomaximise effectiveness and independentbusinesses such as trading and hotel managementare being hived off to realise their trueeconomic value.JAL is much leaner and meaner today.In 1998, manpower was 36,000. By the endof this year the workforce will have beenreduced by 3,500. Another 700 will depart in2002. Cabin crew today are hired on a contract-basedsystem rather than the previous“for life” employment.Perhaps most important is the fine tuningof airline operations; a reorganisation intothree groups:34 | Orient Aviation | March 01