The JAL Group is in the process of constructing
a medium term corporate plan that will see drastic reformation to
its business model and processes, from the period starting FY2009
While it is due to be completed and
announced later this year, the basic course of actions under this
plan has been outlined at the request of the Japanese Ministry of
Land, Infrastructure, Transport and Tourism (MLIT).
The fundamental objective of this corporate plan
is to develop a business model that does not overly rely on the
recovery in the economy, but instead, to look within the company
and implement sweeping cost cuts across the group wherever
- Domestic Passengers - In
the course of restructuring the network, a total of 23
underperforming routes were suspended and the flight frequencies
on 11 other routes were reduced in the fiscal years of 2007 and
The domestic network for FY2009 will see an
additional 7 routes discontinued and the flight frequency of 1
route reduced. As an overall result of this capacity cut for the 3
fiscal years, the size of the group's domestic fleet will be
reduced by 9 aircraft by the end of FY2009.
Passenger - On the international network, 6 unprofitable
routes were suspended and 3 routes saw cuts in frequency in FY2007
and FY2008. As for FY2009, operations on another route will be
ceased and the flight frequency on 2 routes reduced.
- Cargo - The
group's cargo business model is undergoing a radical make-over
with plans that include establishing more strategic partnerships
with external companies in order to condense the risks faced by
cargo operations in this economic climate.
- Cost Reductions
- In the fiscal year 2008, JAL achieved a 50 billion yen cost
reduction through a variety of measures such as the temporary
decrement in annual bonuses, improved personnel productivity, and
adjustments to the wage system which alone led to a 5 billion yen
saving. The group estimates an overall cost savings of 10 billion
yen can be reached in FY2009 from the continuation of these
Also contributing to the cost reduction
achieved, the early retirement scheme in FY2007 and FY2008 shrank
the workforce by a total of 5,574 persons, from 53,100 employees
at the end of FY2006, to 47,526 employees at the end of FY2008 and
thereby decreasing labour cost.
Plans for FY2009 include adjustments to the
pension scheme which will bring about another 88 billion yen in
cost reductions. In addition, a special early retirement scheme
will be implemented and each department is to re-look at their
business processes to sift out more ways to lessen costs.
Measures to be
Aircraft in the group fleet used for
international and domestic routes are progressively undergoing
downsizing and renewal, and the overall fleet size will be reduced
as JAL continues the switch to smaller, more fuel-efficient
aircraft. More emphasis will be placed on routes with higher
profitability and the airline has said it will pursue drastic cost cuts
- Domestic Passengers
- The domestic network is being
reassessed and revised based on more conservative projection of
demands and profitability. The airline has said it does not discount the possibility of
discontinuing more under-performing routes. In addition, JAL plans
to operate more regional jets on domestic routes and re-evaluate
the management structure of subsidiary airlines of the JAL Group,
where it will look for further areas for cost cuts.
- International Passenger
- The international network is also being reassessed and revised.
Furthermore, higher efficiency, state-of-the-art aircraft are
progressively replacing older, bigger aircraft in the fleet to cut
fuel consumption and cost.
- The group's cargo business model will continue to
undergo drastic changes which include establishing more
strategic relationships with external companies.
Reductions - In addition to changes in the pension system
and the implementation of the special early retirement
scheme, cost cutting measures will also converge on
departments such as maintenance, flight operations,
cabin crew, airport operations, sales and other backend
JAL's fiscal year 2009 is April
1, 2009 to March 31, 2010.
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