Asia’s largest carrier by revenue has released several such proposals in recent times, even if the newest plan does offer a sliver more hope than previous efforts.
JAL’s problems have been well-documented. As for many airlines, high oil prices have brought unwelcome pressure. But JAL has made things considerably more difficult thanks to a series of safety incidents, along with the highest debt load of any Asian airline.
The new plan, accordingly, takes aim at many aspects of the bloated carrier’s operations. JAL is looking to slash 4,300 jobs and US$5 billion of debt, while also downsizing its fleet and re-focusing on more profitable routes. In addition, the airline said it will speed up disposal of non-core assets such as hotels and real estate. JAL chief executive Haruka Nishimatu, meanwhile, has also pledged to take a 60 per cent pay cut — while the company’s top nine executives will now share an open office, in a bid to improve staff solidarity.
The plans sound impressive, but few analysts believe JAL can achieve its lofty profit targets. The airline is aiming to increase its operating income to ¥88 billion (US$725.3 million) in 2010 from the current figure of ¥35 billion.
JAL is expected, however, to face a tricky ride from its nine employment unions over the staff cull plans, particularly after pushing through a 10 per cent pay cut last year. JAL’s spate of safety lapses, meanwhile, have helped key rival All Nippon Airways (ANA) to grow its own market share. In the last two years alone, the airline has suffered an engine fire, wheels falling off during a landing and a flight forced to return because of a cracked cockpit window.
Unsurprisingly, the JAL brand has also suffered. The safety lapses have had a detrimental effect on consumer confidence, while the image of being financially beleaguered is an unattractive one in conservative Japan.
The flag carrier that helped to define the Japanese boom years of the ’70s and ’80s must hope that the worst is behind it.
Diagnosis 1... Yukiko Harada, managing director, TrainTracks
Once held in the same high esteem as prestigious Japanese brands such as Sony, Toyota and Fujitsu, the Japan Airlines brand has taken a beating over the past few years. In a recent ranking of 140 national brands conducted by Diamond business magazine, JAL came in at number 137, well behind ANA, which was ranked at number 24. The brand value of both carriers has changed radically compared to 10 years ago, when Diamond ranked JAL at 68 and ANA at 71.
In a hierarchical society brought up to respect seniority and authority, reports of boardroom disputes with shareholders have hurt JAL’s corporate credibility and brand equity. However, the real bludgeon has been accidents and safety issues that have seen once-loyal customers shift their alliance to ANA.
Management has taken a number of steps in an attempt to restore the airline back to health and already announced a new recovery plan in early February.
However, rebuilding its diminished brand equity and regaining public trust is likely to be a slow process which no cosmetic promotional or advertising campaign can fix. A focused and patient communications programme, both internal and external, will be essential to rebuild brand credibility.
Diagnosis 2... Chris Beaumont, president and CEO, Grey Global Group Japan
JAL as a business is at a tipping point; a carrier that has too much in common with PanAm to be comfortable. Poor management, numerous safety issues and business results that saw a loss of US$89.9million last quarter have led to the airline’s confirmation that it is downsizing by eight per cent.
JAL should focus on revitalising its brand both internally and externally. Through necessity, it has to contemporise its brand character.
ANA has been helped operationally as well as mentally by the halo effect of the Star Alliance codeshare network. In April, JAL will join One World — this offers a tremendous opportunity to build on the successful heritage of JAL of the 1970s to ’80s, targeting Japanese passengers over the age of 40 who are increasingly wanting to enjoy enriched experiences.
Critical to this improved customer orientation, JAL needs to consider its internal branding. Here again there is little clarity and consistency: there are multiple workers’ unions. Critically, the current JAL management doesn’t have customers in mind; it is singular in trying to improve business efficiency. The airline needs a brand-centric customer orientation that will revive pride and optimism.
