Night of the long knives at Japan Airlines

The outside world looks on with a mixture of admiration and astonishment at Japanese corporate management practice. The admiration comes from the vision and determination of conglomerates like Honda or Toyota to innovate and expand.

In the airline business, All Nippon Airways, is, under the guidance of surefooted chairman Yoji Ohashi, pursuing a sound strategy. It was recently even confident enough to raise its operating profit forecast to ･78.5 billion ($671 million) for the year ending 31 March 2006.

Now for the astonishment: what is happening at Japan Airlines (JAL)? With less than a year under his belt at the helm of JAL, chief executive Toshiyuki Shinmachi has faced a call to resign by four our of the carrier's top 15 directors and 50 senior managers. The incredible development, which came in the form of a petition, also called for fellow senior directors Katsuo Haneda and Hidekazu Nishizuka to step aside too.

It is reported that the unnamed directors asked for the resignations "in a bid to renew management" amid JAL's poor financial performance and stuttering market reputation. The call has been flatly rejected by Shinmachi and his fellow directors. In a statement Shinmachi said: "Their behaviour undermines public trust at a time when JAL Group must join hands and hearts to meet the two urgent management challenges. At the same time, I apologise sincerely to all the stakeholders."

The reasons for JAL's woes are analysed in depth in the March issue of Airline Business by our Asia-Pacific editor Nicholas Ionides. And the carrier is adamant that the measures it is taking, and more to come in its eagerly awaited new business plan, will enable it to turn the corner.

However, this latest move illustrates how deep the internal misgivings run about JAL's strategy. No doubt the upstarts wanted action, and fast. Their petition might result in another management change at JAL, although Shinmachi appears determined to fight on.

Whichever faction wins out, it is a telling sign of underlying trouble that a carrier of the stature of JAL is in a major fix. And with greater competition on the horizon as airport capacity opens up in Japan the repair crews need to redouble their efforts to shore up JAL's stressed balance sheet and its dented market image.