More pain lies ahead for Japan Airlines

JAL aircraft.jpgWhat will Japan’s Enterprise Turnaround Initiative Corp find when it studies whether it should invest in Japan Airlines that we don’t already know?

The reality is that JAL will become bankrupt without government help. And despite all the caveats from the different parties, it is almost certain that the Japanese government – through the ETIC – will help the carrier.

What is certain is that the airline must drastically revamp its operations if it is to emerge from this crisis as a viable entity. Slashing its fleet and network will help, as will coming up with an agreement to reduce the cost of its pension payments.

But what JAL really needs is a government allows it to be run as a proper airline without state-intervention in its operations – something that has contributed to this crisis – and a management that realises that they need to run the airline like a business and make the necessary changes.

Japan’s transport minister remains optimistic about the airline’s future, but the JAL that emerges from this crisis must be very different to the one that went into it. Otherwise, it would all have been a waste.

Shareholders, unsurprisingly, have been dumping JAL stock, and the airline’s market capitalisation is worth less than half of rival All Nippon Airways. That simple fact would hurt the proud JAL management, but there is likely to be a lot more pain ahead of them in the coming years.

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