NICHOLAS IONIDES SINGAPORE
Japan Airlines (JAL) and Japan Air System (JAS) are forecasting substantial cost savings from their planned merger, and have finalised a formal schedule for its completion.
The carriers announced the plan in November, and confirm the new, enlarged airline will operate under the Japan Airlines Group banner. They expect to save around ´73 billion ($550 million) between them annually from fiscal year 2005. The move will involve 3,000 job losses.
The merger is to be carried out in two stages up to 2004, provided it secures government approval. The first phase, in October, will see the formation of a joint holding company, to be known as Japan Airlines System. Operations will remain largely separate until spring 2004, when integration is due to be completed. The company's business name will then change to Japan Airlines Group.
International passenger services will operate as Japan Airlines International, while domestic passenger operations will go under the banner of Japan Airlines Domestic. Cargo operations will be known as Japan Airlines Cargo.
In fiscal year 2005, cost savings are expected to amount to ´73 billion - ´31 billion from facilities, ´24 billion from manpower, ´12 billion from aircraft and ´6 billion from other areas. Savings from unnecessary investment are also expected to amount to ´100 billion, according to the carriers, which also expect to reduce their combined fleet by around 10 aircraft.
In last year's announcement of the merger, JAL and JAS said they would create a carrier with a domestic market share of around 48%, compared with rival All Nippon Airways (ANA) with a domestic share of around 49%.
ANA, which is opposed to the deal, is Japan's biggest domestic operator, but is smaller than JAL overall, as the larger carrier has a much bigger presence in the international market. JAS is the country's number three carrier with a limited international network extending only to Seoul in South Korea and China.
JAL and JAS say international network development will centre on expansion within Asia and China will be a key focus. At the same time they will "expand through alliances to further increase competitive power". Neither is a member of a global alliance, although JAL is close to oneworld.
Source: Airline Business
