Leaner, rather than bigger, is the new mantra at Japan Airlines, which continues to restructure its business as it aims to return to profitability within the next two years.
JAL emerged from bankruptcy protection in March after 14 months by implementing restructuring measures in co-operation with the government-backed Enterprise Turnaround Initiative Corp. It has been streamlined its operations and structure, cutting routes, trimming its network and retiring dozens of older aircraft to cut costs.
The measures appear to have an impact, with JAL reporting an operating profit of 188 billion yen (Y) ($2.3 billion) and operating revenues of Y1.36 trillion for the year to 31 March. It is about two years away from posting a net profit, JAL president Masaru Onishi told Airline Business at the AGM.
JAL, however, is also a much smaller airline. In April, it reported passenger numbers of 41.9 million for the year to 31 March 2010, down 12.6% from a year before. Rival All Nippon Airways, however, reported passenger numbers increased by 1.6% to 43.1 million, meaning it has overtaken JAL for the first time since 2002.
"Our focus is not on dominance or majority share," says Onishi. "We are focusing on improving ourselves and increasing the service standards so that we can make more passengers want to fly on JAL. This is the most important item on our agenda."
It has to cope with a tough Japanese airline market. ANA, a formidable competitor, also plans to set up a low-cost subsidiary. Dedicated Japanese low-cost carrier Skymark has also ordered six Airbus A380s to begin long-haul services.
JAL is mulling starting up its own low-cost subsidiary, possibly in collaboration with Jetstar, the subsidiary of its Oneworld alliance partner Qantas Airways. In the full service business, co-operation with its Oneworld alliance members will help as well.
"JAL is still in transition and the focus is on rebuilding our financial strength. It is not that easy for JAL to expand as an airline, and so the expansion will be through our alliance to take advantage of the networks that our partners have," he says.
The long-haul business remains important to JAL and that is where the carrier hopes that aircraft like the Boeing 787, which it will begin to receive from later this year, will help it to gain an advantage. It has already said that the 787 will be deployed on the Tokyo-Boston route next year.
"The 787 is a game changer. Previously, we used larger aircraft on long-haul routes as they had the range but the concept has changed with the 787. The 787 allows us to be more efficient," he adds.