Japan Airlines (JAL) is to step up job cuts under a "revival plan" that it hopes will return it to consistent profitability after a difficult few years. 

Asia's largest airline group is in a race against the clock to put its financial house in order ahead of major changes to the Japanese market that are coming in 2009. That year a new runway opens at Tokyo's busy Haneda airport that will allow new competitors to start challenging it domestically, while more slots will also open up at the congested Narita international facility.

Japan Airlines tail 
© Japan Airlines   
JAL is taking aggressive action to avoid being left behind in a changing market

JAL releases a medium-term business plan every year, but this time it has come out earlier than normal and the carrier says it includes more aggressive cost-cutting action than in previous years. A key element will be the further reduction of its wages bill by ¥50 billion ($414 million) annually "from and after fiscal 2007".

It hopes to achieve this mainly by stepping up job cuts, which have already been taking place. Layoffs are rare in Japan and, like most other corporations, JAL mainly cuts jobs by not replacing staff when they retire.

Between the beginning of April this year and the end of March 2010, says JAL, the group workforce will be reduced to 48,800 from 53,100, meaning another 4,300 jobs will go. JAL says this is in addition to the several thousand jobs that have been cut since it acquired Japan Air System in 2002.

Staff salaries were cut by 10% in April last year and JAL says this reduction of basic wages will be maintained for at least the next year. It also plans to implement an early retirement programme, revise retirement benefit-related systems, review allowances and bonuses "and take other large-scale personnel cost reduction measures". In addition, chief executive Haruka Nishimatsu and other executive directors will have their salaries cut further.

JAL, which joins the oneworld alliance in April, also says it will step up "aircraft downsizing" in the years ahead, meaning it will operate smaller aircraft on both domestic and international routes. It will also continue to shift more operations to subsidiary carriers that have lower cost bases.

JAL expects these and other cost-reduction measures will help it report a net profit of ¥7 billion in the year to March 2008. It suffered a net loss of ¥47.2 billion in the year to March 2006, but the airline hopes to return to profitability in the current year to March 2007, with a forecast ¥3 billion net result. This will primarily be because of asset sales, however.

Source: Airline Business