Japan Airlines (JAL) is to transfer low-profit operations to its subsidiaries in an effort to cut costs under a new business plan running to 2001.

JAL plans to rename Japan Air Charter and transform it into a scheduled carrier operating short-haul flights to mainland Asia, Hawaii and Oceania, while shifting minor domestic routes to JAL Express.

The move parallels an earlier reorganisation by rival All Nippon Airways (ANA), which is transferring 20% of domestic routes to subsidiary Air Nippon over a three-year period.

JAL itself plans to focus on highly profitable long-haul routes to Europe and the USA, as well as core domestic services.

Under the new plan, the airline will also slash its 36,000-strong ground workforce by 10%, cut its board by half, defer the purchase of 12 aircraft and retire others.

JAL hopes the moves will enable it to report an annual profit of at least Y30 billion ($250 million). In the year ended March 1998, it recorded an after-tax loss of Y94.2 billion on sales of Y1.2 trillion.

Despite the planned changes, Merrill Lynch analyst Naoko Matsumoto believes JAL's capacity expansion plans are too ambitious - although not as much of a gamble as those of ANA.

"With demand projected to actually fall this year and the outlook for next year projected to be fairly flat, it is difficult to see how it can reach its target," he says.

Source: Flight International