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JAL to retire 103 aircraft, cut 16,000 jobs in financial turnaround

Japan Airlines (JAL) will retire more than 100 aircraft, cut 16,000 jobs and streamline its operations as part of a rehabilitation plan to return to profit.

The Oneworld carrier, which filed for bankruptcy protection in January after running up severe losses, submitted its financial reorganisation plan to the Tokyo District Court today.

Under the plan, JAL's creditors will forgive ¥521.5 billion ($6.2 billion) of the airline's debt. Japan's Enterprise Turnaround Initiative Corporation (ETIC), which was tasked to turn JAL around, will give the airline a pay-in of ¥350 billion in December. JAL will in turn issue the ETIC with 175 million new shares.

JAL expects to implement its new business plan in December, after it receives the court's approval in end-November.

The carrier says it will retire 103 aircraft as it seeks to reduce the number of aircraft models in its fleet and use smaller, more efficient aircraft. It will phase out all Boeing 747-400s, Airbus A300-600s, MD81s and MD90s from its fleet by end-March 2011.

Instead, it will deploy small and medium-sized aircraft such as the 737-800, Embraer 170 and the 787, which will be "key to [its] future international route strategy".

JAL expects its first 787 to arrive in March 2011, says a JAL spokeswoman. The carrier has 35 firm orders and 20 options for the new aircraft.

The airline has not received any notification from Boeing about a change to the delivery date, following Boeing's announcement last week that the first delivery to launch customer All Nippon Airways would be delayed until the mid-first quarter of 2011.

On its route network, JAL will focus on operating more frequent services on domestic routes using smaller aircraft.

It will concentrate its international route planning around major US and European cities as well as high-growth Asian routes, says the carrier. It announced in April that it would suspend operations on 45 routes.

In addition, JAL will cut 16,114 jobs by end-March 2011, resulting in a total workforce of 32,600. The airline will carry out the job cuts through early retirement and the sale of subsidiaries, it adds.

On top of this, the airline will review wage systems and downsize airport facilities among other measures to cut costs further, says JAL.

The carrier will also consolidate its group operations by the end of its current fiscal year, ending 31 March 2011.

Its core business Japan Airlines International (JALI) will merge with holding company Japan Airlines Corporation and three other subsidiaries to form a single entity. On 1 April 2011, JALI will change its name to Japan Airlines Co.

A JAL spokeswoman says the airline aims to achieve ¥24.8 billion in net worth by end-March 2011. Following the pay-in from the ETIC and the issue of shares, JAL will have capital of ¥175 billion and capital reserves of ¥175 billion, says the airline.

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