March 28th, 2011
02:42 PM GMT
Japan Airlines at one point in its proud history boasted the title “World’s Largest International Carrier”. Not so today and likely not ever again. But that may be a very good thing.
With a short four-paragraph press release at about 5pm Tokyo time, Japan’s flagship airline announced it was emerging from bankruptcy and ready to take to the skies again. But it’s quite a different JAL then the one we knew in January 2010, when it filed for Japan’s equivalent of bankruptcy protection. In the last 15 months, its bank accounts have been depleted as it’s paid off billions in debt. A third of its workforce – some 15,000 people – have been laid off. And the last planes of what used to make up the world’s largest Boeing 747 fleet in the world are rolling off the tarmac for good.
Today’s JAL aims to be a smaller – and profitable – airline. That’s in terms of network and in terms of plane size. To save on costs, the company says it will cut nearly 50 routes from its global network. To support profits, JAL says it will boost its partnership with oneworld, the airline alliance that includes American Airlines, Cathay Pacific and British Airways, to keep its passengers connected abroad. As for planes, the jumbo jet will be switched out for Boeing 787 Dreamliners. Maximum seating capacity will shrink from the 500s to the 300s but money will be saved as energy efficiency increases.
And these austerity measures for this aviation giant are working. From March to December 2010, JAL was finally able to report a profit of about $1.9 billion. That’s after three of the previous four years in the red. And today’s press release announced Japan Airlines successfully paid off about $4.8 billion in reorganization debt, while also receiving about $3 billion worth in new capital confidence from 11 financial institutions. So it would seem the flight path forward could turn out less turbulent than the routing of the past year.
That is, were it not for two natural crises and one nuclear catastrophe. Japan’s recent 9.0 magnitude quake, subsequent tsunami and growing radiation fears from Fukushima’s nuclear power plants are sending air passenger numbers down. That’s for both foreign and domestic travel. Not exactly the best of times for a recently bankrupt airline company to try and fill its empty coffers. Still, Japan Airlines’ new model may be better for it in the long run. It may just have to fly a little farther into the future to realize the profits it wants.
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