JAL interview

JAL rebounding from bankruptcy, says president

JAL president Yoshiharu Ueki, a former pilot with 35 years of experience, talks to FinanceAsia about the progress of the airline’s restructuring and its strategy.
Yoshiharu Ueki
Yoshiharu Ueki

Yoshiharu Ueki landed in Hong Kong many times during his career as a pilot at Japan Airlines (JAL), but this week marks his first visit as president of the company.

Ueki is in Hong Kong to give an update on the company’s progress since filing for bankruptcy in 2010 with debts of ¥2.3 trillion ($29 billion). Just two years on, it booked a record operating profit of ¥205 billion for the year ended March this year, with an operating margin of 17%, up from -2.6% in the 2008 financial year.

Media reports have speculated that the airline will re-list its shares by September, though the company has declined to comment. It was delisted from the Tokyo Stock Exchange after the bankruptcy filing and has since received a ¥350 billion capital injection from the Enterprise Turnaround Initiative Corporation of Japan.

Ueki was appointed as president of JAL in February this year, after he started his career as a pilot for the airline in 1974. He continued flying until 2010, when he became an executive officer.

“In terms of restructuring, we have reached the seventh or the eighth station, if I were to use a mountain-climbing metaphor,” Ueki told FinanceAsia in an interview yesterday. “But in terms of the reform of awareness among employees, we’re at around the third station, as we have more than 30,000 people working for us. Altogether, I would say we’re now halfway to where we ultimately want to be. What’s important is to keep working hard.”

The company has been performing well since the start of the fiscal year in April, particularly its international routes, while the domestic routes have been performing largely in line with its plans, Ueki said yesterday.

As for its future strategy, Ueki said the airline will remain committed to mid- and long-haul flights as a full-service network carrier.

“The path that we should take is to try to survive as a full-service network carrier and emphasise routes that can maximise our strength, which is hospitality and the service spirit,” he said.

“We would like to focus on international routes, particularly mid- to long-haul flights to Europe and the US. But we’ll continue to take good care of our domestic route business because it can yield revenues without much volatility.”

To combat higher fuel prices, JAL plans to update its fleet with more fuel-efficient aircraft by increasing its total number of Boeing 787s to 45, from the current four aircraft. As well as using less fuel, the 787 should also help reduce operating costs.

Its new strategy also includes expanding its routes in Asia, such as China, Bangkok, Singapore, Kuala Lumpur and Jakarta, where rapid growth in demand is expected, Ueki added.

JAL also launched a new domestic airline offering lower airfares in August last year. Jetstar Japan, formed in partnership with Qantas and Mitsubishi Corp, eventually plans to offer short-haul international services to key Asian cities, although details are not yet available. JAL and Qantas each own 42% in the airline, while Mitsubishi Corp has 16%.

But Jetstar Japan will not be part of JAL’s consolidated earnings, and while it will take part in important management decision-making for the low-cost carrier, it has said it will not be involved in its day-to-day operation.

“We have no plans to set up our own low-cost carrier at this time,” Ueki said. “This is a big difference between All Nippon Airways (ANA) and our company. They seek two brands, while we focus on the single brand.”

Last year, Peach Aviation, which is 38.7% owned by ANA, became the first low-cost carrier in Japan. ANA has also said that AirAsia Japan, an ANA Group airline, will launch domestic services from Narita in August and new routes will be phased in, “creating completely new demand and contributing to the overall profits of ANA Group”.

With the shaky outlook for the global economy and growing competition, the airline industry as a whole faces tough times ahead. Ueki said that the state of the global economy, foreign exchange movements and fuel prices remain a concern going into next year.

“Both Haneda and Narita airports have been expanding their take-off and landing slots during the past two years, and this presents us with a business opportunity,” he said.

“But at the same time, there’s a possibility that supply will slightly surpass demand. There’s also a growing low-cost carrier market. That means we’re entering the time for fierce competition in the next few years.”

¬ Haymarket Media Limited. All rights reserved.
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