Tokyo March 10: The JAL Group today announced the group's medium term corporate plan for the three financial years' period from April 1st 2005 through to March 31st 2008.
In FY2004, to make up for increased fuel costs JAL implemented contingency measures to increase revenue by 47 billion yen, but JAL expects that severe business conditions will continue into FY2005 because of continuing high fuel costs.
However amid this difficult environment the JAL Group will build a business structure that can produce profits in any environment, through reforms of business structure and to build a strong corporate constitution that ranks with the airlines of Asia and is capable of growth.
The three major areas of structural reforms are as follows:
1) INTERNATIONAL PASSENGER BUSINESS RESTRUCTURING
International passenger business will concentrate in high profit and high growth routes and will suspend low profits route so as to build a more profit-focused network and we hope to increase cost competitiveness by expanding the role of our low-cost subsidiary JALways and on concentrating on reducing both the number of aircraft types and the number of cabin configurations.
2) NETWORK REFORM
The future focus will be directed at developing growth markets, notably in Asia and China.
3) COST STRUCTURE REFORM
Cost structure reforms include the integration of the group holding company JAL Corporation, JAL International and JAL Domestic into one company. These three companies were formed to facilitate the integration of Japan Airlines and Japan Air System, which was completed in April 2004.
Other cost cutting measures include a review of staffing requirements, with the reduction of 1,400 ground-based jobs by the end of FY2007 in addition to 4,500 jobs being eliminated by the end of FY2006 that were already announced last year in the previous mid-term plan. By March 31 2008, the total number of ground jobs will be 5,900 lower than in April 2002. This reduction will be managed by suspending new hiring, not replacing retiring staff and by natural reduction.
JAL also plans an increase in outsourcing, including moving more activities overseas, notably maintenance. JAL will also review all contracts outside the group. The group plans to reduce the number of board members and eliminate directors' retirement bonuses. Additional measures include the reduction of common costs and the further promotion of e-business in the business process, with the target of an improvement in cost reduction of 75 billion yen by the end of FY2007. (March 31, 2008) and in the longer term of 100 billion or more annually.
The JAL Group will aim for simplification in various ways including adopting a slimmer group management structure through integration. A key word in developing a more effective business process is SIMPLIFICATION, which will be achieved by expanding the use of Information Technology (IT) internally and externally.
The objectives of the new medium term plan are: