Shoichi Shirahaze and Masataka Morita / Yomiuri Shimbun Staff Writers
Although Japan Airlines has emerged from its court-backed rehabilitation process, dark clouds still loom over the carrier's restructuring efforts as the number of passengers has declined sharply in the wake of the March 11 earthquake.
With the help of a loan of about 255 billion yen from 11 banks, including the Development Bank of Japan, JAL has paid a restructuring debt of about 395 billion yen.
Since filing for bankruptcy protection in January 2010, the airline has carried out full-fledged corporate restructuring by dropping unprofitable domestic and international routes and axing about 16,000 jobs.
As a result, the airline is expected to post a group operating profit of about 170 billion yen, nearly three times initially projected, for the term ending this month.
However, in the aftermath of the earthquake, tsunami and nuclear plant crisis, which a senior JAL official called "a situation far beyond our imagination," the airline cannot avoid making large-scale restructuring changes.
Reservation cancellations have poured in, reducing passengers on its domestic routes by 28 percent and its international routes by 25 percent.
The nuclear plant crisis has hit JAL's flights from abroad particularly hard. As a result, the airline will cut by nearly half its flights on 11 international routes, mainly to South Korea and China, next month.
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TSE relisting could be delayed
JAL hurriedly completed the rehabilitation process so it could become a joint-stock company on Friday in preparation for relisting of its stock by the end of 2012, although its business performance may deteriorate.
The Enterprise Turnaround Initiative Corporation of Japan (ETIC), the state-backed fund that has led JAL's turnaround and has invested 350 billion yen in the airline, planned to have its investment reimbursed by January 2013 from profits made through the relisting of its stock.
Due to the expected prolonged adverse effects of the quake and the nuclear plant crisis, however, there is a possibility JAL's relisting may be delayed and reimbursement of the public funds injected into the airline postponed.
The ETIC has started discussing a possible extension of its existence, initially set at five years, with the Cabinet Office, which is responsible for the turnaround body. This would mean that the ETIC would continue to support JAL's restructuring.
Former JAL President Haruka Nishimatsu once said the company went under primarily because it was highly vulnerable to such external factors as international terrorism, while the company "had no mechanism to downsize business operations promptly when demand declined."
"JAL is being tested whether it has changed its corporate structure so it can properly deal with such contingencies [as the aftermath of the quake]," said Waseda University Prof. Hajime Tozaki.
"Unless JAL implements further cost-cutting efforts, by slashing routes and personnel, there is a possibility it could fail again," said a senior official of a leading bank, which was among those extending the 255 billion yen loan.
In completing the rehabilitation process, JAL won investments totaling 12.7 billion yen from eight companies, including Kyocera Corp., which JAL Chairman Kazuo Inamori founded, and Daiwa Securities Group Inc.
At a press conference Monday, Inamori said JAL had no plan to increase its capital further. Yet JAL may be asked to do so in the days ahead by banks that have extended loans.
(Mar. 30, 2011)
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