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Deregulation crucial to JAL's future: Former Deputy Head of Industrial Revitalisation Corp

9-Feb-2010 11:17 AM

Industrial Revitalisation Corporation of Japan's Former Deputy Head, Kazuhiko Toyama, stated deregulation of the airline industry will be crucial in returning Japan Airlines to profitability, adding that the Japanese Government should be prepared to accept the airline could be sold to a local rival (Yomiuri Shimbun, 09-Feb-2010). Mr Toyama added that the three-year period the state-backed Enterprise Turnaround Initiative Corporation of Japan (ETIC) has to turnaround the carrier will not be sufficient, given the scale of the task and the financial state of the carrier. Mr Toyama also described the response of JAL's management to the challenges as "woefully slow" and commented that "demand for airline services looks unlikely to pick up in the near future".

Industrial Revitalisation Corporation of Japan: "I was astounded when I saw the state of JAL's operating and financial situations as a member of the task force. Usually, an airline, even if it chalks up losses in its settlement of accounts, can post a profit in terms of cash flow as airline services can produce earnings on a daily basis. But that wasn't the case with JAL. Its finances were getting worse each day. That was mainly because JAL had never properly got around to downsizing its fleet. The fixed expenses of maintaining its aircraft remained too high for years, which took a chunk out of the company's revenues...Charting JAL's resuscitation and growth strategy for the coming five to 10 years won't be viable for the turnaround body. The success of JAL's bailout, therefore, will hinge on who will buy the airline after the ETIC-led turnaround is terminated. Before this happens, the government should remove as many airline industry regulations as possible. This would give JAL a broad array of options to rebuild itself. In addition, we should enable All Nippon Airways and airlines from other parts of Asia to vie freely in the race to buy JAL,” Kazuhiko Toyama, Former Deputy Head, Source: Yomiuri Shimbun, 09-Feb-2010.