JAL Group announces Mid-Term Management Plan for FY2012-2016

The JAL Group (JAL) announced (15-Feb-2012) its Mid-Term Management Plan for FY2012 to FY2016 (12 months ended 31-Mar-2017), developed to "effectively overcome upcoming challenges in the business environment, prevail over competition, and to continuously exist and develop into the future based upon a firm high-profitability structure". Details include:

• Enhancement of the JAL brand: The carrier is seeking to enhance the "JAL Brand" with a focus on being a "high quality, full-service airline with a comprehensive international and domestic network, superior products and hospitable services at all customer touch points, and the most reliable levels of safety in flight operations, setting it apart from other LCC brands";
• Route network, products and services: JAL plans to focus on "high quality, full services" for international flights and "convenience and simplicity" for domestic services. It will allocate resources on operations to Europe, North America and Southeast Asia, where strong demand is expected and where JAL can capitalise on its premium branding;
  • Capital expenditure: JAL is preparing to invest approximately JPY489 billion (USD6.2 billion) in capital expenditure on upgrading the fleet during the five years to FY2016, including 20 of the larger version Boeing 787-9 which is expected to be introduced from FY2015 on medium to long-haul international routes;
  • International expansion: Within FY2012, JAL will expand its international network with three new services from Tokyo (Narita) to Boston from 22-Apr-2012, San Diego in Dec-2012 and Helsinki in Mar-2013. In Southeast Asia, JAL will strengthen its network by increasing the number of services from Narita to New Delhi and to Singapore, deploying 787 equipment on the route. Specifically, all daily services to/from Singapore will be operated with the 787 from FY2012. Flights between Tokyo and Bangkok will also be assigned with newer seats using the current aircraft;
  • Domestic expansion: JAL will focus on creating a highly convenient network around Haneda and Itami Osaka by utilising regional jets.
• Cost competitiveness: JAL plans to "significantly improve cost efficiency during the period. Specifically, in addition to the JPY110 billion (USD1.4 billion) cost savings to be achieved by the end of FY2011 under the Corporate Reorganisation Plan, the Plan targets to lower unit cost from JPY11.5 (USD0.15) to JY11 (USD0.14), which is estimated to translate into an additional cost improvement of JPY50 billion (USD637 million) by the end of this medium term;
• Safety Initiatives: The Plan includes further reinforcement of safety through comprehensive training programmes for staff and a system to preclude the sources of problems beforehand;
• Strengthening group management: The carrier adopts a divisional profitability management system, encouraging employees to take ownership and to participate in the group's management;
• Human resource development: JAL has defined a set of criteria for the "role model" of an ideal JAL employee, and will launch a training programme to reflect this. For each of the above initiatives, every department and group company will also establish performance indicators such as for safety, efficiency and marketing;
• Management targets: JAL aims to maintain the highest standards of safety and customer satisfaction through FY2012 and "establish sufficient profitability and financial stability levels capable of absorbing the impact of economic fluctuations and risk events by achieving "10% or above operating margin for 5 consecutive years and 50% or above equity ratio in FY2016". [more - original PR] [more - CAPA Analysis]

The JAL Group: "During the period covered by the Plan, further growth in global air travel, as well as expanded business opportunities afforded by the increase in departure and landing slots in the Tokyo Metropolitan area (Haneda and Narita) are expected. It also acknowledges challenges posed by Japan's low economic growth rate, heightened competition from Low Cost Carriers ("LCCs") and the downside risks resulting from the European sovereign debt crisis. By implementing the Plan, JAL seeks to establish adequate profitability and financial stability, and to strengthen its resilience to economic fluctuations and risk events. On the service front, JAL endeavors to become the favorite airline of both Japanese and international customers by providing unparalleled products and services to continuously deliver fresh and enjoyable travel experiences. Following is an outline of the Plan, highlighting several key areas that will differentiate JAL from its competitors and position it to achieve stable profits as it continues to grow." Source: Company Statement, 15-Feb-2012.