Editorial
As JAL undergoes reorganization, time to review air transport in Japan
Japan Airlines Corp. and two of its subsidiaries have filed for protection with the Tokyo District Court under the Corporate Rehabilitation Law. Meanwhile, the Enterprise Turnaround Initiative Corp. of Japan (ETIC), funded by government and private sources, said it would support the airline's rehabilitation process, and the government made announcements pledging to assist JAL in maintaining stable flight operations.
The government's stand on the beleaguered airline has flip-flopped since last year, inflating credit insecurity and causing customers to turn elsewhere. It must be emphasized that this wasteful passing of time led to further losses.
At around 2 trillion yen, JAL's debts mark the biggest in history outside the finance industry. Included in these figures are loans guaranteed by the government, which will be rendered unrecoverable due to the new debt relief measures. Tens of billions of yen in taxes will be necessary to compensate for these losses.
JAL must recognize that the general public is being made to pay the price, and handle the situation accordingly. The stepping down of board members and employee lay-offs will be inevitable. Considering that JAL will receive debt forgiveness of some730 billion yen, holding shareholders responsible by reducing the value of the company's stocks to virtually nothing is only fair.
The turnaround agency ETIC will sponsor JAL for approximately three years, during which it will invest over 300 billion yen and provide up to 600 billion yen in loans. But if the rehabilitation process goes awry, causing the loans to sour, the burden will once again be placed squarely on the shoulders of the public.
The new ranks of JAL management including Kazuo Inamori, the honorary chairman of Kyocera who will join JAL as its chief executive officer, and the ETIC have a quite a job ahead of them. In addition to stable flight operations, which are a given, they must address longstanding internal problems such as labor issues and factionalism, and outgrow its dependence on the government.
Customers are expected to object to further elimination of unprofitable routes both domestic and international, but building regional airports in areas with relatively little demand and maintaining routes that served them was a major money-drainer. As such, route reduction is unavoidable.
The government should take the opportunity of JAL's reorganization to review the very nature of air transport in Japan. Land, Infrastructure, Transport and Tourism Minister Seiji Maehara has mentioned his intention to abolish a special budgetary account currently in place for airport maintenance -- said to have caused the surge of regional airport construction -- and to reduce landing fees. The issues of turning Haneda Airport into a hub and the roles of the Kansai region's three airports must be addressed.
For the airline industry to flourish in Japan, where the population continues to dwindle, it is necessary to harness the growth seen in China and the entire East Asian region. Approaching airline policy from such an angle is bound to give JAL's revitalization process a boost.
(Mainichi Japan) January 20, 2010