Japan Airlines Corporation Ordinary Shares (JALFQ)

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JAL delays submission of restructuring plan, group chairman won't step down

JAL Chairman Kazuo Inamori is pictured during a press conference on Tuesday. (Mainichi)Troubled Japan Airlines (JAL) has announced that it will postpone the submission of its corporate reconstruction plan to late August -- a two-month delay.

The airline, which has filed for bankruptcy protection, had originally planned to file its rehabilitation strategy with a court by the end of June. However, as it continues to change the plan, adding more flight routes to be discontinued and more jobs to be cut, the company found it was unable to meet the original deadline.

During a regular press conference on Tuesday, Hideo Seto -- trustee of a state-backed corporate turnaround body which is aiding the airline's rebuilding process -- said the extension "is part of our efforts to enhance the corporate value of JAL, and we have gained the understanding of JAL's creditors." He emphasized that the delay would not affect the company's recovery.

In April this year, JAL decided to abolish 45 international and domestic routes -- an increase from the 31 it had proposed earlier in January. The JAL group is also planning to start cutting jobs ahead of schedule.

However, after creditors and some officials from the Ministry of Land, Infrastructure, Transport and Tourism expressed their concerns over the feasibility of JAL's reconstruction plan, JAL decided it needed to draw up a more solid financial plan in order to win their acceptance.

A JAL official said that although the group's core business, Japan Airlines International Co., posted an operating loss of 10.3 billion yen in April this year, the amount was a 22.4 billion yen improvement from a year earlier thanks to cost-cutting efforts such as reductions in labor expenses.

"The improvement was greater than expected," Seto pointed out.

Meanwhile, JAL Chairman Kazuo Inamori came under fire after JAL was found to have given members of the Seiwa-juku -- a group of young executives who study Inamori's business strategies -- various perks including discounts on flight tickets. The benefits were criticized as an abuse of power for private purposes, and they have since been canceled.

"The members formed a JAL fan organization, and the benefits provided to them were the same as those offered to our general customers," said Inamori, suggesting the benefits were within the scope of the company's standard services for corporate customers.

The road ahead for JAL looks to be a bumpy one. Commenting on speculation that he might step down early as chairman, Inamori denied the possibility, saying, "It's in the public interest for us to bring fair competition to the marketplace. I would like to be a part of that process for the next two or three years, as long as my health permits."

http://mdn.mainichi.jp/mdnnews/business/news/20100526p2a00m0na016000c.html

(Mainichi Japan) May 26, 2010