[030910.EN.AIR] Japan Airlines Files Reorganization Plan

On August 31st, Japan Airlines filed its proposed reorganisation plan with the Tokyo District Court, and the Court rendered an order to put the reorganisation plan to the creditors' vote.
Japan Airlines Corp, Japan Airlines International and JAL Capital Co have been implementing business restructuring under the corporate reorganisation proceedings since filing for bankruptcy protection in January.


The main points of the reorganisation plan are:


Reduction in the number and size of aircraft, through early retirement of inefficient models, the deployment of new small and medium-sized aircraft. A total of 103 aircraft, including all 747-400s, A300-600s, MD-81s and MD-90s, will be retired.

The number of aircraft models flying JALI routes will be reduced from seven to four (excluding regional jets). Highly efficient small-sized 737-800, the even smaller regional jet E170, and the 787 will be deployed.


Elimination of unprofitable routes and optimisation of route network. For domestic routes, the focus will be on more frequent service using smaller aircraft, and the flight network will be maintained at a certain level. International routes will centre on the major cities of the US and Europe and on Asian routes (a growth market), securing strategic positioning within alliances. For resort routes, JALI will specialise in Honolulu and Guam routes.


Reform of airport cost structures, review of facilities and the sale or liquidation of subsidiaries (including disposal of the hotel business).

Office space will be reviewed, airport terminal space will be partially returned, requests will be made for reductions in fees for joint facilities shared with other airlines, real estate-related fees will be reduced by vacating storage rooms and cargo warehouses, etc.


Reduction in personnel costs will be achieved through headcount reductions (by encouraging early retirement and through the sale of subsidiaries), and by reducing per-unit charges for subcontracted services. The number of Group employees will be cut from 48,714 to approximately 32,600 by end-2010.


Managerial resources to focus on the air transport business, and subsidiaries in peripheral fields will be sold. The cargo and mail business will use passenger aircraft belly space, and dedicated freighter aircraft will be taken out of service.


Elimination of multi-layer structure and redundant functions, with the creation of new departments that will be responsible for cash flow and profit & loss results on individual routes.


Merger of three debtor companies, starting on the day following the day of confirmation of the reorganisation plan:


Japan Airlines Corporation (JALS), Japan Airlines International (JALI) and JAL Capital (JLC) will merge, with JALI as the surviving entity.


Stock owned by JALS shareholders will be acquired gratis, all treasury shares will be cancelled, and JALI will reduce stated capital and capital reserves to zero.


JALI will receive pay-in totalling ¥350 billion from the Enterprise Turnaround Initiative Corporation of Japan (ETIC) and will issue shares to ETIC.


JALI will absorb and merge with JALways Co and JAL LIVRE Co.


Source : EFT, 01.09.10.