JAL – The Rise, Fall and Troubled Rebirth of Japan’s Flag Carrier

February 7th, 2011By Category: Work Tips

Founded in response to the country’s need for dependable air transport during the period of reconstruction after the Second World War, Japan Airlines has come a long way since its humble birth more than sixty years ago.

Established in 1951 with no more than 100 million yen in its pockets, the airline experienced a period of explosive growth and expansion in the 1960s and 1970s. By 1981, it had become the world’s largest international air cargo operator and had carried more than 100 million passengers to destinations around the world.

The flag carrier was privatized in 1987 and by the late 1980s and early 1990s, profitability seemed to be guaranteed to its shareholders quarter after quarter (success in no small part due to a promo-campaign that had Janet Jackson dancing in front of JAL 747s). At that time, Japan Airlines seemed to be unstoppable.

The fortunes of the airline, however, took a severe turn for the worse after the burst of Japan’s asset price bubble and economic recessions in the United States & the United Kingdom. In 1991, Japan Airlines reported its first loss since 1985 and remained unprofitable for more than seven years. In an attempt to minimize its losses, the carrier cut nearly four thousand jobs, forged an alliance with American Airlines, replaced Japanese staff with lower paid Thai workers and tried to attract price-conscious customers through the launch of its then-budget airline division Japan Air Charter. The measures eventually allowed Japan Airlines to become profitable again in 1999 – but only just.

By 2009, however, Japan Airlines sought to repeat history. Record losses were posted, and the company was forced to cut staff and routes to reduce operating costs. The Japanese government attempted to avoid insolvency by giving the flag carrier a hundred million yen in loans. All measures were proven to be ineffective, and Japan Airlines filed for Chapter Eleven on January 19th, 2010.

You may think that it can’t get any worse than the biggest bankruptcy in the country’s history. For the troubled flag carrier, however, it can.

Many are questioning the viability of JAL’s continued operation. Though it has since returned to the black, it did so at the cost of nearly 16 000 jobs, destination cuts, retirement of thirty six of its largest aircraft and a twenty percent reduction in overall capacity. JAL is now faced with a class – action lawsuit from a hundred and fifty employees, who are suing the company for wrongful dismissal in response to the airline’s $1.7 billion profit last year. Domestic routes are being challenged by low – cost carriers and by shinkansen operator JR Group; whose bullet trains achieve similar travel times to air travel at a substantially lower cost. Airport landing fees and Japan’s corporate income tax remain sky – high and continue to eat into Japan Airline’s profitability. On the domestic front, it is clear that Japan Airlines is fighting a losing battle.

The problems, however, aren’t limited to domestic routes and internal problems. Joint operations between long-time rival All Nippon Airlines and United Airlines (which merged with Continental in October last year) threaten to take international customers away from the embattled flag carrier. Cost – conscious customers are also migrating to budget airlines from Southeast Asia, who offer tickets to and from Japan at a fraction of the cost. And let’s not forget American Airlines, a struggling carrier with whom JAL was forced to ally with after the bankruptcy.

It is difficult to tell what the future will hold for the flag carrier of the Land of the Rising Sun. The only thing certain amidst its restructuring is the uphill battle that Japan Airlines will continue to face.

Photo Credit: EyOne / Wikimedia

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GaijinPot is an online community for foreigners living in Japan, providing information on everything you need to know about enjoying life here, from finding a job and accommodation to having fun.

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  • Mickey says:

    Another example at how inept Japan are at moving with the times. Like a stupid dinosaur stuck in the dark ages Japan have no idea how to run a modern day business. Look at GDP, university grad employment rates etc.

  • Anonymous says:

    JAL has to understand that there is no two major air carrier in market like Japan can survive as seen in other markets.
    The only way out is a diversify or dissolve itself to not be burden for the Japanese tax payers.
    Like Mubarak of Egypt it should know when to go.