Reuters is reporting HERE that JAL has announced a new CEO.   The founder of Kyocera probably most known here for cell phones, Kazuo Inamori, has been named as the new CEO in place of Haruka Nishimatsu who agreed to step down as part of a restructuring by a Japanese government fund. 

 

I see a few potential problems here.  First, Mr. Inamori is 77 years old and in his statement regarding this new position, he said:

 

“I am old and a full-time job is hard for me, so I would like to work three or four days a week and I will work for free.”

 

That doesn’t inspire my confidence.  The airline business is punishing and requires constant care and attention.  Anyone who will guide a successful restructuring really needs to be making a comittment to long hours for the next 3 to 5 years. 

 

Second, Mr. Inamori doesn’t have any prior airine or even transportation and/or hospitality experience.  His background is in electronics.  I’ve said it before and I’ll say it again, the airline business is a service industry.  One of the things that often confounds outsiders to the business is just how much cash it takes to run an airline even on a *daily* basis.  The amount of money flowing through an airline is staggering and newcomers often believe that simple “tweaks” will yield profit.  They don’t.

 

Yes, there have been outsiders that have come into the airline industry and succeeded nominally.  United Airlines is rather famous of seeking its CEOs from outside the business and most recently with its current CEO Glenn Tilton.  However, many would argue that Glenn Tilton is the perfect example of why it should NOT be done and I would tend to agree. 

 

JAL needs a dynamic leader with excellent ties to the Japanese financial world but who is also capable of leading JAL’s staff through what will be a very painful restructuring.  Jobs will have to be cut.  Routes will have to be restructured and new alliances found.  Japan is in need of an LCC carrier and someone who could identify how to start one would be an excellent candidate for JAL.  Sadly, LCC business models are outside the knowledge of most Japanese airline executives.  (If you think JAL Express is an LCC, read THIS and you’ll find it really isn’t.)

 

JAL also have to figure out its international routes which just boggle my mind at times.  For instance, JAL flies Tokyo-NYC-Rio de Janeiro and offers flights with 5th freedom rights between NYC and Rio.  Now, flying JAL between those two cities might sound attractive but it strikes me as silly.  JAL would be far better off flying to NYC and allowing AA (via the Oneworld alliance) carry their follow on traffic to Rio. 

 

JAL just announced a closer partnership with Oneworld member, Mexicana, for carrying traffic from the US to Mexico.   While there are strong ties between Japan and Mexico, this makes sense for JAL.  

 

At one point, JAL was flying to destinations such as DFW, Cairo, Beirut and Copenhagen.  That kind of flying reflects someone acting as a national flag carrier but not an airline acting in its own best interest.  The new leadership will have to rationlize the routes, rationalize the fleet and figure out which of two major airline alliances to participate in. 

 

The fleet is comprised of a mix ranging from Boeing 737s to Boeing 747Ds and capacity will have to be reduced and aircraft interiors reconfigured to reflect the accomodation of more coach class traffic.    JAL is in the enviable position of having 2 airline alliances, Oneworld and Skyteam, court their membership and offering generous financial packages in return.  But choosing the right alliance isn’t just about how much financial rescue packages offer, it is about identifying who can offer the best revenue improvements over the long term.  I still believe that JAL will ultimately remain with Oneworld if only because fighting anti-trust issues by joining Skyteam is not what an airline should be doing during the fight of its life.

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