And that isn’t exactly breaking news, is it? Everyone knew it was coming and now it has happened.  Japan Air Lines must now face the music, reorganize and find a way to survive. 

 

It isn’t as if they were a shining example of profitability over the years.  Indeed, it was yet another airline formed as a national flag carrier that was ultimately privatized and which ultimately went into deeper and deeper debt.  Its cousins are airlines like Alitalia and Olympic, not British Airways and American Airlines. 

 

The blame lies in the company culture and by that I mean it went too long in a regulated and semi-regulated environment and then got set free into the competitive winds of the world with a crew of executives that never knew any real competition.  Its one positive attribute was its service level which by most accounts was impeccable. 

 

There has been a lot of criticism for the CEO, Haruka Nishimatsu, over the past few weeks.  Particularly when it was announced that he was ultimately going to be replaced by Kazuo Inamori, founder of the Kyocera Group.   I wrote about that announcement HERE.   Tonight I remembered a video that was passed around among many airline enthusiasts as a kind of great example of what an airline CEO should be.   Mr. Nishimatsu is shown riding a bus, eating in the general cafeteria of the company and generally being one of the people.   I remember many people posting on other blogs about him earning just $90,000 in salary after cutting all his perks when he had to slash budgets and staff at JAL.  (See below)

 

 

Let’s remember that this guy at least tried to do the right thing which is quite unlike many in this business at times. 

 

So, what’s next?  Well, JAL has to layoff thousands of employees, reduce costs at every level, probably purchase some new aircraft and find a way to claw itself back into profitability.  That’s a tough thing to do even in good times. 

 

I’ve some doubt about their choice of CEO to do it with.  This is a man who plans to work for no salary and put in “3 or 4 days” a week as well as choose a second-in-command from the current airline ranks.  Huh?  Really? 

 

What JAL needs is a seasoned airline executive who has extensive experience in competitive environments and who understands what it means to run both a national and international airline.   There are plenty of those around in this world but, yes, it does potentially mean hiring someone who isn’t Japanese to run the airline.  Or at least to lead the airline out of its current problems. 

 

There is some precedent for this.  Nissan’s CEO is Carlos Ghosn, a Lebanese-Brazilian man who came to Nissan from, of all places, Renault.   He made enemies until he surprised everyone by bringing Nissan back to profitability.  If they can’t stand to hire outside of Japan, then they would do well to find someone at ANA to take over. 

 

If the Japanese government and JAL’s board want to be serious about recovery, they need someone who is the best, not someone who is politically safe. 

 

JAL will likely rid itself of its 747 fleet in favor of a 777 / 787 fleet for its international operations.  It is time for those Airbus A300 aircraft to go too.  It will have to eliminate stupid routes like flying from New York City to Rio de Janeiro.  Their focus on First Class and Business Class will have to be realigned.  (An amazing portion of some of their international aircraft is dedicated to these two classes leaving only a small portion for Economy Class.)

 

But I have to say that I think this is going to turn much uglier before it gets better.  I think JAL will flounder and I think the Japanese government will continue to pump money into it (and, in a way, they kind of have to since they provide the only competition to speak of for ANA.) 

 

Speaking of ANA, I found this quote on the Dallas Morning News Aviation Blog from ANA:

 

“We believe it is important to secure customer convenience by the injection of public funding. However, we are also highly concerned that the fair and competitive environment would not be secured under the financial support and injection of public funding.”

 

That kind of criticism is rare in Japan but ANA has had to fight for its success since its inception.  They have a point but strangely even I find such a statement a bit tacky on this day. 

 

Everyone says it is Delta and SkyTeam who will lure JAL away from the Oneworld alliance.  I must say, given all the talk, I’m beginning to be swayed.  However, I remain skeptical that they can enter into the SkyTeam alliance, particularly with Delta, without their being some anti-trust issues on the part of both governments.   If they are leaning that way, I believe it is because someone in the Japanese government is leading them to believe there will be no issues.  I do not think that that will be the case in the United States, however.  One look at the criticisms of the AA/BA/Iberia anti-trust case and you’ll see what I mean.

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