Turnaround

of Japan
Airlines
Ankit Goel 13P124
Kaushik Nihalani 13P148
Mayank Rathore 13P150
Nikhil Jain 13P152
Prabudh Jain 13P155
Shashank Shukla 13P166

History
1951
JAL got established

1987
Full privatization

2002
Japan Airlines System
is listed on the first
section of the stock
exchange

1954
First scheduled
international service

1983
World's number one
passenger and cargo
transportation
performance according
to IATA

2004
Japan Asia Airways
becomes wholly owned
subsidiary

1961
Commenced
northbound route to
Europe

1967
Commenced round the
world route

2010
Japan Airlines delisted
from the first section
of the stock exchange

Reasons for the fall

Loss in risky investments in foreign resorts and hotels
Multiplicity of aircrafts and low utilization
Increasing costs with growing pension & payroll costs
Loss on domestic and international routes
Had to continue on loss making routes due to political
obligations
Japans asset price bubble and recessions in US & UK
By 2009, economic downturn resulted in decline in passenger
numbers

By end of 2009, the outstanding debt stood at $30

billion

Structural Reforms
Optimization of route
network

Headcount reductions

Pension reform

Sale of aircraft directed

towards reducing the
number of aircraft
models used

Aggressive utilization
of alliances

Review of the air

transport business
(including cessation
from the use of cargoonly planes)

Avoidance of aviation
fuel price fluctuation
risk

Sale of subsidiaries
directed towards
reorganization of group
companies

Procurement reform

Facility reform

Construction of a
management control
structure and
accounting reform

The Restructuring Model

Stakeh
older
Manag
ement
Financi
al
Restru
cturing

New
Leader
ship
Crisis
Stabiliza
tion

Organi
zation
al
Chang
e

Strate
gic
Focus
Critical
Proces
s
Improv
ement

Crisis Stabilization

JALI received pay-in totalling 350 billion yen from the Enterprise
Turnaround Initiative Corporation of Japan ("ETIC") and issued
shares to ETIC

Prior to filing the petition for commencement of reorganization

proceedings, ETIC held consultations with Development Bank of
Japan Inc. and arranged for a line of credit for the JAL group,
totalling 600 billion yen, to be available from January 2010

New Leadership

Kazuo Inamori took on the task of leading the turnaround of

Japan Airlines Co. in January 2010. He had zero experience in
aviation management

His style was to have the whole company share a single

philosophy, from the top-ranking executives to low-ranking
employees, and then manage the company based on that
philosophy

Told executives early on that they have to state the

managements philosophy and share that with everyone at the
company

His goal was to keep everyone in the company involved. He

embarked upon the idea : This is your company, and its
goal is to make all of you happy

Strategic Focus

Construct a more efficient and strategic organization that is capable of

reliably sharing the Group's managerial policy.

Emphasizing greater frequency and smaller aircraft, maintain network

centering on Haneda Airport routes and direct effort towards improving
profitability

Direct initiatives towards the strengthening of network, including the

utilization of bilateral alliances with other airlines

Addressing event risk - a structure to be built under which effort will be

made to discover signs that an event risk may occur, the appropriate system
development to be carried out, and adjustment of flight structures and
emergency measures for reducing fixed costs to be flexibly implemented

Stakeholder Management

For group companies, responsibility for profit and loss was clarified;

improvement of the group's overall managerial conditions

greater sharing of managerial policy with stakeholders

Mr. Inamori's policies took the form of a 125-page booklet, "JAL

Philosophy," carried by all 32,000 remaining employees

Individual corporate units were held accountable for maximizing

profitability even divisions that were not directly generating
revenue for reviving the group

Unit leaders meet once a month to share cost-saving ideas and

competitive intelligence, and are directed to put that information to
work immediately.

Critical Process Improvement

Reduced the number of aircraft models through early retirement of

inefficient models

Reduction in aircraft size through deployment of new small and mediumsized aircraft models

Wholesale elimination of unprofitable routes

Cargo-only planes (freighters) taken out of service, and the service

focused on cargo service using passenger plane cargo compartments
(bellies)

Initiatives taken to achieve major reductions in real estate-related fees.

Office, airport, warehouse space subjected to thorough review.

The IT infrastructure, which had become obsolete and overly complicated

was updated to accelerate the flow of organization-related information

Organizational Change

Head count reductions through early retirement and sale of subsidiaries

Welfare and other (fringe) benefits to officers and employees were

reviewed

JALS, JALI and JLC merged, with JALI as the surviving entity

JALI absorbed and merged with JALways Co., Ltd. and JAL LIVRE Co., Ltd

Multilayer structure and redundant functions of the organization

eliminated, and new departments created that were to be responsible
for cash flow on an individual route basis

Managerial resources concentrated on the air transport business, and

subsidiaries in peripheral fields were sold.

Financial Restructuring

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

Reduction in Taxes and public charges

For fuel hedge transactions using derivatives, decisions with wide discretionary
latitude to be eliminated, and risk management to be strengthened

Elimination of Debt

On an approximate consolidated basis JAL Group had more liabilities than assets at the
end of March 2010 amounting to 959.2 billion yen. But, according to the
Reorganization Plan there would be a modification of rights, an investment by ETIC of
350 billion yen and recording of business profits etc. which would eliminate the
excessive liabilities by the end of March 2011.

The repayment rate for Reorganization Claims shall be the same for all Three
Debtor Companies; and with the merger, the internal claims among the Three
Debtor Companies will extinguish

Risks and Controversies

The most frequently

asked question by
the institutional
investors during an
overseas tour to
market the Initial
Public Offer was
whether JAL, after
becoming a private
company again
would be able to
maintain its cost
discipline or not

The Liberal
Democratic Party
which was always
keen to criticize the
ruling Democratic
Party was the main
opposition to
restructuring of JAL
and had called for
measures to keep
resurgence of JAL in
check

The ANA has cried

foul stating that
charging the aids
and other tax
breaks has created
an unequal playing
field that was not
fair

It allegedly lobbied
for concessions
behind the scenes,
such as the
preferential
allocation of landing
slots coming up at
Tokyos Haneda
airport around 2014

Achievements

For the year 2011, the

Japan Airlines was
named CAPA Asia
Pacific Airline of the
Year

JAL emerged as the

second largest initial
public offering in 2013
after Facebook and the
4th largest IPO in
Japan after filing for
the 4th highest
bankruptcy in Japans
history

In the six months

ended 30-Sep-2011
Japan Airlines Corp
(JAL) generated a solid
profit results with
revenues of USD7.7
billion, an operating
profit of USD1.4 billion
and a net profit of
USD1.3 billion

JAL returned to healthy profits.

JALs revival story

Thank You