JAL still in trouble. Lots of it. With 4,300 fewer employees to take the blame

February 6, 2007
By Ken Worsley

Japan Airlines (JAL) somehow managed to lose 47.2 billion yen ($393 million) in the fiscal year ending March 2006. That is a truly impressive amount. Certainly, airlines the world over were in trouble, with Delta et al declaring bankruptcy in the US, and jet fuel costs literally sky high.

But JAL managed to beat themselves up. How did they go about cutting back on costs? Since 2005, they’ve had a string of safety problems, including an engine fire, wheels falling off during a landing, a flight that took off with a faulty latch and another flight that was forced to return shortly after takeoff when a cockpit window cracked. Somehow, JAL didn’t manage to kill one of their own customers, let alone injure even a single passenger, during that stretch.

I’m not sure if it’s bad luck or good luck, but it’s bad business when an airline is obviously cutting costs by trimming the “Safety fat,” if there even is such a thing. However, things might just be about to turn around for JAL. According to Mana Nakazora, a corporate credit analyst at JPMorgan Securities Japan, “Management is a little bit more aggressive than the previous leadership.”

And it seems so: JAL announced today that they are going to cut 4,300 jobs by 2010, in addition to the 6,000 ground staff jobs already slated to be cut by 2008.

However, what didn’t make the big news might be JAL’s best management decision do date (in 2007): the company will no longer punish its staff when their errors lead to casualties. Such a policy only led to cover-ups and never allowed JAL to properly account for what had gone wrong during accidents.

We’ll be watching this one for sure…

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