Japan Airlines widens
loss forecast, cuts 4,500 jobs

An airline manager says he doubts
Hawaii will be directly affected

Japan Airlines System Corp., Asia's largest carrier by sales, widened its loss forecast for this year by more than a third and promised to cut its workforce by 4,500 to help reverse the decline.

Japan Air Lines The airline said it will post a biggest-ever loss of 89 billion yen ($799 million) in the year ending March 31, the second time it's widening its loss forecast since November. It earned a profit of 11.6 billion yen in the year ended March 2003.

"Demand from passengers, especially Japanese group travelers, hasn't recovered as much as we expected," said Japan Airlines' Tokyo-based President Isao Kaneko. Japanese tourists are still worried about flying internationally because of Asia's outbreaks of bird flu and other factors, he said.

Gilbert Kimura, the airline's regional sales manager in Hawaii, said he has so far not received any word about staff cuts or reductions in flights to Hawaii.

Kimura said he doubts Hawaii would be directly affected. In fact, the future looks promising as far as Hawaii is concerned, he said.

"It's the biggest destination for the airline. So far, as a whole, outbound Japanese travel is slowly recovering so that shouldn't affect flights here," Kimura said.

Japan Airlines and rival All Nippon Airways Co. are cutting costs to recover from last year's SARS outbreak which caused passenger numbers to slump. Japan's two biggest airlines have been slower to rebound than Asian carriers such as Singapore Airlines Ltd. and Cathay Pacific Airways Ltd. which are planning to expand fleets and add routes.

Cathay's second-half profit fell a less-than-expected 1 percent to HK$2.54 billion ($326 million) while Singapore Airlines' third quarter profit more than doubled to $224 million.

Japan Air's rival "All Nippon Air is moving ahead on cost reduction" and it's making an impression, said Yoku Ihara, an equity manager at Retela Crea Securities Co. The additional job reduction plan is a "positive move," he said.

Japan Airlines, formed by the merger of Japan Airlines Co. and Japan Air System Co. in October 2002, said sales revenue for the year ending March 31 may fall 1 percent to 1.96 trillion yen, from its November forecast of 1.98 trillion yen. The company widened forecast for current loss, or pretax loss from operations, by half to 75 billion yen.

Cost cuts

Japan Airlines' staff cuts among ground workers, which represents 7.9 percent of its workforce, will be completed by March 2007, the carrier said. The company plans to achieve the cuts by not replacing retiring workers.

"We can't achieve the cut by waiting and we may have to think of measures to meet the plan" said Japan Airlines' Managing Director Gentaro Maruyama. Japan Airlines plans "to scale back an increase in jobs" at the affiliates, he said.

The company also plans to hire more of part time and non- Japanese flight attendants who earn lower salaries, raising the proportion of lower-paying staff to 25 percent in three years through March 2007, from 18 percent now. Japan Airlines did not say how much money it will save with this move.

Japan Airlines Co., which mainly operates international flights, merged with Japan Air System to cut costs and expand its share of the domestic air travel market dominated by rival All Nippon Airways. The bigger carrier estimates the effect of the merger will total 68 billion yen by March 2007.


Japan Airlines System said it will delay aircraft delivery and scale back investments by a third to 150 billion yen for the next business year, and further reduce investment to 129 billion yen in 2005.

The company plans to shrink its fleet by 14 planes to 272 aircraft in the four years through March 2007. The Japanese airline will also reduce the types of aircraft to 11 from 16 by retiring the MD-11 planes made by McDonnell Douglas Corp. and the A300 made by Airbus SAS.

Starting in April, the merged entity will be reorganized into Japan Airlines Domestic Co. and Japan Airlines International Co. and the holding company will be named Japan Airlines Corp. in June.


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