JAL Group Announces Mid-Term Management Plan for Fiscal Years 2012-2016
• Purchasing twenty Boeing 787-9 aircraft bringing total firm orders of 787 Dreamliners to 45
• Enhancing the JAL Brand by introducing innovative products and services ahead of competition
The JAL Group today announced its Mid-Term Management Plan (hereinafter “the Plan”) for fiscal years 2012 to 2016 (year ending March 31, 2017), developed to effectively overcome upcoming challenges in the business environment, prevail over competition, and to continuously exist and develop into the future based upon a firm high-profitability structure.
During the period covered by the Plan, further growth in global air travel, as well as expanded business opportunities afforded by the increase in departure and landing slots in the Tokyo Metropolitan area (Haneda and Narita) are expected. It also acknowledges challenges posed by Japan’s low economic growth rate, heightened competition from Low Cost Carriers (“LCCs”) and the downside risks resulting from the European sovereign debt crisis.
By implementing the Plan, JAL seeks to establish adequate profitability and financial stability, and to strengthen its resilience to economic fluctuations and risk events. On the service front, JAL endeavors to become the favorite airline of both Japanese and international customers by providing unparalleled products and services to continuously deliver fresh and enjoyable travel experiences. Following is an outline of the Plan, highlighting several key areas that will differentiate JAL from its competitors and position it to achieve stable profits as it continues to grow.
Enhancement of the JAL Brand
The “JAL Brand” will be enhanced to emphasize JAL’s distinction as a high quality, full-service airline with a comprehensive international and domestic network, superior products and hospitable services at all customer touch points, and the most reliable levels of safety in flight operations, setting it apart from other LCC brands.
Route Network, Products and Services
JAL plans to focus on “high quality, full services” for international flights and “convenience and simplicity” for domestic flights. It will allocate resources on operations to Europe, North America and Southeast Asia, where strong demand is expected and where JAL can flex its strength as a high quality service-oriented airline by providing the kind of products and services that customers will always find refreshing and enjoyable, and that will encourage them to fly with JAL again.
JAL is preparing to invest approximately 489 billion yen in capital expenditure on upgrading the fleet during the five years to FY2016, including twenty orders of the larger version Boeing 787-9 which is expected to be introduced from FY2015 on medium to long haul international routes. The twenty orders comprise ten new orders and ten converted from orders of the 787-8. The overall purchase of the Dreamliner now stands at 25 firm orders of the 787-8, and 20 of the 787-9 with twenty options, raising the total order of 35 Dreamliners to 45.
Within FY2012, JAL will expand its international network with three new services from Tokyo (Narita) to Boston from April 22, San Diego in December, and Helsinki in March 2013. JAL’s direct flights to both U.S. cities will be their first links to Asia, providing customers in the region greater convenience and travel options. Via Helsinki – the hub airport of fellow oneworld alliance partner, Finnair, customers can expect smoother connections to/from some 50 over destinations in Europe through its compact and efficient terminals.
In the high economic growth region of Southeast Asia, JAL will strengthen its network by increasing the number of flights from Narita to New Delhi and to Singapore and also deploy the latest Dreamliner to both cities. Specifically, all daily services to/from Singapore will be operated with the 787 from FY2012. Flights between Tokyo and Bangkok will also be assigned with newer seats using the current aircraft.
On domestic flights, JAL will focus on creating a highly convenient network around Haneda and Itami (Osaka) by utilizing regional jets.
Cost Competitiveness
JAL will continue to significantly improve cost efficiency during the period covered by the Plan, while maintaining the highest standards of safety quality. Specifically, in addition to the 110 billion yen cost savings to be achieved by the end of FY2011 under the Corporate Reorganization Plan, the Plan targets to lower unit cost*1 (the expense of providing each available seat kilometer) from 11.5 yen to 11.0 yen, which is estimated to translate into an additional cost improvement of 50 billion yen by the end of this medium-term.
Safety Initiatives
Ensuring safety in flight operations is the basis of the existence of the JAL Group. The Plan includes further reinforcement of safety through comprehensive training programs for staff and a system to preclude the sources of problems beforehand and continue to inherit the group’s deeply ingrained safety culture.
Strengthening Group Management
By inculcating the principles of the JAL Philosophy in every employee, and adopting a divisional profitability management system, JAL aims to realize a high level of productivity and profitability. With all employees encouraged to take ownership and to participate in the group’s management, group companies can administer a sound and autonomous management.
Human Resource Development
Aiming to bolster the hiring and training processes across the group, JAL has defined a set of criteria for the role model of an ideal JAL employee, and will launch a training program to develop professionals capable of delivering the highest levels of safety and service.
For each of the above initiatives, every department and group company shall establish performance indicators such as for safety, efficiency and marketing, etc. These will feed into a structure that monitors progress against benchmarks on an ongoing basis, thereby ensuring the steady execution of the Plan, the achievement of our management target, and the realization of the JAL Group Corporate Policy.
Management Target
Based on a competitive unit cost as a result of high productivity, JAL will improve its domestic and international networks to take advantage of global economic growth, and will strive to continuously provide customers a fresh and enjoyable travel experience. By doing so, JAL aims to achieve the following management target:
1. JAL recognizes that “flight safety” is the basis of the existence of the JAL Group and our social responsibility. As a leading company in safety in the transportation sector, JAL will maintain the highest standards of safety.
2. JAL will provide unparalleled services to continuously deliver a fresh and enjoyable travel experiences for customers. We aim to achieve “Customer Satisfaction No. 1″*2 by FY2016.
3. JAL aims to establish sufficient profitability and financial stability levels capable of absorbing the impact of economic fluctuations and risk events by achieving “10% or above operating margin for 5 consecutive years and 50% or above equity ratio in FY2016”.*3
*1 Cost per available seat kilometer (CASK), the unit cost of production for an airline, is defined as consolidated airline operating expenses divided by total available seat kilometers. The target for fiscal 2011 was 12.9 yen/ASK, according to the Corporate Reorganization Plan and the current estimated unit cost of FY2011 is 11.5yen/ASK. For assumptions of the Plan, please refer to sections 7-2 and 7-3 of the Plan for FY2012-2016.
*2 Repeat intention rate and recommendation intention rate, based on Japanese Customer Satisfaction Index (JCSI) published by Service Productivity & Innovation for Growth, Japan Productivity Center
*3 The management targets are based on the fuel (Singapore Kerosene) and FX (Yen/Dollar) assumptions described below. They do not take into consideration any drastic change from the assumptions and volatility in demand due to terrorism, war, catastrophes, etc.
Fuel and Foreign Exchange (FX) Assumption for FY2012-2016E
Fuel (Singapore Kerosene) USD130/bbl
FX JPY85.0/USD
Source: JAL
