Air Transport World

Domestic bliss: as it completes the integration of Japan Air System, Japan Airlines looks forward to a more stable revenue environment.(Profile)

If Japan Airlines System Corp. Chairman and President Isao Kaneko needed any further affirmation of his November 2001 decision to acquire Japan Air System, last year's SARS outbreak certainly provided it. At the peak of the crisis last May, JAL's international passenger numbers fell 52% compared to the year-ago period, while traffic on routes to China was off by close to 80%. Last November, JAL estimated that SARS reduced operating income by [yen] 115.5 billion ($1.04 billion), and in March it raised its loss estimate for the just-ended fiscal year from a colossal [yen] 65 billion to a staggering [yen] 89 billion, citing continued sluggish demand in the fourth quarter owing to worries about terrorism and continuing concern over SARS and the Avian flu.

Hard as it is to believe, it might have been worse: Prior to the acquisition of JAS, some 66% of JAL's passenger revenues came from international operations, leaving the carrier even more exposed to events like the Asia currency crisis and 9/11. By comparison, rival All Nippon Airways derives only about a quarter of passenger revenue from international services.

Now, with the integration of JAL and JAS set to be completed this month through the establishment of Japan Airlines Domestic and Japan Airlines International under a single holding company, Kaneko is looking forward to a more stable revenue stream. Domestic and international passenger turnover is split nearly 50/50 and JAL boasts that it offers "the greatest aviation network in Japan."

The integration process itself has been a model of planning and execution, a step-by-step approach that began with the creation of a holding company structure in October 2002 to manage the project. …

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