Posts Tagged ‘JAL’
Do JAL’s suitors understand that sometimes you can’t always get what you want?
JAL's future could be solely a Japanese question (Photo C. Stewart 2009)
At the American Airlines Fall Management Conference, CEO Mr Gerard Arpey stated that JAL would not benefit by leaving the OneWorld alliance. A day later AA CFO Tom Horton followed-up by saying JAL would “have have difficulty clearing regulatory hurdles if they sought antitrust immunity for closer business ties with another alliance. ” In fact, AA has clearly alluded it would oppose any such move.
There is no argument that JAL is in serious financial trouble, and perhaps even less of an argument that Japan may yet be the next sovereign national default. That could even be part of the AMR strategy, as they begin to see their chances with a mutual AA/BA eclipsed slightly by BA/Iberia- and the delay U.S. governments official ruling on this important subject.
Even in that light, Mr. Arpey’s recent comments represent, at best, a fundamental misunderstanding of his Japanese partner’s cultural approach to business. At worst they demonstrate yet again a narrow U.S.-centric view of the global aviation industry. Even if JAL would make a comment, which they wouldn’t, statments of this calibre would generally only serve to further isolate AMR from this important strategic partner both culturally and financially.
I personally know the ladies and gentlemen of AMR to be clever, erudite, and savvy people. I respect them. In my opinion, however, I have seen them demonstrate a repeated weakness through the years. This weakness comes in two parts. First is to unabashedly apply US style business approaches in places where an alternate approach may be advisable, and the second is to rely on US O/D traffic on most int’l routes to an excess that isolate them from some local markets. Ironically, this appears to not a mistake shared by all of their US competitors.
I do not believe that AMR, DL and the rest of JAL’s recent suitors could have been unaware of Japan’s much stricter foreign ownership rules, which make U.S. ownership appear positively liberal. They also could not have been oblivious to the complexities of lobbying a new Diet that has barely taken office for a change in laws related to restrictions on simple equity stakes. Add into mix the potential suitors intense interest in Haneda, and then overlay the already contentious presence of Macquarie Bank in Haneda financing chain, and I think what you will find is a perfect storm. In my view, it is a storm that has already taken both JAL and the new Japanese Government to a more isolationist stance.
I would even go so far as to hypothesise that JAL simply and strategically used the OneWorld and SkyTeam interest to their own political advantage, never fully intending the follow through with a financing offer without first doing what the foreign carriers could not- lobbying their own government.
JAL knew that the guaranteed financing was in place prior to the landslide election victory by the Opposition Democrats. Now that that money had evaporated in a single August evening, a sense of careful self preservation became the focus. JAL had to demonstrate contrition for their failures through management shake-ups and uncomfortable cultural issues around lay-offs and pension issues, and painful semi-public audits.
Simultaneously, however, it also began to draw a picture the new Hatoyama government what life might be like with another major Japanese company, some say even the “flag-carrier”, being funded by non-Japanese- and with access covenants that may not have been in best interest of any Japanese carrier.
The manner in which the Opposition Democrats have responded to the JAL crisis only further proves that there are discrete and delicate cultural issues at play here that must not be ignored. The most telling demonstration of this is the first radical change in government in over fifty years was swept to power on a wave of promises to reform government handouts to corporations chose to break with their own platform of reforms within weeks of taking office. This very public break with policy came in the form of mixture of guarantees and promises of further support measures for JAL on the condition of reform.
One of the most painful reforms is the requirement for JAL to cut their pension by a two thirds consent of it’s retirees. It is this requirement that has JAL seeking professional mediation.
While most western carriers such as BA and AA are no strangers to pension shortfalls, this is a more difficult issue in Japan. Japanese culture still holds on to the idea, even if it is an illusion, that a company has a tacit understanding to look after the employee during the course of their lives. While the reality has been quietly changing over the past decade, and represents one of the core changes occuring in Japanese society, it is difficult for for the culture as a whole to adapt to this particular change.
Overall JAL has most likely “shelved these discussions” with AMR and DL and moved on to chart it’s own course. It is a mixture of national pride, culture, and their potential to turnaround that make it plausible that JAL can chart an independant course.
As for AMR and Mr. Arpey, you would think that he of all people should know that threats, no matter how veiled, rarely will win you many friends in Japan- much less help you conclude a successful deal.
Great Links:
JAL charts an independent course to find clear air
JAL does it "Their Way"
What a month it has been for Japan Air Lines! Prior to the Japanese elections at the end of August, which swept Yukio Hatoyama and the Opposition Democrats to power for the first time in 54 years, JAL believed it was to be the recipient of a carefully crafted short-term financings package with the previous government.
This left the normally conservative JAL with a serious problem, and as other carriers have already long ago realised – there were very few places to turn for funding. So what is Asia’s largest carrier to do when it finds a new government that came to power on a promise to wean Japanese Corporations off of preferred public funds?
A Helping Hand
Well we did not have to wait long to find that other carriers were more than interested in lending a helping hand. From OneWorld partner American Airlines leading the charge to Tokyo, to SkyTeam’s Delta it suddenly seemed that there was ample opportunity for JAL to forge new partnerships. Soon, some of the larger members of the major alliances were scrambling to put together a deal. In that frenzy of activity, including AA’s major liquidity drive which found them with 2.9MM USD in cash for various strategic moves, a few finer points seemed to be being papered over. To keen observers of Japan, none of these ovetures really seemed to fully add up. From talk of mergers to liquidity buyouts it seemed as though the principals and the mainstream reports all but ignored some of the more practical issues with Japanese ownership laws, which make US foreign ownership rules look positively liberal.
I would not want to play chess with JAL
The whole affair also seemed to focus on the partnership possibilities and missed some of the all important cultural cues that caused some to wonder if JAL were not just strategically playing their suitors. Surely JAL has to know at the start that without a swift and unlikely change in Japanese law, at best, they could only accept well under 10% of any liquidity offer that included stocks and other securities.
Also surprising was the move by JAL’s potential suitors, as none of the carriers involved in the negotiations could actually be accurately described as in a position to throw a financial lifeline to a new partner. Of particular mystery was AA/BA’s combined approach, with AA’s health only now beginning to stabilise and BA being self described as being in a “critical cash position”. So tenuous is BA’s position that they recently asked staff to voluntarily forego a month of pay, or work a part-time schedule. Delta is still wrapping up the final costs from it’s acquisition of Northwest Airlines. So what was in it for them? Access to the lucrative Japanese market and the coveted slots of Haneda were a good start. Having a foothold in once of the densest markets in Asia was certainly another.
I did it ”My Way”
During the past month none of this ever really added up for us at TWC. Now in the wake of the Japanese Government and the Japanese Development Bank’s latest promise of support and assistance, and the caveats that come with it, will JAL be able to navigate its way to clear air? We would argue that while cultuarally Japanese companies, and their employees, still want to fulfill the covenant of lifetime employment, it is no longer practical. It is a positive sign that JAL make the hard choices that other carriers have already had to make in recent years. I do not think that we should underestimate the pain and cultural complexity that they will have to negotiate while cutting the bottom line. In many ways it will be harder than in the right-to-work culture found in the U.S.
So as JAL’s President steps down- some would say in less-than-honourable circumstances- the carrier is this month intensifying the scale and depth of its voluntary restructuring. Having been with three carriers who stared down insolvency, and two who succumbed, all I can think is no matter how hard the cuts, there is no replacement for charting your own voluntary course through these hard times. I wish JAL nothing but luck as they do things “their way”.
Tokyo Tragedy
- What happened to the FedEx MD11?
- What is the impact to Narita Airport and to Passengers?
- Some real-time passenger stories
- Our Summary of the situation
The Departure Boards at Narita today had to be watched closely, as they changed frequently and generally for the worse.
Having just arrived in Tokyo on Sunday evening, I can personally attest to how the winds were already causing a few delays on the arrival of our flight from London. As we approached Runway 34L the on-board “birds eye view” camera gave us a wonderful view of the runway as we pitched slightly from side-to-side. I often forget how tired you can be after nearly twelve hours on an airplane. I was to learn today, however, that my long trip was nothing in comparison to what some passengers were about to go through.
I was awake at 0500, as travellers often do on long trips. My wife and I got up and wandered around the early morning streets of Tokyo. While still a little dark, the wind was howling through the clean streets of the city. Having watched a bit of the local news earlier, we had heard it was going to be a beautiful day, but the Japanese Meteorological Service had issued a warning for high-winds through the Tokyo area.
What happened?
Then this morning at approximately 0650 Tokyo London time, FedEx Flight 80 from Guangzhou, China was landing at Tokyo Narita. As the MD11 flared up, just before touching down, the aircraft appeared to come down onto the runway in an uncontrolled manner. Bouncing up again only to clip its wing causing the aircraft to fatally lose control and in a fiery explosion come to rest with the front of the fuselage turned upside down.
Japanese Rescue workers focus on saving the pilots -- courtesy NNC
We watched in horror as the Japanese fire and rescue response was immediate and efficient, and it took the fire-fighters just under an hour to cut their way into the MD11’s cockpit area to rescue the two pilots. While initial reports from the Japanese Fire Services advised that both the pilots were alive after being extracted, they later both later died.
The impact of this tragic event is being felt at Tokyo Narita, not only by the Fire and Rescue Services, but also by the passengers. The closure of one of the runways at Japan’s busiest airport is having a serious ripple effect on travellers.
While waiting at Tokyo Station for the Airport Express train I met the Hanson family from New York. Doug and Anna Maria Hanson were booked to travel today on JAL’s flight to Honolulu. They, and their two teenage daughters, had been travelling the world for over a month visiting South America and Asia. They had just finished enjoying a one week stay in Tokyo and said “We are looking forward to the Hawaii portion of their trip.” Now as we approach Narita airport the Hanson’s are not sure if they will be going at all today.
I am fairly certain the Hanson's did not make it today.
Anna Maria said, “It is a terrible tragedy. If there is a delay, we can handle it.” They had the air of seasoned travellers. When asked what she thought of their trip so far, she said, “People we have met here in Japan, and in Asian countries in general, have been among the most polite and organised that we have encountered. I am sure that we will find a way to make it to Honolulu.”
The Departures Hall was full of queues that one might expect, and on the far side of the airport check-in area, the queue for the information desks was full of passengers and their baggage that were not heading anywhere, at least for today. In typical Japanese fashion, everything was calm, and orderly, and there were plenty of airport staff available to answer questions and direct passengers.
At Narita I met William Oliver, a British businessman who came to Tokyo last week for meetings and stayed over the weekend to do some sight-seeing. Learning that his flight home JAL flight, JL401 to London was now cancelled he said, “I wish I had just gone home as originally planned; but there is nothing for it is there? Understandably, and for obvious reasons, there is just not another airplane available“ He said that his airline has been very accommodating, and helpful, “… but I am still not sure how, or when, I am returning home.”
The arrivals board told the story of the diverted and cancelled inbound flights. Despite the cancellations, some flights did arrive several hours late.
What could be worse than not being able to get a flight out of Tokyo?
The news is actually worse for those who were already heading for Tokyo, especially for passengers who were in the air and on their way from European destinations. Generally these flights are set to arrive in the afternoon. Flights from the UK, Germany, and the Gulf Region are particularly affected. In the case of JAL’s London inbound flight, it was diverted to Nagoya airport. Some flights have been diverted as far away as Sapporo on the north island of Hokkaido, not an easy rail trip for passengers.
There were a few passengers who were luckier, and were diverted to Central Japan. I spoke to Jennifer Tolliver, a University student from Liverpool, as she was slumped over a cup of coffee in the Departures Hall. Bleary-eyed she relayed the story of how she was on her way to China to visit friends, and had chosen to fly via Tokyo to save money. “Our flight was diverted to Nagoya. I had no idea where exactly that was in Japan. Now, I have had to spend so much time and money on a train ticket that I could have just flown directly.” Her airline has managed to get her another flight later tonight, but with all of the other cancellations she voiced a concern that she would actually be able to make it. “I am just afraid I will need to spend more money for a hotel, if I can even find one.”
Emily Logan, a Australian on an extended “around the world trip” had been helped out significantly by her airline. Her next stop is San Francisco, and JAL was able to transfer her to a Cathay Pacific flight leaving tomorrow via Hong Kong. “We are not actually upset, but we are little annoyed that we are going to miss so much of our time in San Francisco.” At one point an airline representative had told her that things may not return to normal at Narita until Thursday. While we were speaking her travelling companion was on the phone checking to see if their travel insurance would cover extra expenses in this particular situation.
The International Arrivals hall would normally be full at this hour on a Monday
As I stood in the nearly empty Arrivals Hall on what should be a busy Monday night, watching the cancellations, an automated message was playing overhead. “The NAA (Narita Airport Authority) is advising that some aircraft have been diverted for operational reasons. Please contact your airline for further information, and we apologise for any inconvenience.”
Nothing to apologise for, but plenty of other emotions to express.
In my opinion, there is nothing to apologise for. I personally observed the Japanese Authorities, the airport, and the airlines handling issues and doing their best given the tragedy that they are also dealing with. While everyone I spoke to may have been inconvenienced, and it may take days for Narita to return to normal, people were still acutely aware that two pilots lost their lives today. That puts it all in perspective.
From all of us at TWC, we wish the FedEx pilots friends, family, and co-workers our sincere condolences for their loss. To the brave firefighters and rescuers who tried their best to reach the pilots in time, we stand in awe of your bravery.