JAL turnaround chief says airline is on the mend

TOKYO: The man in charge of resurrecting Japan Airlines said Wednesday that the carrier is aggressively shedding its bad habits and moving toward financial health more quickly than expected.

When chairman Kazuo Inamori, 78, took over nine months ago, Japan Airlines, known as JAL, was a sick company. It had just filed for one of the biggest corporate bankruptcies in Japanese history, saddled with $25.6 billion in debt, unprofitable routes and a bloated workforce.

Inamori, one of Japan's most celebrated entrepreneurs of his generation, was tapped to lead a turnaround.

What he found was a deeply fragmented organization with unclear lines of responsibility and no system in place to track real-time financial data. Instead of offering innovative leadership, longtime managers fought to maintain the status quo.

``Within the company, there was little sense of crisis about bankruptcy and no unified fervor about the need to pull together to rebuild the company,'' Inamori said at the Foreign Correspondents' Club of Japan.

So Inamori decided his managers needed to learn about leadership for JAL to succeed. He took 50 of his top managers and put them through an intensive management training course.

Some resisted at first, but eventually they developed a ``true awareness of what it meant to be leader,'' he said. In the first six months of the fiscal year, JAL booked likely booked a record operating profit, Inamori said.

Such initiatives are an extension of Inamori's business ideas that he developed over a career that includes the founding of two major Japanese companies _ Kyocera Corp. and No. 2 mobile carrier KDDI Corp. He became a Buddhist monk after retiring and extols ``amoeba management'' theories, in which each business unit is self contained and generates its own revenue.

Inamori has written 11 books on management and achievement, including ``Respect the Divine and Love People'' and ``Your Dream Will Come True Without Fail.''

Inamori said he is working to adapt the amoeba concept to the airline setting and hopes to begin full implementation next year. He acknowledged that Japan's flagship carrier has a long way to go and faces a number of challenges, including uncertainties about the global economy and increasing competition from low-cost carriers.

``But by creating new leaders who will take responsibility, and by dividing the company into small units that must account for their own profitability, I believe reconstruction will be possible,'' he said.

JAL's restructuring plan includes some painful steps that underscore the company's precarious situation. It is cutting its global workforce by some 30 percent, selling off subsidiaries, eliminating money-losing routes and angling for additional financing.

The plan is being orchestrated as a government-backed bailout, under a group called the Enterprise Turnaround Initiative Corp. of Japan, after JAL filed for bankruptcy protection in January. It includes a 521.5 billion yen (6.4 billion) debt waiver mainly from financial institutions and a 350 billion yen investment in JAL by the ETIC.

The state-backed agency is in talks with several major Japanese banks to secure an additional 50 billion yen in loans, Inamori said, which would help JAL repay outstanding debts and push the rehabilitation process forward.

Inamori said he would not push for rapid expansion and there had been no decisions made on whether JAL would launch a low-cost carrier, as its rival All Nippon Airways has announced.