EVERY three months or so, employees of Japan Airlines (JAL), from the boss to pilots and ground staff, spend a day studying a little white book that is JAL’s turnaround manual. Some discuss it in department meetings every day. It sounds Maoist, but the prescriptions are cheerily Zen-like, reflecting the thinking of the man JAL credits as its saviour, Kazuo Inamori, an aged business guru. One of its mantras is: “Be thankful.” Indeed, JAL has a lot to be thankful for.
On September 10th JAL—lavishly supported by the government—at last emerged from its spectacular nose-dive into bankruptcy, pricing an initial public offering (IPO) at ¥663 billion ($8.5 billion), at the top of a range offered to investors. The price will make it more valuable than its national stablemate, All Nippon Airways (ANA), when it is relisted on September 19th, even though analysts say ANA has long been the better-managed airline. ANA has grumbled about the unfair advantages handed to its better-known rival.
It has shed all its jumbos since then, slashed its number of routes, reduced staff by a third, persuaded its unionised pilots and staff to take big pay cuts, and slashed its pension payouts by up to half. As a consequence, the latest results show its operating profit margin has surged to 17%, from negative territory in 2008. That is higher than some of the most profit-hungry low-cost carriers, such as Ryanair (see chart). It has made JAL, for a while at least, one of the world’s most profitable airlines.In many ways, the turnaround highlights the pros and cons of government intervention. On the positive side, the airline’s return to profitability has been stunning. JAL was one of those blue-blooded Japanese firms that put prestige far above profit: before its bankruptcy in 2010 the company once owned the world’s biggest fleet of jumbo jets, many of which flew half-empty.
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