Ministry seeks drastic restructuring for Japan Airlines+

TOKYO, Aug. 20 Kyodo -
The transport ministry on Thursday urged struggling Japan Airlines Corp. to
formulate a business improvement plan with drastic restructuring measures
including integrating operations with a rival company, ministry officials said.

The Land, Infrastructure, Transport and Tourism Ministry raised the potential
integration of operations, apparently having in mind that JAL's cargo business
could, for example, be merged with Nippon Cargo Airlines, a subsidiary of
Nippon Yusen K.K., industry watchers said.
The ministry's suggestion was made at the first meeting of an expert panel
tasked with monitoring a business turnaround by Japan's former national flag
carrier which is now struggling with loss-making businesses. It secured a
large-scale state-backed emergency loan deal earlier this year.
At the first meeting, the ministry also demanded that JAL make thorough cost
reduction efforts such as by scrapping and reducing services on unprofitable
routes and bringing down the levels of wages and corporate pensions which are
deemed too high, the ministry officials said.
The six-member panel, chaired by Takehiko Sugiyama, president of Hitotsubashi
University, will offer JAL advice on reform and have it reflected in the
airline's business improvement plan, including drastic restructuring steps.
At the meeting, JAL officials briefed the panel on business improvement steps
that the airline is studying and said that it is planning to compile the plan
and release it to the public by the end of September.
It is extremely rare for the government to get involved in the restructuring
plan of a private company. The contents of the plan are also likely to be
influenced by the moves of the new government to be formed after the Aug. 30
House of Representatives election.
The ministry also urged JAL to employ other measures such launching joint
businesses with companies outside the airline industry and expanding
code-sharing flights, the ministry officials said.
On cost-cutting efforts, the ministry urged JAL to map out ''a reform to gain
social understanding,'' saying that the government will not subsidize running
costs for money-losing flights except for those to isolated islands that are
''imperative for living.''
At the meeting, one panel member said, ''It is necessary to sufficiently
examine pension issues and the wage levels of pilots,'' hinting that reviewing
the treatment of employees would be a necessary condition for approving JAL's
improvement plan.
''JAL's improvement plan cannot win society's trust unless it is improved and
no aspect of the company is given sanctuary,'' Hiroaki Taniguchi, vice minister
of the transport ministry, said at the outset of the meeting.
''We would like (the panel) to scrutinize the contents of the improvement plan
and provide frank and harsh advice,'' Taniguchi said.
The panel intends to regularly monitor the business improvement plan, the
ministry said.
Executives of lenders that agreed with JAL to extend a total of 100 billion yen
in state-backed loans, such as the Development Bank of Japan, Japan Bank for
International Cooperation and Mizuho Corporate Bank, attended the meeting as
observers.
Hit by a decline in the number of travelers amid the global economic downturn,
JAL incurred a consolidated net loss of 99 billion yen in the April-June
quarter.
Transport minister Kazuyoshi Kaneko has evinced the ministry's stance of aiming
for government-led rebuilding of JAL's management, telling a news conference
earlier this month, ''The ministry would like to steadily supervise and
monitor'' the airline.
==Kyodo