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THE SORRY STATE OF JAPAN AIRLINES
By Joe Brancatelli
January 20, 2010 -- When Japan Airlines finally tumbled into bankruptcy late on Tuesday afternoon Tokyo time, I ran up to my attic to unearth a tale of life at Asia's largest carrier from nearly 30 years ago.

According to an article in a then-contemporary Japanese business magazine, a passenger asked a Japan Airlines flight attendant for an oshibori, the hand towel that JAL then, and now, distributes before meals. The stewardess refused, the passenger persisted, and the dispute eventually escalated to the chief purser, the master of all he surveys in flight. The purser reluctantly agreed, but sternly warned the passenger not to expect a towel at mealtime too.

The magazine's conclusion: Japan's vaunted reputation for polite and gracious service could only be maintained if everyone knew their role in the process. JAL's in-flight staff was certainly wrong not to provide a towel, the magazine decided. But the customer was also at fault. She should have known that oshibori was not available at an unscheduled time and should never have embarrassed the cabin crew by asking for one at an unexpected moment.

If nothing else, JAL's latest bankruptcy is the very model of a modern Japanese business failure and a reaffirmation of Japan's unfailing ability to make it all about manners. The airline will be bailed out to the tune of $11 billion—the fifth time in a decade the carrier has been rescued by government and/or private players—and JAL apologized. Not once. But twice.

We "sincerely apologize to all of our shareholders, financial creditors, customers, and other parties concerned for the great inconvenience and concern this situation might cause," an English-language JAL statement ritualistically noted. After it outlined the draconian measures the airline and its many subsidiaries would take to return to health, the statement retreated to the requisite Kabuki: "Lastly, we again apologize to all of our shareholders and other parties for the great inconvenience and for causing concern."

You may chuckle at the niceties of JAL's public stance, but you may wish for a little corporate humility in the next few days as our own "legacy" carriers—Delta, American, United, Continental, and US Airways—report their fourth-quarter and full-year 2009 results. They will again lose billions of dollars, and, rather than apologize, they will blame passengers for not paying enough high fares, not flying frequently enough, and having the audacity to continue switching their business to alternate carriers such as Southwest and JetBlue.

Be it humble or hostile, the dire straits that JAL and the old-school American carriers find themselves paddling through won't be calmed anytime soon. The model they built is probably forever broken, and, ironically, JAL's future and the fate of several U.S. airlines are inextricably bound.

In JAL's case, the problems date back 25 years, to a 1985 crash that claimed more than 500 lives and remains the world's worst single-aircraft disaster. Even though JAL, nationalized in 1953, had literally been the wings of Japan's postwar revival, the crash shook the country’s faith in its "flag carrier." It's been downhill ever since as JAL was buffeted by Japan's 20-year economic malaise; falling outbound Japanese tourism and rising fuel costs; a less-than-perfect privatization; a misbegotten merger with a domestic competitor in 2002; and an even more unfortunate expansion strategy that left it bloated with too many unrelated businesses, too many employees, and $25 billion in debt.

At the height of its market dominance after the 2002 merger with Japan Air System, JAL commanded a 66 percent share for international service and 46 percent share of the domestic Japanese market. But profits have been virtually nonexistent since the merger and JAL was passed by All Nippon Airways, Japan's largest domestic carrier and a respected player in the international sphere.

Although details are still sketchy, JAL's three-year restructuring plan announced Tuesday will cut more than 15,000 employees from the company's current workforce of nearly 52,000 and end flights on 14 international and 17 domestic routes. Shareholders will be wiped out, of course, and bondholders are in for a haircut on their holdings. A massive fire sale of noncore assets is almost assured.

For all of its problems, however, Japan Airlines still has some fans: American Airlines, which is desperate to keep it in the Oneworld Alliance with British Airways, Iberia, Qantas, and Cathay Pacific; and Delta Air Lines, which fronts the SkyTeam Alliance with Air France, KLM, Alitalia, and Korean Air. For various reasons, and despite their own woeful financial situation, both American and Delta are desperate to loan JAL cash.

American, which has cut many of its own international flights in recent years as it struggled to remain afloat, needs to keep JAL in Oneworld. If JAL defects to SkyTeam, American would lose access to JAL's still-formidable hub at Tokyo's Narita Airport, its ties to secondary Japanese markets, and many fast-growing regions of Asia. Delta, which now has a large hub at Narita, thanks to its merger with Northwest Airlines, wants an alliance with JAL to solidify its grip on transpacific service. As a result of the bidding war between American and its Oneworld allies and Delta and its SkyTeam partners, JAL is assured billions in short-term aid and long-term revenue sharing.

Ironically, the battle is a textbook example of how old-line airlines look to the past, not the future. Japan and its troubled flagship carrier are no longer the dominant players in Asia. Moreover, Narita is one of the world's most cramped, least pleasant, and most expensive hubs. The future clearly belongs to China, which has built new state-of-the-art airports in Beijing and Shanghai to support its economic growth and political power. India is also an emerging regional power and Tokyo is hardly a compelling place for travelers to visit en route to the subcontinent. Besides, India has a growing number of nonstop flights from the United States.

"Delta and American would both be better served by concentrating on the future of Asia, not the past," the network strategist for a major European carrier told me several weeks ago. "JAL probably isn't worth it anymore. Narita certainly isn't worth it anymore."

The Fine Print…
All five of the U.S. legacy carriers have raised their domestic checked-bag fees since the beginning of the year. Unless you are an elite-level flyer or traveling on a full-fare or premium-class ticket, expect to pay $20 to $25 for the first checked bag and $30 to $35 for the privilege of checking a second bag. Southwest Airlines, which still allows all flyers to check two bags free, has launched a TV campaign to highlight its policy. JetBlue Airways still permits you one checked bag free of charge. You can view an updated list of baggage fees and rules at a site called Airfare Watchdog.
ABOUT JOE BRANCATELLI Joe Brancatelli is a publication consultant, which means that he helps media companies start, fix and reposition newspapers, magazines and Web sites. He's also the former executive editor of Frequent Flyer and has been a consultant to or columnist for more business-travel and leisure-travel publishing operations than he can remember. He started his career as a business journalist and created JoeSentMe in the dark days after 9/11 while he was stranded in a hotel room in San Francisco. He lives on the Hudson River in the tourist town of Cold Spring.

THE FINE PRINT This column is Copyright © 2010 American City Business Journals. All rights reserved. Reprinted with permission. JoeSentMe.com is Copyright © 2010 by Joe Brancatelli. All rights reserved.