JAL seeks cut in pension benefits to secure it’s future

Japan Airlines (JAL) is meeting with retirees and current employees this week to secure cuts in pension benefits of 30% and 50% from each group respectively. The cut in benefits are needed so that JAL can reduce the guaranteed return it provides on company pension funds from 4.5% to 1.5%, in line with Japanese government bonds.

JAL needs to achieve these changes to gain access to public funds to help finance its restructuring, without which it faces the risk of liquidation.

The airline is projecting its fourth annual loss in five years, and has been on the decline since its badly executed takeover of Japan Airlines System in 2002. This time period has seen the ascendancy of All Nippon Airways (ANA) adding greater pressure on JAL.

The change in pension benefits follows the start of implementing a cut back in the size of the airline’s route network to reduce losses.

My recommendation for a long-term fix is to look at changing the company’s corporate culture, which even at the best of times is an extremely difficult task.

What other recommendations would you make both short term and long term for JAL to be a successful airline in the future and retain its position as Asia’s largest airline?

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