JAL combines operating set-up

From October 1, 2006, Japan Airlines will be a single operating company, following the unification of the present two operating companies, JAL International and JAL Domestic companies.The new single operating company will bear the name Japan Airlines International.  Unification of the two JAL operating companies will achieve greater efficiency and cost reduction by the elimination of duplication and will improve intra-company communications.  JAL International and JAL Domestic were formed in April 2004 to take over the roles of the former Japan Airlines and the former Japan Air System. The two JAL Group operating companies were based on the legal entities of their separate predecessors. Overseeing their operations was a holding company, Japan Airlines Corporation, which remains in that role.  During the initial process of integration of Japan Airlines and Japan Air Systems (JAS), which took place from October 2002 to April 2004, the group concentrated on enhancing collective strength and corporate value. But this has been negatively impacted by a series of adverse global events: terrorism, the war in Iraq, SARS outbreaks and most recently by record-breaking fuel prices.  As a result of this impact and its effect on fundamental changes in the business environment, JAL management felt that further integration was both necessary and desirable to create a new organization by blending the two operating companies into one. The decision to create the new unified company was announced on February 4, 2005 with the target for completion in FY2006.  Under a streamlined administrative structure, the new unified JAL Group organisation will be capable of flexibly coping with the continued upheaval in the international business environment.  The original plan for integration of the two former competitors, JAL and JAS, brought the new organization huge cost benefits in Japan.  They were able to combine sales and ticket offices, airport facilities including check-in counters, administration offices, flight operations departments and ground service facilities. Taking into account staff reductions, economies through fleet reduction and other effects, the net integration were estimated at about 50 billion yen for 2005.  Integration created a stronger, more competitive airline with a 50% domestic market share, matching chief rival All Nippon Airways (ANA) in terms of domestic capacity and network power.  Traditionally, the Japan domestic market is more stable than the international marketplace and the combination of the domestic revenues of JAL and JAS gave the new JAL Group added financial strength. Domestic revenue generated by the integration now matches JAL international passenger revenues, creating a better revenue balance.  Before integration, JAL domestic revenues accounted for only 30 percent of total sales revenues and international revenue accounted for 70 percent, making the former JAL over-reliant on the more volatile international market.