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JAL bankruptcy: Japan's unfriendly skies

Analysis: One of the biggest busts in Japanese history sparks plenty of questions.

Yoshitomo Aoki, an aviation expert, echoed the generally positive response to the move. “Some people have said JAL should have been fazed out, but Japan needs two major airlines [the other is All Nippon Airways] to encourage competition,” he said.

“I’m not surprised the DPJ has acted in this way. They promised to change Japan in every way, so it wasn’t difficult to see that the transport ministry would opt for bankruptcy.”

Martin Schulz, an economist at the Fujitsu Research Institute in Tokyo, agreed that the airline was one dinosaur worth saving from extinction, but added: “JAL’s creditors will have to swallow a big bankruptcy, which is a major break from the survival-at-all-costs approach of the past.

“The DPJ has sent a message to smaller corporations who have survived crises until now because of government support.”

Despite the magnitude of JAL’s woes, Schulz doubts they will add much to growing public angst over the health of "Japan Inc."

“Sentiment is already at the lowest levels imaginable,” he said. “Confidence among the public is almost non-existent after 20 years of seeing their economy slip in and out of crisis. JAL is a symbol of something that has already been lost.

“All the ingredients are now there for a successful company, but it depends on how the restructuring proceeds and whether politicians start interfering again. JAL will only recover if it respects its customers and starts to act like a genuinely private company.”

Amid the turmoil it is easy to forget that the airline is being courted by foreign counterparts eager to gain access to its extensive network of routes across Asia.

American Airlines is part of a $1.4 billion offer to keep JAL as a member of the Oneworld Alliance, while Delta is attempting to lure it to the Sky team group with promises of $1 billion in fresh investment.

Delta has said that defection could earn JAL an extra $400 million a year in revenue and give the two companies a 43 percent share of the market between Japan and North America, nearly double that of the JAL-American partnership.

“JAL won’t have much scope to expand if it stays with American,” Aoki said. “A deal with Delta would be high risk, but with potentially high returns.”
 

http://www.globalpost.com/dispatch/japan/100120/jal-wtf