August
2007
Kansai Airport Opens 2nd Runway, Prepares For 24-Hour
Operation
Kansai International Airport became the nation's first airport capable of
operating around the clock when it opened its second runway on Thursday.
The facility's arrival and departure capacity now surpasses that of Narita
International Airport near Tokyo, and it aims to leverage its enhanced
capability to compete against rival airports in other parts of Asia and
become a hub for international air cargo. The new 4,000-meter runway is
one of the longest in Japan, together with the main one at Narita. A total
of 903.6 billion yen was spent to build a 545-hectare artificial island to
host the runway as well as to construct other necessary infrastructure.
Kansai International, which opened in 1994 off the coast of Osaka
Prefecture, will start to operate 24 hours a day in October after its
flight control system is upgraded to handle the increased traffic. (The
Nihon Keizai Shimbun, August 02, 2007)
June
2007
JAL President Ends Eventful Year With Recovery Still
In Doubt
Haruka Nishimatsu became president of struggling Japan Airlines Corp. one
year ago, and with the advantage of his independence from internal
factions he has been able to boldly undertake painful reforms. But JAL
remains financially weak and lacks a clear strategy to deal with global
deregulation and the expansion of airports in the Tokyo area. Over the
past year, Nishimatsu has made more than 10 weekend trips to Narita
International Airport to welcome executives of corporate clients and
business partners returning from abroad on JAL flights. He revived this
once-standard practice, suspended under his two predecessors, "so
that my lack of experience in sales will not be seen as a weakness,"
said Nishimatsu, whose career at JAL has been entirely on the financial
side of the business. "I want to set an example that stimulates the
rest of the company." Nishimatsu has drawn public attention to his
personal commitment to reform by commuting to work on trains and setting
his annual salary at only 9.6 million yen. His promotion to the presidency
from the lower ranks of the board of directors "has much to do with
his being outside the (company's internal) politics," said one
executive, "so he had nothing to protect." This enabled him to
be bold with restructuring, which stalled after JAL integrated its
operations with those of Japan Air System Co. in 2002. A typical reform
has been to lower the mandatory retirement age for incumbent directors and
former directors working in group firms as directors or advisers.
Nishimatsu will now reorganize JAL's four advisory systems and abolish
four executive adviser positions, from which retired directors have often
interfered with management through officials who were once their
subordinates. "I'll put an end to this bad practice so younger people
will have more opportunity for promotion," he said. In April,
Nishimatsu implemented a special voluntary retirement program for managers
above the level of division chief. As the company anticipated, 250
applied, reducing the number of executives at group firms by 30% and
lowering the average age of office heads by more than two years.
Nishimatsu has also reviewed ways to execute the medium-term management
plan that began in April. Since the merger with JAS, JAL has reviewed the
plan each year without ever achieving the initial goals. Under a contract
with U.S. corporate turnaround firm AlixPartners, JAL gets advice on
specific ways to implement job cuts and other measures, and it has just
appointed a director to promote the plan's progress. As a result, an
executive said, JAL "will likely achieve" its fiscal 2009 goal
of cutting 4,300 jobs in 2008, "a year sooner than planned."
Although the medium-term program targets to trim 50 billion yen in annual
personnel costs, only 2 billion yen will be saved through the voluntary
retirement program for managers. Labor negotiations will open in July on
changes to JAL's retirement system, including a voluntary retirement
program for lower management. If the process cuts severance pay by 10%,
the firm can reduce this year's set-aside by about 20 billion yen. The
effect will diminish in fiscal 2008 and onward, requiring further measures
on personnel costs down the road. To cope with rising fuel costs, JAL must
invest in more energy-efficient aircraft. But getting loans from leading
banks is "essentially impossible," said one bank executive,
because they all downgraded loans made to JAL to a higher-risk category
following March inspections by the Financial Services Agency. JAL has
drawn up a plan to increase capital and service its debt, and asked
leading banks to help. Some firmly oppose the scheme because JAL recently
obtained additional loans of 70 billion yen, so the airline was not able
to reach an agreement with the banks before Tuesday's shareholders
meeting. "We will decide whether to offer capital assistance once we
see some progress being made in the medium-term plan and a recovery in the
company's performance, a banking source said. Nishimatsu's reform plan has
reached a crucial point in attaining medium-term goals and regaining lost
confidence among banks and shareholders. (The Nikkei Business Daily, June
27, 2007)
Kawasaki Heavy To Build 2nd Plant For Boeing 787
Parts
Seeing strong demand for Boeing Co.'s 787 Dreamliner, Kawasaki Heavy
Industries Ltd. will invest about 20 billion yen to construct another
Aichi Prefecture factory to produce components for the midsize passenger
jet, The Nikkei learned Sunday. Kawasaki Heavy already operates an Aichi
Prefecture production facility specializing in forward fuselages and other
parts for the 787, a next-generation aircraft that goes into service in
2008. The new facility, which Kawasaki Heavy aims to bring into operation
around the end of that year, is expected to double the firm's monthly
output capacity to around 14 aircraft bodies. With Boeing seeing a sharp
rise in orders for the 787, Kawasaki Heavy believes that it needs to
bolster its production system to meet demand. Kawasaki Heavy will first
sign a production expansion contract with Boeing and then begin building
the new plant at a site neighboring its existing Aichi plant. Contracted
to build airframes and other 787 components, Kawasaki Heavy, Mitsubishi
Heavy Industries Ltd. (7011) and Fuji Heavy Industries Ltd. (7270) all set
up new dedicated facilities in 2006. With its new addition, Kawasaki
Heavy's total investment is expected to reach nearly 40 billion yen.
Mitsubishi Heavy, Fuji Heavy, and parts and materials manufacturers are
expected to increase their production as well. Aircraft production by
Japanese manufacturers set a record in value terms for a second straight
year in fiscal 2006. Commercial aircraft constituted 52% of the value,
topping that of military aircraft for the first time ever. (The Nihon
Keizai Shimbun, June 12, 2007)
