Japan Air Lines Company Ltd.

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Japan Air Lines Company Ltd.

Tokyo Building
7-3, Marunouchi, 2-chome
Chiyoda-ku, Tokyo 100
Japan
284-2081

Public/State-owned Company
Employees: 20,367
Sales: ¥781.5 billion (US$ 4.909 billion)
Market value: ¥2311 billion (US$ 14.51 billion)
Stock Index: Tokyo

In 1952 the governments of Japan and the United States signed a bilateral agreement which established normal air services between the two countries. During the postwar American occupation Northwest and Pan Am were the two principal air carriers serving Japan. The formation of a Japanese airline was not permitted until the occupation ended in 1951. At that time Japan Air Lines was established and placed in charge of domestic flight services between a number of major Japanese cities. In 1952, however, it was in need of capital. The Japanese government purchased an entire JAL stock issue which doubled the company’s capital, but also gave the government a 50% interest in the airline.

The airline suffered from a shortage of experienced pilots. Nearly all Japanese aviators were drafted into the air service during the war and very few survived. As a result, American, British, and other Commonwealth aviators were required to operate the company’s fleet of aircraft (which consisted of Martin 202s leased from Northwest and, later, a number of DC-4s) until Japanese pilots could be trained and assimilated into the flight crews.

Japan Air Lines grew quickly under the leadership of Seijiro Yanagida. In early February of 1954, JAL inaugurated its first international route, a semi-weekly service which connected Tokyo, Honolulu, and San Francisco. Plans were made to extend JAL services to Hongkong and Sao Paulo, Brazil, the center of a large Japanese community in South America. Also that year, JAL opened offices in Los Angeles, San Francisco, and Chicago. A route connecting Tokyo and London was established when the airline purchased several de Havilland Mark II Comet jetliners.

In its first year of operation JAL secured a significant share of the trans-Pacific market. However, the company lost money, despite a $3 million government subsidy. In its rush to acquire the latest aircraft, JAL purchased production orders for DC-6Bs from other airlines. This plan for securing early delivery of the airplanes obliged JAL to pay a compensatory premium. Another costly factor was the training program which placed an unusually high number of employees on the payroll. In addition, JAL’s maintenance and repair work was being performed by United Airlines until Japanese personnel could be trained.

Japan Air Lines offered its first issue of public stock in May of 1956. ¥500 million (US$1.38 million) was raised to finance the purchase of several new DC-8 passenger jets from the Douglas Aircraft Company. The company made a number of subsequent public offerings and had increased its share capital to ¥5.3 billion (US$14.7 million) in 1960. That figure was increased to ¥11.7 billion (US$32.5 million) in 1962 and ¥18.2 billion (US$50.5 million) in 1965. The increased capital at JAL’s disposal enabled it to implement a rapid expansion program.

In 1958 JAL extended its Bankok service to Singapore, marking a significant return to Southeast Asia for Japanese interests. The Japanese occupation of Malaya and the East Indies during World War II has remained a politically sensitive issue for Southeast Asian governments. The return of the Japanese flag to Singapore on commercial terms began a normalization process between Japan and Southeast Asia.

Japan Air Lines created a subsidiary in 1957 called the Airport Ground Service Company, which provides a variety of maintenance services to JAL and other airlines serving Japan. The company’s personnel training programs were completed that same year, and for the first time JAL was operating regular flights with all-Japanese crews. Two years later a JAL crew training center was opened at Tokyo’s Haneda Airport.

The company began a Tokyo to Paris service in conjunction with Air France in 1960. This route was unique because it was one of the first regular services to fly over the North Pole. Air France provided the Boeing 707 jetliners which were required for the long stretch over the Arctic.

Later that year JAL received its first DC-8 commercial jetliners. Less than a month later it was put into service on the Tokyo to San Francisco route. By the end of the year JAL DC-8s were flying to Los Angeles, Seattle, and Hongkong. The company ended its arrangement with Air France and inaugurated its own DC-8 service from Tokyo to London and Paris via Anchorage on June 6, 1961.

The next jetliner to enter service with JAL was the Convair 880 which was used primarily on domestic and Southeast Asian routes. After appropriate arrangements were concluded with various governments, JAL established a “Silk Road” service between Europe and Japan via Hongkong, Bangkok, Calcutta, Karachi, Kuwait, Cairo, Rome, and Frankfurt. The route was inaugurated in October of 1963 with the new Convair jets.

The Boeing Company sold its first airliner, a 727, to JAL in 1965. This purchase marked the beginning of a close relationship between the airline and Boeing. Over the years JAL would become Boeing’s best foreign customer. In addition, that same year JAL adopted the tsuru (which means crane) as its official symbol. The crane is a symbol of good luck in Japan and is regarded as an appropriate motif for the Japanese airline.

Shortly after setting up a new computerized reservations system called JALCOM early in 1967, Japan Air Lines completed a route network which stretched around the world. The trans-Pacific service to San Francisco was linked to New York and London, where it connected with the “Silk Road” back to Japan. It is a honor for an airline to boast around-the-world service. Few have been able to maintain them for more than just a few months. JAL’s worldwide service, however, lasted for six years.

A dispute over the Soviet occupation of several Japanese islands has prevented a full normalization of relations between those two countries ever since World War II. Once again, Japan Air Lines has helped to promote a normalization of relations between Japan and a foreign country. In 1967 JAL inaugurated a service in conjunction with the Soviet airline Aeroflot which linked Moscow and Tokyo. The Soviets provided the aircraft (a Tupelov 114) and flight crew, but the cabin attendants were a combination of JAL and Aeroflot personnel.

JAL created a subsidiary called Southwest Airlines on June 22, 1967. The new airline operated domestic services between Japanese cities and vacation spots in the Ryukyu Islands in southern Japan. JAL’s tourist business continued to grow as the country became more affluent. In 1969 the company founded another subsidiary called JAL Creative Tours, whose purpose was to market travel packages and excursions.

On July 22, 1970 Boeing delivered the first of several 747s to JAL. Three months later the aircraft was introduced on the Tokyo-Los Angeles route. In addition to jumbo jets, JAL had three Concorde and five Boeing supersonic transports (SSTs) on order. These jetliners were later canceled when the price of a Concorde increased and the Boeing project was abandoned.

Shizuma Matsuo, who succeeded Seijiro Yanagida as president of the airline in 1961, was promoted to the position of chairman in 1971. Another company officer, Shizuo Asada, took Matsuo’s place. During this period of time questions were raised about JAL’s management. A series of major accidents throughout 1972 culminated with the crash of a JAL DC-8 after takeoff from Moscow’s Sheremetyevo Airport. These accidents were blamed on the pilots’ lack of experience. Commercial pilots in western nations usually come from the military where they gain thousands of hours of flight experience. Japan, however, has only a small “self-defense force” whose pilots are forbidden from taking higher-paying jobs in civilian aviation. As a result, less experienced JAL pilots (it was reported) tended to lack certain instinctual skills during crisis situations. The airline investigated this problem, but in the meantime the loss of its DC-8 created an equipment shortage which forced JAL to cancel the London-U.S. portion of its around-the-world service. Consequently, the company took a number of steps to ensure that accidents of this kind would not occur in the future.

On April 21 of 1974, as part of a wider government campaign to normalize relations with the People’s Republic of China, Japan Air Lines suspended its service to Taipei. Taipei is the capital of Taiwan, an island which has been ruled by a rival Chinese government since the Communists came to power on Mainland China in 1949. Six months later JAL opened air service between Osaka and Shanghai in the People’s Republic of China. The following year JAL created a separate subsidiary called Japan Asia Airways which resumed the air service to Taiwan.

Japan Air Lines continued to add Boeing 747s to its growing airliner fleet. However, in 1977 a number of Japanese politicians were implicated in a scandal which involved illegal payments from the sale of Boeing airplanes. An investigation by the Japanese government led to the resignations of several Japanese officals before any formal charges of wrongdoing could be initiated. Boeing’s chief competitor, McDonnell Douglas, hadn’t sold a new airplane to JAL in over 10 years. That company’s latest entry in the commercial jetliner market was the wide body DC-10. The DC-10 was smaller than Boeing’s 747, but it was also more suitable for a number of JAL’s routes. Soon thereafter, the airline purchased a number of DC-10s and introduced them on routes previously served by DC-8s, which were converted for freight service.

Boeing, however, was still JAL’s number one aircraft supplier. JAL had a special need for aircraft capable of carrying very large numbers of passengers and only Boeing manufactured an airliner as large as the 747. In 1980 JAL accepted delivery of its first 747SR, a special 747 capable of carrying 550 passengers. It was used mainly for domestic flights between Tokyo and Okinawa.

Japan Air Lines was recognized for its numerous successes when it was chosen “1980 Airline of the Year” by the editors of Air Transport World. And while JAL had made its mark in the air, it was also very active on the ground. Tokyo’s Narita Airport was built to accommodate Tokyo’s growing air traffic and relieve the pressure of air traffic at the older Haneda Airport. The problem with Narita, however, is that it is located 66 kilometers from downtown Tokyo. JAL officials had long expressed an interest in developing a high-speed train which would cover the distance in 20 minutes. After many years of experimentation, JAL introduced the HSST (high speed surface transport), built in conjuction with Sumitomo Electric Industries and Tokyo Car Manufacturing Company. The HSST (also known as a “mag-lev” vehicle because of the way it works) does not touch the rails it rides over. The train is magnetically suspended approximately one centimeter above the rails. Since it never touches the rails, there isn’t any friction and, as a result, the train can travel at greater speeds. On February 14, 1978 the HSST achieved its intended operating speed of 300 kilometers per hour. It was demonstrated on a special 400 meter track at the Tsukuba Exposition in 1985 with the hope that it may attract buyers searching for a high-speed public transportation system.

Shisuo Asada announced his retirement as president of JAL in 1981. He was succeeded by Yasumoto Tagaki. Under Tagaki, Japan Air Lines entered a new phase in the world airline market. Deregulation in the United States inspired increased airline competition in foreign markets. By 1983 a committee recommended that JAL should be operated more like a commercial operation, and perhaps even privatized.

In 1985 the Japanese government authorized JAL’s domestic rival, All Nippon Airways, to fly international routes and operate cargo services in competition with JAL. In return, JAL was given the authority to fly more domestic routes in competition with All Nippon, which had a monopoly on many Japanese routes. It was also suggested that Toa Domestic Airways and a number of other foreign airlines be given greater freedom to operate in Japan.

During this period JAL suffered from a number of brief but highly publicized strikes. Perhaps the biggest blow to the company’s credibility came in February of 1982, when the pilot of a JAL jet (who was later diagnosed as a schizophrenic) crashed his airplane into Tokyo Bay, killing 24 passengers. Many air travelers subsequently avoided JAL, severely depressing the company’s earnings.

On August 12, 1985, JAL flight 123 from Tokyo to Osaka took off with 524 passengers. Shortly after takeoff, while the cabin was pressurizing, the rear bulkhead ruptured and severely damaged the 747’s tail fin. The airplane had no manueverability but stayed aloft for 30 minutes before crashing into a mountainside killing all but four passengers. This was the most serious single-airplane accident in aviation history, and it kept thousands of customers away from JAL. Yasumoto Tagaki assumed full responsibility for the tragedy and offered his resignation to Prime Minister Yasuhiro Nakasone, who publicly berated Tagaki for lax discipline. Japan Air Lines held memorial services and offered to pay all educational costs of any children who lost parents in the crash. Later, Tagaki personally went to visit the surviving members of the crash victims, offering one last apology before his resignation took effect.

Susumu Yamaji was appointed JAL’s president in December of 1985 and Junji Itoh was named the airline’s chairman in June of 1986. Mr. Itoh became the first chairman of JAL with a background in marketing. Under Itoh’s leadership JAL was restructured and organized under three main operating divisions: international passenger service, domestic passenger service, and cargo (including mail) service. Itoh also made progress with the company’s strained state of labor relations.

The most obvious feature of chairman Itoh’s leadership is the company’s emphasis on marketing. Under the previous management the loyalty of Japanese customers was largely taken for granted. In a more deregulated market, however, JAL is forced to fight for its share of the market. The American airline companies are expected to compete intensely in Japan. JAL has prepared for their arrival by securing agreements with Delta Air Lines and Western Airlines which link JAL to an extensive American flight network.

The Japanese government’s ownership of Japan Air Lines has been reduced to 34.5%. It is expected that the government will sell its share of JAL to the public in 1987. When this privatization is complete, JAL will still be the tenth largest airline in the world, serving six continents with the world’s largest fleet of 747s numbering 47.

Japan Air Lines has diversified its operations into a number of wholly- and partially-owned businesses, including its chain of Nikko International Hotels, and Japan Creative Tours Company, Ltd. (JALPAK), a packager of international tours. In addition, JAL operates Southwest Airlines (in Japan) and Japan Asia Airways, and the Airport Ground Service Company, an aircraft maintenance division.

Principal Subsidiaries

Japan Creative Tours Co., Ltd. (50.2%); Airport Ground Service Co., Ltd. (85%); Japan Air Lines Development Co., Ltd. (67.1%); Nikko Trading Co., Ltd. (72.9%); Southwest Airlines Co., Ltd. (51%); Japan Asia Airways Co., Ltd.