JAL struggles to pull itself out of nosedive

ALL is not well in Japan's friendly skies, where the main national carrier, Japan Airlines, is struggling with the nationwide problem of corporate risutora - restructuring - to put an end to three years of losses that have cost the company pounds 550m, writes Terry McCarthy.

Inflated wage costs - JAL stewardesses now earn pounds 53,000 a year - bad corporate planning and cut-throat competition from trans-Pacific US carriers and other Asian airlines have left JAL in the doldrums. A recovery plan was finally hammered out at the end of last year, focusing mainly on cutting the Japanese workforce and replacing it with cheaper foreign labour, but the plan faces opposition from unions and even the minister in charge of regulating the airline industry.

The desperation of JAL executives received a comical touch last week when stewardesses protested against the company's latest promotion drive. Supposedly to encourage more families to take domestic flights rather than trains, several planes were painted with Walt Disney motifs, and stewardesses were told to wear Mickey Mouse ears. They refused.

But JAL's headaches go beyond cartoon dress codes. Last month, the company announced it would hire new staff on a contract basis, rather than offering jobs for life, to save money and increase flexibility. The transport minister, Shizuka Kamei, came out against the plan, which he said could reduce safety standards. In fact, the minister's real fear was that introducing contract workers would antagonise the labour unions.

Eventually, a compromise was agreed under which contract staff would be given extra training, longer contracts, and some hope of permanent jobs in the future. But for JAL it was another unwelcome reminder of how little room it has for manoeuvre in its attempt to pull itself out of the red.

In theory, JAL was privatised in 1987. But in practice links with the bureaucracy are still strong and the industry is still highly regulated. No discounting on domestic tickets is permitted, leading to the absurd situation in which two- hour flights to cities inside Japan are now more expensive than cheap tickets on foreign airlines for 10-hour flights to Los Angeles.

JAL has made some headway in reducing costs. Stewardesses who used to be entitled to take taxis to and from the airport, which cost pounds 350 for a two-way fare, are now having to arrive for work by bus. And despite the opposition to hiring Japanese workers on a contract basis, the airline has been hiring large numbers of foreigners: Thai hostesses earn about one-twentieth the salary paid to Japanese hostesses and Western pilots are paid about half the equivalent wages of a Japanese pilot. In the corporate recovery plan more than one-quarter of all cabin crews will be non- Japanese by 1998 and 4,300 Japanese employees will have been shed from the payroll.

An increasing amount of JAL aircraft maintenance will be carried out in the Chinese city of Xiamen, where labourers earn one-tenth of what they are paid in Japan. By that stage, someone is bound to stand up and ask whether JAL can still be called Japan Airlines.

(Photographs omitted)