Set in 2013, this case discusses the challenges faced and overcome by JAL to turn around successfully from a situation of bankruptcy in 2009-2010. In 2009, JAL, Asia's largest airline by revenue and an icon of Japan Inc., was besieged by a severe cash crunch crisis. A skewed cost structure with too many aircraft, bloated workforce and unprofitable routes, aggressive expansion in non-core associated services, and the 2008 global economic crisis, had landed the airline with a debt load of over US$25 billion, an operating loss of US$518 million and a market valuation less than the price of a Boeing 747.
Kazuo Inamori, founder of the electronics leader Kyocera Corp, was tabbed as the new Chairman of the airline and set out to restructure the organisation. Within two years JAL had revived to become the world’s most profitable airline in 2011-12. In 2012, JAL’s initial public offering (IPO) at US$8.5 billion was the world’s largest after Facebook’s IPO, and the company was valued at US$8.72 billion.
Besides government intervention and support, three factors in particular contributed to JAL’s remarkable recovery: rationalisation of the cost structure through supply management and operational restructuring; change in the corporate culture inculcating shared values among all the employees; and the new management accounting system ‘AMOEBA’, to drive accountability across all levels and divisions.
However, Inamori’s stepping down in 2013 raised a few concerns: would JAL be able to stay committed to Inamori’s defined path of high profitability structure and people-oriented culture? Would it continue to learn from its mistakes in the past, and pursue sustainable growth?
This case is designed for use by both undergraduate and post graduate students. Through this case, participants will understand the significance of pursuing sustainable growth strategies, effective change management, and business process innovation. It will also be useful in establishing the role leadership plays, and the importance of succession planning for an organisation to be future ready.
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· The Case (SMU-17-0021)
· Teaching Note (SMU-17-0021TN)