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JAL's Personnel Strife
The Problem is Deep-Rooted

2, 27. 2006

   The internal personnel strife of Japan Airlines Corp. (JAL), in which Toshiyuki Shinmachi, President, and two other top executives, are asked by a group of JAL group executives to resign, is now developing into a major disturbance to such an extent that even Land, Infrastructure and Transport Minister Kazuo Kitagawa remonstrated. As a result of the strife, JAL lost some of passengers to its rival All Nippon Airways Co. Ltd. (ANA), and the difference in business result between the two companies widened. The bad tradition of factional rivalry within the company may be accounted for as a reason for the fall of JAL, but the true reason seems to be even more deeply rooted.

   Those who asked Shinmachi to step down from the presidency were the four people, including Makoto Fukada, managing director. On the ground of the bad management results, such as turning to deficit and non-dividend payment, the four collected signatures from about 50 officials in the managerial level of the companies belonging to the JAL group to support their campaign. Preceding this movement, Eitaro Itoyama, the largest individual shareholder of the company, requested that Shnmachi resign as president.
   JAL is a kind of company that has been constantly ridden with internal strife for a long time. The power structure within the company is made up mainly of the business and administrative factions, and they have repeatedly struggled against each other to win the leadership. Nasty anonymous writings of various kinds flew around in such struggles which sometimes involved politicians and transport bureaucrats.

Business Division's Rebellion Against Shinmachi Intensified Conflict

Boeing 747-400 utilized by theJAL group as one of its main aircrafts
Boeing 747-400 utilized by theJAL group as one of its main aircrafts

   The current internal strife was triggered after Isao Kaneko resigned as JAL chairman to take responsibility for a series of flight troubles and other scandals. Shinmachi, successor to Kaneko for the company's leadership, is originally from the freight section which does not have strong influence within the company, and he is recognized as leaning toward the administrative faction. Thus the business group rebelled against Shinmachi's ascension, and this intensified the conflict.
   Shinmachi, after assuming the position, launched restructuring of the company by taking such measures as the reduction of international flight numbers and 10% wage cuts. But he could not succeed in the effort, faced by opposition from some of the labor unions of the company. The aftermath of the merger with Japan Air System also prevented his effort from succeeding.
   In the case of ANA, on the other hand, a progress was made steadily in putting the financial condition on a sound footing and restructuring work. For the period between April and December 2005, it achieved a revenue increase of 5 billion yen in its consolidated financial report as a result of a "flow of passengers" from JAL to ANA. For the term ending in March 2006, JAL is expected to incur a big red figure of 47 billion yen as a result in part of a revenue decrease of some 32 billion yen caused by fuel prices increases.
   What are the causes for JAL to fail in the restructuring efforts and go down into the red? An airline journalist point has noted three of them:

Factional Strife Depressed Morale of Employees

   Firstly, the rivalry between factions weakened the morale of employees. Employees belonging to the faction that holds the leadership feel safe as long as their leader is in power. But nobody can predict what might happen next. Moreover, personnel changes tend to take place more frequently under this condition, keeping the employees from concentrating on their work.
   Secondly, there are as many as nine labor unions within the company. Some of them not only rebel against wage cuts but also apply pressure on the president to step down. The members of these unions have the feeling of sitting on the unmovable rock and have little sense of impending crisis. The company is partially to blame to make some of the unions so powerful. It created company-run unions in an attempt to weaken other labor unions.
   Thirdly, it is the merger with Japan Air System. Progress is not being made smoothly in the integration of the structures and manuals of the two firms. The employees of old Japan Air System are now treated badly, and this naturally makes them feel discontented. It is said the former directors and executives of Japan Air System are behind the current moves pressuring Shinmachi to stem down.
   The journalist says it is not conceivable that JAL today can rebuild its management structure even if the president changed. It has to make a radical change starting with its corporate culture by, for example, employing a foreign business person as its president, as Nissan and Sony did, the journalist said. JAL "should not be wasting time in internal strife," he said.

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