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JAL AND JAS MAKE PROGRESS TOWARDS NEW JAPAN AIRLINES GROUP
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15 July 2002

Japan Airlines and Japan Air Systems today announced further details of their integration plans, moving steadily toward establishment of the new Japan Airlines Group in October 2002. 

Details of the operations plan and sales policies, following establishment of the new Group that have been decided to date are described below. In addition, financial forecasts for the new JAL Group up to FY2003 are announced, taking preparatory measures for the merger into consideration.

From now it is the companies' intention to keep moving steadily toward realizing effects of integration in all areas at an early date, to strengthen the Group's management base and contribute to improved customer convenience.

(unedited)

1. Operations Plan

We will be taking measures in the area of sales, related mainly to reservations, and pursuing more efficient use of duplicated production resources. In addition to improved efficiency, we intend to work to benefit consumers by promoting competition, expanding our network and introducing new schedules.

(1) Domestic routes

Promoting competition

We will operate more flights out of Haneda on routes where ANA is dominant in terms of number of flights offered (Haneda-Okayama, Haneda-Ube/Yamaguchi) from October 2002. From April 2003, we will continue to promote competition, by inaugurating service on routes that ANA currently monopolizes and adding more flights on routes where it is dominant.

Network expansion

In addition to the increase in flights out of Haneda described above, from October 2002 we will expand our network, mainly of flights out of Nagoya.

Maximizing route operation efficiency

From October 2002 we will make more efficient use of production resources (equipment, maintenance, airports, etc.) currently duplicated with JAS, and improve scheduling, on our Haneda-Memanbetsu and Haneda-Tokachi/Obihiro routes. From April 2003 we will undertake a major overhaul of our route network, in order to further maximize usage of duplicated resources in order to concentrate these resources on specific routes.

Equipment freed through the process of maximizing efficiency will be used productively to reduce investment in replacement equipment and to promote competition and network expansion.

(2) International routes

Maximizing route operation efficiency

From October 2002, duplicated flights on the Hong Kong route will be streamlined to improve operational efficiency. (Currently JAL operates 4 daily flights on this route, JAS has one, so total five. After October this will be reduced to 4 daily). From April 2003, further efficiency will be sought. Equipment freed through this process will be used productively to reduce investment in replacement equipment and to promote domestic route competition and network expansion. 

2. Sales Policies

System integration will be realized by April 2004. We will provide integrated JAL Group products and services under the "JAL" brand name.

(1) Systems

System integration is planned by April 2004 including main reservations, ticketing and airport systems. Until that time, the current JAL and JAS systems will continue to be used.

(2) Reservations

Reservations for flights after April 2004 will be accepted at the same telephone numbers for domestic and international flights respectively. Until that time, reservations for JAL and JAS flights will be taken by their respective reservations centers.

Operators at both reservations centers will be trained in operation of both airlines' reservations terminals, allowing reservations for domestic flights after February 2003 (for flights after April 2003) made on both airlines at the same time (return flights, connecting flights, etc.) to be taken by either the JAL or the JAS reservations center.

For flights after October 2002, we are planning to make it possible for customers to check seat availability for domestic flights for both airlines on the JAL and JAS homepages.

(3) Mileage program

A joint mileage program will become available for domestic flights from October 2002, allowing sharing of domestic route mileage calculations and awards.

We plan to merge the JAL and JAS programs in April 2003. When this takes place, mileage accumulated through JAL Mileage Bank and JAS Mileage Service respectively will be honored under the integrated program, giving the new JAL Group's mileage program the largest network in Japan, and allowing mileage calculation and use of complimentary air tickets on domestic and international routes (except for Ryukyu Air Commuter-RAC).

(4) Fares 

Regular domestic route fares will be lowered by 10% from October 1, 2002 and a greatly expanded range of discount fares will be offered.

For a period of six months beginning October 1, 2002, new 'JJ repeater tickets' priced lower than existing repeater (Kaisuken) tickets will be offered as part of the JAL/JAS integration campaign.

Using the JAS domestic and JAL international route networks, we will study introducing new fares on international routes to improve passenger convenience, for example, by setting new discount fares for flights direct from regional airports or connecting fares to international flights.

(5) Schedule, etc.

From October 2002, an integrated JAL/JAS TIMETABLE will be produced in addition to current timetables. 

(6) Airports

Until airport systems are integrated, in principle airport check-in counters will be maintained separately by each airline, with integration to take place gradually where possible. From October 2002, joint JAL/JAS information counters will be gradually set up at major domestic airports.

From October 2002, shared usage of automated check-in machines will be gradually phased in at major domestic airports. Additionally, new automated check-in machines jointly developed by JAL and JAS will be phased in gradually. 

Beginning from October 2002, passengers with high total accumulated mileage will be offered use of both JAL and JAS airport lounges at domestic airports.

(7) Package tour products

For overseas package tours, products will be integrated into JALPAK-organized tours beginning with products for the first half of 2003. For domestic package tours, products under a new integrated brand will be marketed as soon as possible in FY2003.

Until then, for products for the second half of this year, overseas package tours organized by JALPAK and JAS NiceWing and domestic package tours organized by JAL Story and JAS NiceWing will be sold using JAL and JAS flights.

(8) Sales organization

To strengthen the Group's sales, the JAL and JAS sales organizations will be integrated from October 2002, forming the new company JAL Sales Inc.

Sales counter facilities in the main cities will gradually be cut back and/or merged during the current fiscal year, and will handle reservations and ticketing for both airlines.

Where wholesaling is concerned, beginning from April 2003, JALPAK will handle all international sales, whereas domestic sales handling will be merged, strengthened and streamlined as soon as possible during FY2003.

(9) Other services and campaigns to meet customers' needs will also be developed. (Details to be announced on each occasion)

(10) Cargo operations

Cargo operations, including airport handling system, cargo handling system, sales policies and so on, will be integrated as soon as possible to provide better customer service.

3.Financial Forecast up to FY2003

(1) We will endeavor to stimulate stronger demand for air passenger and cargo transport and at the same time will accelerate benefits of integrating operations in order to cushion as much as possible the effects of reduced earnings due to returning slots and lowering regular fares. 

(2) We will aim at generating an operating profit of over 88 billion yen for FY2003.To maximize capital efficiency, we forecast ROE of 10% at the end of FY2003 and we estimate the ratio of operating cash flow/consolidated interest-bearing debt of 10% or more. 

Outline of JAL Group Operations Plan to FY2003

I. FY2002 (from October)

1. Domestic routes

(1) Promoting competition and expanding the domestic route network
Equipment freed through the process of eliminating duplication of service on international routes will be used productively on domestic routes to promote competition and network expansion.

Promoting competition on Haneda routes: we will operate more flights on routes where ANA is dominant in terms of number of flights operated. Until June 2002, ANA was the only carrier flying the Okayama and Yamaguchi-Ube routes. JAL began service on these routes from July 1 but even so ANA continues to dominate these routes so we will promote competition by increasing frequency on these routes.

Promoting competition and network expansion on other routes: we will inaugurate a Nagoya-Kumamoto route and add more flights to the Nagoya-Fukuoka route.

(2) Improving route operation efficiency and new schedule

On the Haneda-Memanbetsu and Haneda-Tokachi/Obihiro routes, duplicated equipment and facilities will be concentrated on JAS to improve route operation efficiency and scheduling. There will be no change in overall frequency on these routes.

(3) Other

Response to return of slots at Haneda intended to promote competition
We will respond to return of slots by reducing frequency by one flight on each of the routes below from October 2002 (subject to review in accordance with demand trends after November 2002) Asahikawa, Sapporo, Hakodate, Komatsu, Kansai, Hiroshima, Kochi, Oita, Kumamoto.

After April 2003, when thorough revamping of our route network becomes possible, we will eliminate duplicated flights, mainly on trunk routes.

Response to review of provisional use of slots at Itami

We will respond to this by reducing frequency on the Itami-Matsuyama route by one flight.

2. International routes

On the Narita-Hong Kong route, we will reduce frequency of duplicated flights by one flight and operate using JAL aircraft. (Overall reduction from 5 daily to 4 daily flights).

II. FY2003

1. Promoting competition and expanding our route network

We will continue promoting competition and expanding our network on domestic routes by inaugurating flights on Haneda routes monopolized by ANA, and through other measures.

2. Improving route operation efficiency and scheduling

We will undertake a major overhaul of our domestic route network and further concentrate duplicated production resources on specific routes. At the same time, we will cut back on duplicated flights, mainly on trunk routes, and establish a new schedule.

On international routes we will also continue cutting back on duplicated flights to improve route operation efficiency. Equipment freed through the process of maximizing efficiency will be used productively to reduce investment in replacement equipment and to promote competition and network expansion on domestic routes.

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