JAL to finally join OneWorld from Today, 1st April 2007

Today, Japan Airlines officially becomes a member of the OneWorld alliance. Perhaps you remember the joy and expectation that you felt back on Oct 25, 2005 when JAL announced this for the first time (official release). Or if you haven’t been in Japan for two years, perhaps you remember feeling that joy on Feb 8, 2006 (official release) or even June 4, 2006 (official release) when JAL proceeded to again announce exactly the same thing. Well it seems as though JAL has finally got its act together and can’t delay the move any longer. (Yeah) Finally, we gaijin who come from the US, UK, Australia and Hong Kong (to name a few) can show our home country mileage cards with pride (and without frustration) every time we pay exorbitant prices to ride on JAL around the Japan countryside. I don’t know about you but I was sure getting sick of fighting with the グラホ (Guraho, “Ground hostess”) every time I went to Haneda about why she couldn’t accept my card and that just because JAL had announced it three times already, why would that actually mean that they were going to do it!??? Then again, if you’re half savvy you’re probably about to tell me that you stopped using JAL altogether after the spate of accidents that were all over the press last year. (If you are new to Japan or missed the news, then I recommend you have a read of Japundit’s very thorough history of accidents last year here.) While I do feel sorry for JAL being such a feast for the media during 2006 (*) you start to raise questions when you see signs of such disorganization on almost every front – maintenance, decision making, pilots, public relations, you name it. It is in stark contrast to the heart warming story we discovered last year by researching the up and coming female CEO of Air Transse.

(*) apparently the journalists decided last year to team up against JAL and make as much noise as they possibly good about every single mishap to “commemorate” the 20th anniversary of the horrific Osutakayama crash.

You only have to open up JAL’s homepage to see how JAL has lost a grand total of almost 100 billion yen during the last four years. JAL has had three CEOs in the last year and each one of them has announced aggressive restructuring plans at the start of their term, only to see their targets disappear in smoke months later. The source of these problems began to surface early last year when Itoyama Eitaro (糸山栄太郎 , Japan’s most infamous corporate raider) started threatening the then CEO (Toshiyuki Shinmachi, 新町敏行) to quit on his homepage (first of many posts to be found here). Surely enough, Shinmachi was replaced within three months and now it is the former CFO, Nishimatsu (西松遥), that is tackling the huge task of turning around Japan’s near-bankrupt national carrier. But the dethroning had nothing to do with Itoyama’s vocal complaints. Shinmachi was actually the victim of a board-room coup which ended up seeing a vast majority of the old board resigning as a result.

So what really happened?

Since JAL was founded over fifty years ago, the company has had more politics than the LDP. Each time the president has changed, it has been a mixture of a trade-off and a battle between the major factions: Sales (営業) 、 HR (労務)、 Planning (企画). Especially when you consider that Japan is not a country where you hear of strikes and other industrial action, the strength of JAL’s labour unions (労働組合, rodokumiai) are amazing and perhaps the strongest ingredient in the recipe of management at JAL. Sure, human relations are also issues in Western Airlines. Everyone knows that the main reason that United Airlines has gone bankrupt three times is because it fails to win enough sacrifices from its labour unions. What is most amazing at JAL is the number of unions. At last count, JAL had 11 different labour unions. While some of these were inherited from the JAS merger, even the old JAL has historically had numerous, very powerful labour unions(*). Becoming the President of JAL was like coxing a United Colours of Benetton rowboat with eleven (sometimes thirteen) rowers who each spoke different languages.

(*) Unfortunately it is only available in Japanese, but the book “沈まぬ太陽” by “山崎豊子” offers a fascinating look into the life of a senior labour union member in the 80s at JAL and the pain he is put through. Highly recommended. (link to it on amazon.co.jp here) Let me know in the comments section below if you want me to review it in more detail.

Nishimatsu’s appointment was special in that he was the first ever CEO to come from a financial background (read no faction). While it was the four young directors who threatened to quit if Shinmachi didn’t step down that received a lot of the credit at the time of the coup, it turns out that there is another power figure hidden behind the galley curtain. JAL’s king maker is man called Yasunaga Sumio (安永純雄) and he is the real reason behind the tying of the noose around Shinmachi’s neck.

Unlike the usual elite Salaryman at JAL that have graduated from Tokyo or Kyoto University, Yasunaga was the odd one out. He graduated from Kyoto Gaidai (京都外国語大学) and wasn’t even employed by the honsha (本社, head office) in Japan. In fact, his most important promotion was to run a small ryotei (料亭, Japanese eatery) in Ginza during the bubbly 80s. A promotion you say? Well, yes. Just like the rest of the world, Japan is all about connections and that is what Ginza was all about. While he was head of the Ryotei he had the chance to mingle with the most important up and coming politicians of the day. Although JAL is technically a public company, it is still seen by many as a division of the Japanese government and even today large decisions have to be vetted by Nagatacho.

While Kaneko Isao (兼子勲) is often referred to as one of JALs most charismatic former CEOs he had one major weakness – that was Nagatacho. Without either a talent or an interest for entertaining the mandarins, he had to find someone from within the organization to deal with the bureaucrats downtown. Yasunaga was that man. In part due to his powerful backing from the HR faction and in part due to Yasunaga’s political skill at massaging the MLIT (国土交通省, kokudokotsusho) Kanekos rule was sweet and successful (he lead the company from ’98- ’05). Although Yasunaga was never officially named to the board of directors, he was an adviser to Kaneko – and the board – throughout Kaneko’s rule.

Alas, Kaneko made a poor choice for his successor. Shinmachi had no real base in any of the strong factions (he was from the weak cargo faction) and so had an unstable power base from day one. Even after Kaneko stepped down, for better or for worse, Rasputin was still there and Shinmachi realised that by manipulating the strength of Yasunaga, perhaps he could extend his reign of the JAL empire for longer than most people expected. (Indeed Kaneko was rumored to have only chosen Shinmachi because he knew it would guarantee a quick changeover to his favorite kouhai in his faction). Unfortunately this backfired, and the factions (all sensing that their turn at the throne might be delayed further) restarted their war. Worse still, they started washing their laundry outside of the firm. This culminated the board room coup last year.

This is where the story takes a real “only in Japan” type twist. Following the coup, three of the four zohangumi (造反組, rebels) actually resigned from their posts! How weird is that? They won the fight, Shinmachi resigned – they even got the scalp of several key Kaneko aids – yet the protaganists were forced to “take responsiblity” for their controversial actions as well. It’s almost resemblant the blood balance sheet that you see in the Yakuza wars.

The unanticipated by-product of this was Nishimatsu. After the shakeup, Nishimatsu was Switzerland. He was the only person left on the board who hadn’t taken sides in the feud. Nobody at JAL wanted a finance man to be running the company, they just had no other choices. I’m not even sure that he wanted the job. It is no easy feat running JAL at the best of times, but without the support of a faction, it will be extremely difficult for Nishimatsu to force real changes at any level. Unfortunately, the signaling from the continually delayed OneWorld announcement is hinting that maybe JAL’s problems have yet to be solved. Good luck Nishimatsu, but I’d be watching your back if I was you.