‘Extremely difficult to change JAL’s mind’

A confidential government report has described as “extremely difficult” the task of persuading Japan Airlines to reconsider its decision to pull out its flights from the CNMI this year. The report traced the difficulty to the negative publicity that JAL has been attracting in Japan due to safety issues and recent bad management decisions. A turnabout now could result in its initial decision to pull out from Saipan being seen as another “rash decision.”

“Given this broad media exposure, it will be extremely difficult to convince JAL to change its position on CNMI flights unless a ‘face-saving’ way for JAL to reverse its decision can be found, and as long as it can be engineered so that it does not appear that JAL has made ‘yet another mistake’ given the rash of major mistakes at JAL over the past five months,” said the report, which was prepared by the Marianas Visitors Authority prior to the June 1- 2 CNMI delegation visit to Japan.

MVA also noted in the same report that since the JAL board “has not ratified the plan to pull out of the CNMI…, the possibility remains that JAL can be convinced to delay or abandon its plan.”

In the 15-page report, MVA cited that the past few months had been problematic for JAL due to many citations from the Japanese government’s Ministry of Transportation.

Under the “JAL background” section of the report, MVA cited that on Jan. 22, a Sapporo JAL flight to Tokyo “taxied for takeoff without clearance” resulting in the ministry’s warning and extensive media coverage.

On March 11, a Seoul JAL flight to Tokyo “[entered] a runway without permission, forcing a near miss with another jet, which was forced to abort landing,” resulting in “severe MOT warning.”

On March 16, a Tokyo JAL to Saporro flight “[flew] without emergency escapes in working order.” The following day, the ministry reportedly ordered JAL to improve operations “with public warning—considered a severe rebuke.”

On May 8, a Sao Paolo JAL flight to Narita “[made] an emergency landing in Sapporo due to a sudden drop in cabin pressure.”

On May 22, a JAL flight from Jakarta “aborted landing because meal service was still in progress—with 70 meal trays still on seatback tables and meal carts in isles. This reportedly resulted in another warning and suspension of 10 crew members.

In the same report, MVA cited the following “reasons” by JAL for the looming CNMI pullout:

* Low seat yield, citing that it would terminate flights which carry a purely leisure passengers “since the profits on leisure passengers are relatively low.” Profits are usually made on business class seats and on cargo/freight.

* Low net pricing since package prices to the CNMI are generally priced so low, the potential margin for JAL “is too low for them to make a profit.”

* Crisis sensitivity in that when crises like 9/11 and SARS take place, tour prices to Saipan fall significantly.

* Higher operating costs, since aviation fuel prices have almost doubled in the last several years in that “for every $1 increase in prices, it costs JAL $50 million in losses for its international operations.”

* Selling off its old DC-10 and 747 aircraft, which are used on the CNMI routes as part of JAL’s restructuring.

JAL also said that it is also terminating not only Saipan, but also other major destinations like Guam and Honolulu.

In the report, MVA said it asked JAL if it could possibly reconsider the termination of its services to the CNMI if offered financial support by the CNMI.

“JAL’s response was that they would need many millions of dollars in financial incentives each year even to reconsider, given the overall yield,” said the MVA.

“MVA Japan does not believe that there are any economic arguments that can be made to convince JAL to reverse its decision,” it added.

Gov. Juan N. Babauta and MVA officials will lead a second visit to Japan this weekend to negotiate with JAL again. They earlier met with JAL executives during the first week of the month.

After the first trip, Babauta said that he remains hopeful that after the ongoing “massive restructuring” within JAL, the new organization would continue to provide services to the CNMI.

“Not all hopes are lost with respect to JAL service to Saipan,” he had said.

JAL is reportedly expected to make a formal announcement about its plans in the Marianas next month.

Currently, JAL provides daily flights to Saipan from Narita and Kansai.