Japan Airlines was established as the national flag carrier of Japan in 1953. The government was the largest shareholder and for over 30 years, JAL was the only Japanese domestic airline with the rights to fly international routes. In other words, as a government entity it had a monopoly on those prized international sectors.
Rather than employing professionals in the industry, the government tried to run the airline, creating bureaucratic inefficiencies that had little inclination to deliver the value customers are looking for.
Hope came in the late 1980s when the government sold it’s stock in the company and the airline was privatized. In 2002 Japan Airlines System was incorporated to manage JAL and by 2006 the airline’s daily operations had reached 192 international routes and 387 daily flights.
A new brand identity and aircraft livery themed around ‘the arc of the sun’ was created and it was hoped that ‘the identity would help JAL build a stronger global brand and position a JAL flight as a means to acclimatizing to Japanese culture, attempting to attract more international business people flying to Japan to choose JAL over other international carriers’.
In 2010, JAL is fighting off claims of imminent bankruptcy by multiple media organizations. According to etravelblackboardasia.com, JAL has experienced financial difficulties for quite some time and currently owes more than US$5.8 billion.
JAL shares plunged to a record low in Tokyo trading last week, however the airline is still positive that it will experience a turnaround with the support of the Japanese government. The site also quotes a JAL spokesperson as saying that reports that JAL was planning to cut all of its international routes to cut costs are 100% false.
Well, only time will tell but it is crystal clear that the airline is in big trouble and is surviving on bail outs from the ETIC (Enterprise Turnaround Initiative Corporation of Japan).
What lessons can other legacy carriers learn from this?
Using creativity to build a brand.
When Japan Airlines and Japan Air Systems merged, the idea was to provide the foundations for a more efficient organisation to compete both domestically and internationally. Nothing wrong so far.
Next came the development of the brand image. This was to clearly communicate the fact that the merger had created a new and improved organization. According to Landor, the JAL agency, “the JAL brandmark needed to express a new business philosophy and strategy and at the same time be flexible enough to apply at every touchpoint where travelers, airline employees, and travel advisors have exposure to the brand.”
Landor also says on it’s website, “The JAL mark reaches dynamically to the sky. It is derived from the motif of a rising sun, one of the best-known icons of Japan. The mark is drawn in a modern way and is reflected in the red sun on the tail of the aircraft. In 2002, the integrated holding company was established and the JAL mark was introduced. It is now visible in advertising, ticketing, airport environments, and the combined fleet of aircraft. Implementation of the design will be gradually executed through prioritized applications.”
Sounds good, but the problem is that consumers aren’t buying that stuff anymore. Positioning products belongs in a mass economy that no longers exists. There are too many airlines essentially positioning themselves in the same way. This is because positioning and the 4 ‘Ps’ are imprinted on the DNA of an entire generation of marketers. But the market conditions have changed and it is time to bury the concept otherwise we’ll see more companies in the same position as JAL.
JAL should have focussed it’s brand building efforts, not on reaching for the sky with a motive derived directly from the sun but on providing value to customers based on bespoke relationships with existing customers, access, relevant content to relevant segments, userbility, technology and more. Sure a slick identity is important but it will not build the brand on its own.
JAL was late joining an airline alliance which meant it couldn’t offer the interconnectivity of competitors. This has had a profound impact on the airline. ANA, JAL’s competitor joined Star Alliance in 1999, eight years before JAL joined ONEWORLD.
Although once the airline was privatised, it did reduce costs by cutting staff levels and employing cheaper foreign staff, it still operated at high unit costs which had a negative impact on operating effectiveness.
The right technology
It is critical to invest in technology that is user friendly. JAL’s flight planning software is awkward and confusing.
Like many airlines, JAL focussed on attracting customers to the high yield spots at the front of the plane. There is a general theory (I don’t know how true it is) that if you fill business class on a 747, the flight is paid for and the rest is gravy. This is a common strategy but in the recent economic meltdown it’s not a very effective one.
Despite no longer being a government company, JAL was slow to adapt to the economic situation and suffered as a result. It is imperative therefore that airlines become more nimble and whilst a strategic plan is important, it has to be versatile enough to adapt quickly to challenging market situations. At the same time, it has to be adaptable to take advantage of opportunities.
I doubt very much that the Japanese government will let JAL fail. But what about other Asian legacy carrier established by governments to fly the flag globally? Many of them are already sucking funds out of already empty coffers. Will they be alowed to fail?