Japan Airlines plans to transfer about 3,000 employees to subsidiary airlines and non-aviation business areas. The airline had more than 35,000 employees on its books at the end of March, with the reshuffle affecting less than 10% of the airline’s overall workforce. Japan Airlines says the move reflects a shift in focus within the airline and is about placing its employees where the highest growth and revenue opportunities are.
A change of direction at Japan Airlines
Japanese outlet Nikkei Asia broke the story this week. The outlet says that because Japan Airlines is focused on short- to medium-term tourism demand, rather than the traditional, more upscale corporate market, the 3,000 workers will shift from the “core” aviation business of Japan Airlines to non-aeronautical business units like the airport. shopping, e-commerce and insurance as well as low-cost airlines like Zipair Tokyo.
Japan Airlines wholly owns or has interests in several subsidiary airlines, including Zipair Tokyo, J-Air, Japan Air Commuter, Japan Transocean Air, Jetstar Japan, Hokkaido Air System and Ryukyu Air Commuter. Nikkei Asia suggests that 60% of diverted labor will go to non-aviation business units while the remaining 40% will go to various subsidiary airlines.
About 40% of transferred workers will head to low-cost airline subsidiaries like Zipair Japan (pictured). Photo: Zipair Japan
An eye on a larger share of the leisure and tourism market
The move will not happen overnight. Instead, Japan Airlines says it will take up to three years to complete the transfer of employees. The reasoning behind the decision is a mix of changes affecting many airlines and some forces unique to the Japanese market. Like many other airlines, the Japan Airlines Group has successfully diversified into non-aviation business activities, launching its extensive loyalty program into financial activities such as insurance and retail retail such as online shopping malls.
As many other airlines have discovered, the advantage of these types of companies is that they are not dependent on the number of flights flown. As such, they have proven to be good revenue hedges against events such as pandemics.
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There is also the belief at Japan Airlines, as with other airlines, that the Japanese domestic and international tourism and leisure markets will recover much faster than the corporate market. Sightseeing and leisure passengers are generally more price sensitive than business passengers and are more likely to travel on a low-cost carrier than a traditional full-service airline. This is where the Japan Airlines group sees its passenger growth in the short to medium term, so this is where it allocates resources.
Non-aviation related businesses, such as online shopping, have proven financially successful and relatively pandemic-resistant for the Japan Airlines Group. Picture: Japan Airlines
Japan Airlines maintains workforce agility
Prior to the pandemic, the Japan Airlines full-service brand generated approximately 70% of Japan Airlines Group’s overall annual revenue. But the company expects that number to drop to around 55% by the time the transfer of employees is complete.
Reassigning employees, rather than losing them through voluntary or involuntary layoffs/resignations, has been the practice of Japanese carriers throughout the pandemic. If reality defies predictions and Japan Airlines unexpectedly comes back to life next year, transferring those employees to the full-service carrier is a relatively straightforward process. It also avoids the labor shortages that cripple the airline industry elsewhere.
Japan Airlines expects its domestic flights to return to 90% of pre-pandemic capacity by the end of March 2023. However, international capacity will still be only 50% of pre-pandemic capacity by then. This is mainly because inbound travel restrictions in Japan for non-Japanese travelers continue to hamper Japan Airlines’ international operations.
Source: Nikkei Asia