Japan Airlines

Yoshiharu Ueki eyes China growth for JAL

Japan Airlines 'hero' Yoshiharu Ueki takes on the challenge of navigating the market-relisted carrier through the tough times that lie ahead

PUBLISHED : Monday, 01 October, 2012, 12:00am
UPDATED : Monday, 01 October, 2012, 2:43am

As a commercial pilot, Yoshiharu Ueki had the challenge of safely navigating through sometimes tempestuous skies. As president of Japan Airlines, the nation's flag carrier, the challenges he faces now can be just as turbulent.

Japan Airlines (JAL), which sought bankruptcy protection in 2010, was relisted on the stock exchange in Tokyo last month despite the weak market environment.

The company, which had been bailed out by the government, raised US$8.5 billion in the world's second-biggest initial public offering this year. Only Facebook's share sale raised more, attracting US$16 billion in May.

On listing, JAL became one of the world's most valuable airlines, ahead of its domestic rival, All Nippon Airways, whose market capitalisation was about US$7 billion.

Japanese media praised Ueki, a veteran Boeing 747 pilot and the son of Chiezo Kataoka, one of greatest Japanese film actors of the 20th century, as a hero.

But the victory for Ueki and JAL was short-lived.

Last month, just seven months after Ueki was appointed company president, the outbreak of nationwide anti-Japanese protests in China saw storm clouds gather over the carrier's business outlook.

Thousands of JAL tickets for flights between Japan and China were cancelled and the airline's share price dropped below its initial public offering level.

But back in July during a business trip to Hong Kong, Ueki saw cause for optimism.

"As a pilot, we've had up-and-down years … as a company, I think we're in a very good place right now," he said.

"When I saw the company bankrupted, I felt my heart was broken, and later when I was invited by the board to lead the company, I felt I must take the job as this was like my destiny to save the company."

Ueki, who was famous in Japan as a child actor in his father's movies, joined the airline in 1975 and became one of its most experienced pilots.

He has a low-key management style and often keeps a book of traditional Japanese philosophy in his pocket so he can read and learn when he has a spare moment.

"I gave one of the books to the chairman of American Airlines. I hope he can also learn something from it about how to manage a company," Ueki said.

American Airlines is a business partner of JAL.

Ueki has ambitions to expand the airline's international business and to attract more passengers from China.

Part of the plan is to have more landing slots in Beijing and Shanghai, but this has proved difficult.

He played down suggestions that political reasons were behind JAL not receiving approval from Beijing, instead saying he believed it was simply because the two airports were too busy to handle more flights at the moment.

"Every six months when we meet we will renew and submit our application" for more landing slots in Beijing and Shanghai, Ueki said, referring to Beijing officials meeting executives from the aviation industry.

"I personally think Japan and China should be in a friendly relationship," he added.

Two months after he made these comments, anti-Japanese protests broke out across China over ownership of disputed islands.

Last week, JAL decided to nearly halve flights on routes to Beijing and Shanghai from October 10 to 27.

JAL is not alone in facing problems with the fast-changing political sentiment between the neighbours.

All Nippon Airways also reported that 18,800 seat reservations had been cancelled for flights between Japan and China from last month to next month.

Before the protests, JAL's business outlook looked bright. It reported a record profit of US$2.6 billion in the year to March, bouncing back from the impact of the earthquake, tsunami and the subsequent nuclear power plant crisis at Fukushima the year before.

The most impressive aspect was not the earnings alone but the 17 per cent operating margin, which analysts described as beyond the dreams of the world's major airlines.

By comparison, United Continental, the world's largest airline, posted an operating margin of 5.6 per cent in the year to December, while Cathay Pacific Airways' was 5.6 per cent and All Nippon's 6.9 per cent.

Analysts widely consider Ueki to be well qualified to help JAL navigate the turbulence ahead, including reviving the business in the wake of the earthquake.

Luckily he seems to relish challenges.

"One of the most challenging airports for me as a pilot was the old Kai Tak airport in Hong Kong," Ueki said.

"When I managed to land successfully, I felt very happy and accomplished. I think that's why I like being a pilot."