Japan Air may cut headcount at unit by 2,140

Japan Airlines Corp., Asia’s largest carrier by sales, plans to eliminate 2,140 jobs at its main international unit to cut costs as the global recession damps demand for overseas travel.

Japan Airlines International Co. will cut 13 per cent of its staff by the end of March 2011, reducing the unit’s headcount to 14,100 from 16,240 at the end of last month, spokesman Stephen Pearlman said in an interview today. Some jobs will move to other parts of the company, while 1,640 will be dropped, he said.

The airline is cutting its workforce and retiring its older, less fuel efficient aircraft after losing money in two of the past three years. The carrier plans to cut labour costs by a further ¥10 billion ($109 million) after shedding ¥52 billion last fiscal through workforce reductions and by lowering bonus payments and retirement benefits.

“With the way the market is now, it’s more important than ever for Japan Air to cut costs,” said Masayuki Kubota, who oversees the equivalent of $1.7 billion in assets in Tokyo at Daiwa SB Investments Ltd. “It’s difficult for anyone to predict when these severe conditions will change.”

The decrease in headcount will also be achieved through attrition, Pearlman said. Workers will not be fired, he said.

The airline is also shifting flights to its JALways and JAL Express units to lower costs making some jobs unnecessary, Pearlman said. Worldwide air travel may fall this year, according to International Air Transport Association. The carrier fell 1 per cent to ¥208 at the end of trading on the Tokyo Stock Exchange today. It slid 17 per cent last year.

The airline had its biggest monthly drop in overseas passengers in five years in September flying 17.1 per cent fewer passengers overseas as the Japanese economy fell into recession.

Japanese wages declined 1.9 per cent in November, the most in four years, underscoring a record low in the country’s consumer sentiment.

Japan Air, better known as JAL, plans to cut 400 jobs this fiscal year to reduce its staff to 48,800 after axing 2,297 jobs last fiscal year. Pearlman declined to say how its overall headcount will be affected by reductions at the international unit or how much it will save the company.

JAL plans to increase the share of international flights flown by JAL Express and JALways to 38 per cent by the end of March 2011, compared with 25 per cent at the end of March 2008, it said in February. Some Chinese flights will be shifted from the international unit to JAL Express from next fiscal year, Pearlman said.

In November, the airline slashed its operating income forecast by 44 per cent to 28 billion yen for the year ending March 31, compared with a previous forecast of ¥50 billion, as it flies fewer passengers. JAL had a profit last fiscal year after two years of losses totaling ¥64 billion.