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Bankruptcy of the Japan Airline

Consultancy Management

Peter Meehan

Live consulting Firm

Japan Airlines 2009 Consultant Report

Specialized in Consulting And External audit

Date: 02/06/2016

Student No: 2159403

Name: Bilal Ahmed

MBA-Full Time

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Contents

1.0 Introduction: .................................................................................................... 6 2.0 Project Aims .................................................................................................... 7 3.0 Japan Airline Ltd Background ....................................................................... 10

3.1 External Factors: ..................................................................................................... 11

3.2 Figure 3.4: Total Airlines net profit 2003-2009.................................................. 12

4.0 Problem Definition ......................................................................................... 13 4.1 Figure 4.1: The Five Whys and Fishbone Diagram ............................................... 15

4.3. Figure 4.2 5 Whys root cause analysis of the Problem Definition .................... 15 5 WHYs Worksheet – Japan Airline ............................................................................. 16

4.4 Explanation: ........................................................................................................ 16

5.0 Relevant Literature Review: .......................................................................... 17 5.1 Impact of Leverage: ................................................................................................ 17 5.2 Phases of Organizational Distress:.......................................................................... 17

5.3 Turnaround Management: ....................................................................................... 19 5.4 Organizational Restructuring .................................................................................. 20 5.6 Structural Implication on other elements of organization....................................... 22

5.7 Human Resource Management: .............................................................................. 23 5.8 Leadership Styles .................................................................................................... 24

5.9 Behavioral Leadership: ........................................................................................... 24 5.10 Portfolio Restructuring.......................................................................................... 25 5.11 Financial Restructuring ......................................................................................... 25

5.12 Change Management ............................................................................................ 25

5.13 Transformational Change: .................................................................................... 26 5.13.1 Managing Change: ............................................................................................. 26

6.Potential shortlisted models ............................................................................. 27 7.Research Methodologies: ................................................................................ 28

7.2 Secondary research ................................................................................................. 28 7.3 Primary Research: ................................................................................................... 29

8.Findings/Results: ............................................................................................. 30 Questionnaire ................................................................................................................ 30

9. Recommendation: ........................................................................................... 34 10. Conclusion .................................................................................................... 38 References ......................................................................................................... 40

Appendix A: .............................................................................................................. 43 Appendix C: .............................................................................................................. 45

Appendix D ............................................................................................................... 46 Appendix E ............................................................................................................... 47 Appendix .F............................................................................................................... 48 Appendix G ............................................................................................................... 49

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Report Abbreviation:

CM Consultancy Management

JAL Japan Airline

PID Project initiation document

PD project definition

HBR Harvard Business Review

CSR Critical success factors

KPI Key performance indicators

D/E Debt/Equity Ratio

RBV Resource Based View

IATA International Air Transport Association

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Japan Airlines

Analysis of JAL current Health & Evaluation of Options to Avoid Bankruptcy

Consultant Report

22 September 2009

1.0 Introduction:

Over the past decade the term crisis and crisis management has become

increasingly popular topic for interest for business professionals and

management academics alike.According to the institue of crisis

mangement(2013)business crisis have been on a steady upward trend since

2009.The central idea behind this particular Consultancy report is that it is being

framed at the request of JAL.This report is backed by PID which briefly

incorporates the terms and conditions and disclaimer of this project.Japan state-

backed institution such as development bank and Enterprise turnaround Initiative

Corporation (ETIC) sponsoring the research and compilation of this documents.

Project comprise financial and non-financial benefits in terms of employees

morale, improved credit rating along with sustainable competitive edge, however

these benefits are difficult to quantify but underpinning the master objective to

turn the fortune of persistent loss making organization. This report include

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findings, reasoned judgments, recommendation and conclusion with the

exploitation of academic research,journals,business magazines,articles,peer

reviews, working papers. Extensive primary and secondary research has also

been undertaken which is exclusively focus to diagnose the root cause of

problem and to eliminate them. In addition to this other research platform such as

print, electronic and social media, internet, government and economic publication

also has been exploited. Although the costing involving the consultancy not

always detailed within a report body, the client has specifically requested this

information.

The report is part of organizational strategy to create value and enhance the

potential of revenue in overall organization framework. This framework is to

develop business reconstruction strategies intended to strengthen the position of

creditors, employees and other stakeholders as a result of reorganization.

Rachael Thompson contend that stakeholder management is critical to the

success of every project in every organization I have ever worked with.by

engaging the right people in the right way in your project, you can make the big

difference to its success. And to your career. One way to satisfy stake holder

concerns and promote transparency is to involve project affected stakeholders in

monitoring of project.participational monitoring tend to strengthen relationship

between the project and its stakeholders.

2.0 Project Aims

The aims of this project is to add value in to the client business in order to revive

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and sustain its profitability. As the organization undergoing transformation in fast

pace environment, it is necessary to examine the word add value” it is clear that

what end up being valuable for client and its system is not always obvious or

what is expected by client.However,by applying the concept of interpreting

communities, we show that client and consultant may have problem in

understanding each other language (carter et al,2004) the variety of way

consultant can add value is useful in meeting the wide range of needs emerging

in the client world, “for consultant when defining value added it is necessary to

determine which dimension to include and whose perspectives to use”. David w

Jamison.as the reorganization being supervised by government institution and

has involved renowned financial institututions,objectives was predefine and is

obvious to cut cost without affecting the earning capacity of airline in three year

time as a condition of financial aid. Investment in consulting project yield positive

financial and organizational return to companies(prakash&samwick,2003) .Well

defined Objectives help to determine the aims given below;

1. Ascertain the root cause of problem by carrying out profound research

using formalized tools such as 5 why, cause and effect Analysis and in-

depth research. Which help to breakdown the problem in smaller pieces.

Stratification paves the way for further primary and secondary research

and help to design the recommendations.

2. Provide recommendations to JAL plc. Based on identified problems. Put

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forward measures required to eliminate the causes and overcome

problems,ie; increase revenue/cut cost and to remain competitive in airline

industry, recommendation would be reinforce by propose methods, new

business processes/procedures, Provide Assistance in implementation of

potential frameworks essentially the operational and communication

elements of crisis, models and processes. Recommendation rigorously

considers corporate strategy; undertake research on competitive position,

industry specific analysis, operational management, Resource allocation

and human resource aspects of organization.

3. Facilitate JAL management in gaining knowledge of methods and to

understand relevant models to prepare effectively manager crisis explore

strategies and tactics by using different theoretical lenses and practising

decision making techniques outside of an actual crisis.the deployment of

models in distress situation to overcome such problems in future. Any

process can be built on and format copied for future implementation.

To achieve desired aim we need to eliminate the problem of knowledge

transfer, creation and translation, translation of different interpretation is

simultaneously also as a mechanism of power(foucaut,1972:clegg1989,2001)

we will providing assistance to both manager and employees to their attempt

to improve operations.it is also necessary to conduct research in order to

collect and analyze meaningful data. Research consist of external and

internal research, internal research encompasses both primary and

secondary research. Internal research mainly takes the form of interviews

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with key stakeholders.Questionnares and hand written notes will also be

utilized as part of primary research. This will synthesize with brain storming

session and meetings. A literature review will be conducted to analyze the

research papers, journals and academic books to identify best fit framework

and the contemporary models for particular issue and their deployment. The

review will examine models, academic writings and strategies identified within

the narrow problem definition field. The best fit solution could be based on

research based view(RBD).

3.0 Japan Airline Ltd Background

Japanese aviation comprise the world third largest domestic market about 5.5%

of global traffic and 11% of global industry revenue. An oxford economics study

revealed that aviation has a significant footprint in Japanese economy.

Supporting 07% of GDP and 0.7% of Japanese workforce. JAL is second largest

airline of Japan.Its headquarter is based in Tokyo. Establish with initial capital

outlay of 2bn in year1951.initially its operation was limited to domestic routes,

later on JAL expanded it boundaries in foreign routes granted a license as a sole

international scheduler in Japan and operating successfully in 35 countries

worldwide. During its life cycle it was listed in Japan stock exchange under first

and second section of stock exchange listing.it was fully privatize in 1987. In

2009 JAL suffer operating Losses, which raise concern about its future prospect,

JAL profitability has decline by 147% since 2005. (See Appendix C highlighting

drop in sales in percentage terms.)See Figure below for JAL Comparative

income statement. (See figure 3 for comparative income statement for 2005 to

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2009)

Source (jal.com/30.march 2009)

FIGURE 3: The JAL company comparative Income statement for 2005 to 2009.

Source (JAL.com)

3.1 External Factors:

A first possible distinction is by the origin of distress.it could be external and

internal. Major external influence such as cyclical change in demand, state

regulations, economic environment, war or one off catastrophic event could have

serious implication on business,

The impact global financial crisis which was borne due to the failure of the major

financial institutions caused the drastic impacts on the world economy and slow

down worldwide transportation demand(IATA.2010)Aviation is the pertinent

industry it also got affected by the crisis. Due to which this aviation sector which

is one the fastest growing industry has to face negative growth rate and suffer

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huge losses. Some aviation companies was able to bear such huge losses but

there is a big number of those aviation companies who do not have capacity to

bear such huge losses so they go bankrupt as a consequences of global financial

crisis(ukessays.com 2009)

Japan Airline as announce by its CEO will work on Premium strategy medium

term revival plan by implementing a variety of measure such as cost cutting

measures, no–holds barred to routes restructuring, use fuel efficient aircrafts, the

current distress in mainly caused by ongoing economic crisis and aggravated by

volatility in fuel prices and sharp decline in demand for air service. Japanese

airline industry is inconsistent in terms of growth producing both high and low

demand.IATA latest forecast expect industry revenue to fall by $35b between

2008 and 2009.However in the long term demand in air travel is forecast to grow

considerably (50%)until 2050.(Euromonitor,2008b) (See figure 3.4 international

aviation industry growth for 2003-2009)

3.2 Figure 3.4: Total Airlines net profit 2003-2009

Source (Euro monitor 2008)

-10

-5

0

5

10

15

20

2003 2005 2007 2009

Total Airline net profit

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4.0 Problem Definition

Albert Einstein said” If I were given the one hour to save the planet, I would

spend 59 minutes defining the problem and one minute resolving it” Problem

definition in the area of strategic decision in more often governed by internal

decision. Through discursive moves consultant challenge client definition of the

problem and translate it by appealing on their knowledge and experience of a

similar situation.(James.p.neelankavil,2005) define that most common mistakes

in PD by the client is that they define problem too broadly or too narrowly. Bjorn

Anderson asserts “that client often familiar with the symptom of problem rather

than cause, and these symptoms help the Firm to detect the recurrence of

problem. These symptomatic uses as a yardstick to monitor whether problem has

eliminated or still recurs. beneath every problem lie a cause, thus when trying to

solve the problem consider this approach. Identify the cause or causes of the

problem, find way to eliminate that causes and prevent them from

recurring.”(Bjorn Anderson and tom Fagerhaug :2006)

There is also a growing concern that consultant are pushing standardized

solution rather than listening to the issue and being guided accordingly

(Ashford;1998.xvi)”mistakes can be overcome by systematic approach by

approaching PD in two stages. In the first stage problem is define in broadest

term, and the various components of the problem are identified. In the second

phase the components of the problem are prioritized from the most critical to the

least critical.” (James.p.neelankavil,2005)

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To counter the potential issue consultant put emphasis on interpretative and multi

layered character of consulting work according to (Finchman and Clark 2002)

interpretation is about whether knowledge is required (whether the client has a

problem), what kind of problem the client has, how to apply and create

knowledge with this particular client and how to make sure that changes

occurred” the consultant has utilized a formalized structure approach within an

informal interview process. This would allow identifying the diverse and complex

components of problem and help to drill down the problem further. There is a

model to assist a consultant to identify both clients’ needs and project aims. The

hierarchy of consultant underline specific consultant goals (See Appendix E) This

approach will utilize number of structured tools To determine the root cause with

JAL consultant will utilize cause and effect diagrammed known as the ishikawa

fishbone diagrammed (clary and wandersee,2010) and Five why develop by

sakichi toyoda(shoe maker et al 2013).(see figure 4.1 for the graphic illustration

of the five why’s and fishbone diagramme).

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4.1 Figure 4.1: The Five Whys and Fishbone Diagram

Source (Skool, 2013) (Clary and Wandersee, 2010)

The five whys is very useful tool to identify the actual root cause beneath the

problem, as the root cause is the evil at the bottom that sets in motion the entire

cause and effect chain causing the problem(Anderson Bjorn:2006).(see figure

4.1 for five why root cause analysis).however root cause analysis has some

inherent limitation, most obvious one is the assumption underlying in the model in

that each presenting symptom has only one sufficient cause. Which is not always

the case, another downside the model does not distinguish between casual

factors and root cause. open minded approach with no preconceived ideas to the

end result is ideal for mutual benefit.(Stewart Anderson)

4.3. Figure 4.2 5 Whys root cause analysis of the Problem Definition.

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5 WHYs Worksheet – Japan Airline

Define the Problem: (Declining Revenue and Negative Net current

assets) in 2008-09

Why is it happening? (Identify each as a concern, influence or control.)

2. Inefficient management of resources by Financial,

operational and human resource dept. lack of strategic

depth and consensus in decision making process.

Why is

That?

3.No visionary and vibrant leadership, organizational

structure is rigid and mechanistic.

Why is

That?

4.4 Explanation:

By Applying Root cause analysis together with other research methods such as

interviews and questionnaires, it is possible to find out the problem. This CM tool

is very effective and simple non-statistical tool which widely used to determine

the major cause and the origin of problem. Encompasses the findings with

research it can quickly build on potential recommendation.

1. Incurring too much fixed cost in relation too revenue

Why is

That?

4.Influence of senior government officials in organization

decision making.

5.Common practice in japan,known as”Amakudari”

Why is

That?

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5.0 Relevant Literature Review:

A business failure can be cause by both internal and external factors, According

to(dominic elliot et al;2006) that the crisis incidents or business interruptions are

systematic in nature, comprising of both social and technical elements.”

companies generally tend to focus on profitability due to its reflection on financial

statement as a performance indicator, however JAL liquidity is very essential

element to pay day to day expenses and other obligation, since bankruptcy mean

that a firm fail to honor all its promised payment to other firms.(Bailey

:2003)”Define traits of smart entrepreneur is one who balance the desire to grow

against the desire not to go bankrupt “

5.1 Impact of Leverage:

Borrowing to finance investment is frequently cited as a contributor to financial

crisis. when a financial institution invest its own money at the worst it can lose its

own money but it borrow in order to invest more, it can potentially earn more but

can also lose more than all it has. Therefore leverage magnifies the potential

return from investment, but also creates a risk of bankruptcy. it may spread

financial troubles from one firm to another (suresh goel,2009).Airline industry use

leasing as a main source of finance to buy aircraft hence cost structure highly

consist of fixed cost in terms of leasing interest etc which make it more

vulnerable to fluctuations in seasonal demand.

5.2 Phases of Organizational Distress:

James shein describe phases of organizational distress; if the organizational

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cannot fix it problem in one phase it eventually go in to another phase with less

time to repair the damage.

Blind Phase: company typically begin in blinded phase, revenue may have

stagnated or even fallen off slightly. Management perceives fall in revenue

is seasonal or cyclical variation. Organization and the related parties

denied realities for long time allowing firm to collapse.

Inaction phase: Organization is likely to remain profitable, but its problem

has grown to the point which they cannot be denied.thier inertial

resistance to change inspiring irrational hope that thing will turnaround on

their own.

Faulty Action: at this point management is spurred to action but due to

inaccurate information or incompetent leaders, these proposed remedies

only make the situation worse.

Crisis: Sustain faulty action drive the Firm in to crisis phase, at this point

company has probably tripped covenants with its lenders and its bleeding

cash. supplier insist on cash in demand and auditor raise genuine concern

about the ability of the firm to continue as a going concern, companies

often retain an investment bank to consider strategic option or even direct

their outside council to draft document for the bankruptcy filing.

These phases present a value framework, because study has shown that earlier

Organization recognize itself in one of these phase and launches a turnaround

efforts, the greater the likelihood of its succes,as companies slide down the

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organization distress curve, they find themselves in a rapidly tightening noose.

There are three approaches to help client;

Expert model

The doctor patient model

Process consultation model.

Edgar shein develop third process consultation model define that the consultant

immediately involve with the client as a partner. The consultant and client

collaboratively diagnose the problem, design and implement intervention and

evaluate the success of intervention.” (Shien 1999).but one major drawback

could be As Legge mention “if client is familiar and clearly define problem for

which they require a solution it will be more difficult for consultant to enforce their

own interpretation and solution”(legge,2002)

5.3 Turnaround Management:

(David Vance) suggested that corporate restructuring should be conducted in two

phases.

To get company to profitability.

To get company to superior performance"

Leadership is an important management skills .it can be define as inter-personal

influence directed toward the achievement of goals.(peter senge:1990)Define

that leader in a learning organization are strategic visionaries these leaders are

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able to get other peoples to understand complexity clarify vision and improved

shared mental models”. Timely action by management, leader define that what

the firms is and what it will become, it give direction to every part of the firm form

corporate finance to the loading dock.( john brown) in an interview to HBR in

1997 define “ A business has to have a clear purpose, if the purpose is not

crystal clear people will not understand what kind of knowledge is critical and

what they have to learn in order to improve performance” in absence of such

purpose and clear goal organizational efficiency significantly decline.Henry

mintzberz;define managers “as a craftsman and strategy is their clay, like the

potter they sit between a past of corporate capabilities and future of market

opprotunities”leadership and the management the development of human

resource affect all aspect of business strategy.

5.4 Organizational Restructuring

Contingency theory is the management study of (burn and stalker:2015).they

identified that an organic structure is better suited to an entity that need to be

responsive to change in its products, environment and markets, on the other

hand a mechanistic structure is suited to entity in stable environment Where

change is steady or gradual. Structure highly depend on internal and external

circumstances and network of relation ships (johnson,scholes and Whittington)

argue that “poor performance might be the result of inappropriate configuration

for the situation or inconsistency between structure, process and relationship “It

is more difficult with mechanistic structure to adapt in the fast changing

environment. it is characterized by bureaucratic type of structure formalize roles

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and responsibilities,standardisation of work and centralize decision making,

emphasize on managers authority rather then the expertise of employees. On the

other hand matrix structure is capable to adapt to environmental disruption.

According to Davis and Lawrence,1977 define a matrix structure that any

organization that employ a multiple command system that include not only a

multiple command structure but also related support mechanism and an

organizational culture”

Companies which are surrounded by billions of task mostly rely on matrix

structure. A mechanistic structure is fixed and unbending.(See figure below

presenting the organizational chart of JAL structure)

Figure 5 organizational chart of JAL plc.2009

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SOURCE (Jal.com 2009)

5.6 Interconnected Elements of organization

(Mckinsey 7’s) was first published in 1981,This model facilitate the successful

implementation of change. According to the framework there are seven factors

which contribute to the effectiveness of organization called 7’S.These factors

composed of hard & soft factors. A change in one element has a knock on effect

on other factors. Model is used to asses the changes in other elements as a

result in amendment in one or more factors.

Soft Factors: Hard Factors:

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Strategy

Structure

Systems

Staff

skills

style

Shared Values

5.7 Human Resource Management:

According to nakia maledo”in mechanistic structure employees are dissatisfied

with their work due to the pressure of formalization. Lack of participation and

involvement by employees in decision making reduce the level of engagement.

According to (Robinson et al .2004) “an engage employee can be differentiated

from unengaged employee by the following traits. He Willing to go extra miles,

believe in and identifies with an organization, want to work to make things better,

understand the business context and bigger piture,respect and help colleagues”.

most of the emergent strategies originated from employees ,the resource based

view of strategy has become highly influential,entitis should make full use of

employees (johnson,scholes and whittington)suggest that” if employer can only

see strategies in deliberate plnannig,they not only risk that such strategies can

go unrealised,but they also waste the learning that can emerge from

employees”empoylee voice can be enhance through various mechanism such as

representative consultation, upward problem solving. Suggestion schemes and

project teams.

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5.8 Leadership Styles

In mechanistic structure communication flow vertical up and down in the from of

instructions and orders employees have no power to participate in matters

(Kondalkar;2009)Baurucracy is highly rigid and has a tendency to promote

politics and power blocks. it decrease the efficiency of firm in highly changing and

volatile environment.(Macleod and clarke:2009) emphasized that leader which

ensure a strong transparent and explicit organizational culture which gives

employees a line of sight between their jobs and the vision and aims of the

organization.

5.9 Behavioral Leadership:

(Huczynski and buchanan:2007) define that organizational behavior use the

study of structure ,functioning and performance of organization, and the behavior

of groups and individual within them. This theory of leadership is based on style

rather than traits or quality of leader, in most situations it is the style of leader that

matters. mechanistic structure emphasize to autocratic leadership which retain

most of the power in its hand, on the other hand participative leader try to

encourage participation by subordinates in major decisions. As a result employee

will be more motivated and will perform better in their work. Motivated individuals

are much more likely to work harder to achieve clear work objectives.

(Burns:1977) made a distinction between transactional and transformational

leader” transactional leader approach their follower with an eye to trading and

transformational leader seek to appeal the better nature of their followers,

change them for the better.

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5.10 Portfolio Restructuring

Portfolio restructuring is the acquisition or disposal of assets in form of

divestment, demergers, spin off or management buyout. This include the sale of

underperforming assets. portfolio restructuring can be seen as a part of strategy

to increase the performance of the organization.(Bowman and Singh 1993)define

that it encompasses the broad range of transactions such as selling business

lines, changing the capital structure through the rearranging of debt and equity

capital or altering the internal organization of the firm.

5.11 Financial Restructuring

Financial reconstruction scheme is the scheme whereby Firm organise its capital

structure, including leverage buyouts, leverage capitalisation and equity for debt

swaps. A reconstruction scheme might be agree when organization is in danger

of being put in to liquidation, owing debts that it cannot repay or organization may

be willing to undergo some financial restructuring to better position itself for future

success. The empirical evidence shows that market response positively to

financial restructuring.

5.12 Change Management

Change happens continually in organization, strategic development inevitability

result in some change, planned change is also known as a deliberate and

intended change, As JAL incorporation struggling to move out from current

situation to a new situation.JAL change is one off event but rather it is continually

developing process which has wider effect on every aspect of organization from

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human resource, to organizational structure,.

5.13 Transformational Change:

A major reorganization or restructuring required a through and deep seated

change of the firm system and its procedures. This kind of change has big impact

on entity and on people working on it.Japan Airline company change is

necessary because the current organization and system is no longer appropriate

and change is needed. This encompass reorganization of structure (structural

change), downsize in work force and rationalisation of operation to increase

effectiveness(Elizabeth Ross kanter:2004) suggested that there are cultural

reasons why the organization might be more change adept than others.

According to (kanter) ,change adept organization have three key attributes; the

imagination to innovate, professionalism to perform, openness to collaborate.

5.13.1 Managing Change:

(Moss Kanter:2000) suggested that manager in change adept entity should have

the following skills they are environmentally awrare,are prepared to challenge the

prevailing organizational wisdom, have ability to communicate the

vision,builduing coalition, learning to preserve, making everyone a hero. The

successful strategy will not realise unless it is embed in business.

As part of meeting with senior managers it was determined that strategy would

be more successful if integrated in to business process and facilitated by

consultant. A contemporary dogman define Consulting is more than giving advice

as suggested by hierarchy of purposes of consultant (Arthur n turner SEP 1982

27

HBR)

providing information to client

solving a client problem

making a diagnosis which may necessitate redefinition of problem

making recommendation based on diagnosis

assisting with implementation of recommended solutions

Facilitating client learning teaching client how to resolve similar problem in

future, permanently improving organizational performance.

Having determined the problem definition JAL utilise some core models,

Figure;

6.Potential shortlisted models

item Priority Consultant Client

1 High Kurt lewin Leadership model

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2 Low Deming total quality management

3 High Force Field Analysis strategy implementation

4 High The Gemini 4S strategy implementation

5 High The 7S Approach Transformational change

6 Medium Balogun and hope Hailey change management

7 High The cultural Web change management

8 High Psychological contract Employees model

7.Research Methodologies:

The research area has been broken down in to two part, primary and secondary

reseach.it was argued by (Leech,2004) that mix research method paradigm can

also help to bridge the schism between qualitative and quantitative research.

(Onwuebuzie and leech:2004)

7.2 Secondary research

Substantial Focus toward to gather crude date and collect information about

industry as a whole, competitors and their performance through financial

statement, clientele and government regulation in industry, service standards,

employee’s laws. This will entail the trend analysis in particular industry, financial

health of similar size competitors, general economic indicators/trends such as

inflation,interest,money supply etc. and perhaps more importantly to analyze the

fluctuation in oil prices. Exploiting academic literature with the aim designed

financial strategy encompassing the areas of Finance,marketing,governance and

human resource. Academic research will be used to recommend business

29

models such as lewin force field model and the Gemini 4s model to apply change

successfully in JAL.

7.3 Primary Research:

incorporate the qualitative and quantitative reseach,JAL middle management

and senior management will be interviewed to get in depth information probably

commercially sensitive ,the scope of qualitative research will extend to

encompass government officials who were involved in decision making in JAL

board, informal conservational interviews will be exploit to identify potential data.

the drill down and 5why model become the formal part of primary research.

Primary research uses quantitative method to gauge the level of employees

motivation for example: how far are you satisfied with management incentive

provided by organization an.at an external level to the organization Detail

customer satisfaction survey would be conducted.complementors,lenders

dependence on JAL airline will be measure throu7gh formalized yardstick.

Primary research will be organization wide, include employees through

probability method and key government officials.

7.4 Research Limitations:

Both the primary and secondary data have their own advantages and limitations,

for primary data time factor play a vital role, the entire process of data collection

has to go through the different stages such questionnaire design, pilot study,

data collection, coding/editing and checking. This is time consuming and due to

the size of this project focus will be carried out where it will perceived most likely

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to be able to carry out qualitative and quantitative research. There is a possibility

of bias in the information collected through primary studies. Internal primary

research is limited by the stakeholders engage. The organization is expanding

and as it does the amount of individual knowledge may get diluted or skewed.

For example one person’s interpretation of being busy may vary significantly from

another’s.(Isaac and micheal,1971)

8.Findings/Results:

Questionnaire

To measure the motivation level of employees and to asses the likelihood

resistance level as a result of change.There were total 100 participants in this

project which conducted throughout the organization in almost every department

to gauge the level of engagement with work and to identify the likely resistance

due to the change being imposed. Answer given by participants by completing

the questionnare.The pie chart below represent the answer given by participants.

Result of questionnaires used within focused group;

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Employees in many organization willing accept to

change

Agree

Neutral

Disagree

Employees here are willing to take new task

as needed

Agree

Neutral

Disagree

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Employees in organization take initiatives to Help colleagues when

needed?

Agree

Neutral

Disagree

Employee Proactively identify future challenges

and opportunities

Agree

Neutral

Disagree

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These responses show a low level of engagement with work, and strict

resistance to change. Following set of recommendation being proposed to

In my organization Employees adapt quickly

to different situation

Agree

Neutral

Disagree

I am inspired to meet my goals at work?

Agree

Neutral

Disagree

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successfully implement turn around strategies.

9. Recommendation:

By having determined the problem definition with in JAL, Following

recommendation has been proposed to the management of JAL group which

closely meet the aims of report.

It is highly recommended that JAL change its organizational structure

towards organic structure which is more flexible and embedded with quick

decision making, Must be led by transformational leader will increase the

flow of information in both directions, increase the level of employees

participation and discretion help them to focus on task rather than

underlying formalize standard operating procedures of doing task .it will

help to increase employees productivity and creativity , decentralization

and proper delegation of authority will enhance the potential of middle

mangers they will feel more motivated and responsible by enhancing the

number of subordinates in their command(Flat structure) and through

delegation of authority. in nut shell business have the ability to cope with

unpredictable and dynamic environment.JAL can utilize matrix structure at

this stage Increase employees participation in decision making, implement

learning and development programmes,increase employees motivation

through formal techniques such as job enrichment, and incentive planning.

In the research phase it was found that there is unrest in employees which

is borne by the grapevine rumors of significant redundancy in

35

organization, as part of restructuring plan we have to cut 13000 jobs,

possible reaction can turn in to protest and negative publicity and we also

going to cut pension of retired employees as a part plan. The effect on

employees must be recognized, this aspect of change is very important

and may make change unsuccesfull.effective communication with

everyone affected with change will reinforce the change process, there

should be two way communication. Management should listen as well

explain why change is necessary for everyone. Employees should given

training and education of critical skills which underpinning change

process.Moreover,fromalized Implementation of structured rewards and

performance appraisal system for all employees is highly recommended.

Also there is a need to revise JAL(KPI) and (CSR) which must be

reflective of new management philosophy and vision. .

It is found during meeting with the operational executive that JAL is

operating many unprofitable routes which engage lot of resources in terms

of employees ,Assets, misallocation cost and management time.

Management immediately need to divest unprofitable routes and should

suspend operation in low growth unfeasible markets. Careful

consideration for portfolio restructuring is required in order to release

funds for other strategic areas this will help Firm to fulfill lenders

obligation, a shut down in facilities lead to downsize in work force which

need to be manage prudently contingency redundancy programmed and

cost should planned in advance, it will help to focus on major profitable

36

routes and efficient control over activities, increase operational

effectiveness and will realize value for business. as a part of portfolio

restructuring acquisition of new fuel efficient aircraft should be acquire

rather than Boeing 737,boieng B777x and 767-300ER more efficient in

terms of cost and size.(see Figure 6 for innovative Low cost Boeing

Aircrafts)Fuel cost become a major concern for aviation industries,

volatility in fuel price and steady rise put significant impact on companies

to forecast and budget planning, also rising cost usurp substantial

revenue.Innovaive Boeings will help to tackle to control major cost. See

Appendix .E highlights of fuel contribution to operating cost.

Figure .6 Depicts benefits of innovative technology in aviation industry.

It has been found that adherence to best practice is being neglected which

ensure a transparent and smooth operation in modern organizations. It

can be evident by transport ministry recent injunction for JAL management

to review airline safety procedures, as it was found neglected safety rules

37

and took off aircraft in Tokyo,japan without permission of air traffic

controlers.adherence to formalized rules and voluntary code of conduct

help to avoid most of the mishaps. Implement of corporate governance

practices will help to overcome many problems in the area of control and

supervision. strict adherence to the requirement of governance codes will

lead to establish independent non-executive committees consist of

external CEO’S which primarily responsible to oversee executives

directors and their ability to running the company, There also be a

remuneration committee which supervise the remuneration of employees

and take key decisions in this area, audit committee to ensure objective

and independent audit has been carried out possibly through liaison with

internal/external audit teams and nomination committees who rigorously

oversee the mechanism of hiring and selection of key employees.

During the interview session with Government officials it was reveal that,

they plan to substantially support JAL restructuring through bailout

package. Two state-owned institution are working on behalf of Japan

government .JAL total Liabilities amount to 25$ billion,(ETIC) agreed to

inject 17.7$ billion and state owned development bank contribute to this

package by 2.2$ billions. Remaining 5.5$ b can be settle through utilizing

debt/equity swap model, in which all creditors and lender would have

share in restructure firm. if they agree to give-up their debt. As debt is

increasing at alarming rate, D/E ratio is 4.6% which consider high in airline

industry. Debt for equity swap would counter this risky level and offer a

38

better position to lenders after financial reconstruction without harming

alliances and strategic relationship.

Achieving strategic objectives required successful implementation.JAL

rigid and complex nature of culture need to be change by transformational

approach, existing rituals and way of doing thing would be highly affected

and existing employees probably resist the cahnge,which required careful

monitoring at all stage.

It is believed that Japan Airline will implement above mentioned

recommendation, they can make their operation successful.

10. Conclusion:

The report has dealt with number of outlined issues. Examine the external

influences and impact of these influences in conjunction with detailed internal

examination of organization. Evaluation of strategic options, pros and cons

and feasibility of each option determined. The literature review determine a

number of models and frameworks on Leadership ,teambuilduing,human

resource and other connected issues. The recommendation is set out in five

basic areas with the overriding recommendation is the implementation of

flexible organizational structure and visionary leadership.it is the basic cause

of all symptoms emerge in terms of insolvency and low employees morale. It

is concluded that JAL group bankruptcy was highly contributed by internal

issues, despite being privatized in 1987, it seems wholly state controlled

entity involvement of government officials and conflict of interest which highly

39

contribute to its failure. as it is clear that current business environment is very

volatile which demand flamboyant leader who can translating vision in to

realistic business strategies consider peoples skills leading employees and

help them to achieve objective which in turn enhance the potential and

effectiveness of otrganization.mechanistic structure inherent with limited

communication and limited range of perspectives in decision making affect

the operational efficiency most, inefficient use of assets, less motivated work

force together with leadership gap,absense or proper formulation of policy

statements, procedural guide and governance code of conduct ,all have

contributed to deterioration in performance of JAL.

40

41

References

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GJ.piercy.N.and nicolaund.2011 .Marketing strategy and competitive

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International business. 1st ed. .London Sydney

Finkelstien. 2003 .why smart executives fail and what you can learn fromtheir mistakes [Online].

Available: https://books.google.ie/books?id=iv1_WsFlGGcC&pg Accessed[25 may 2016]

James B Shein. 2009. Strategic guide to corporate turnaround and

renewal[Online].Availablehttps://books.google.ie/books?id=gtFcropCebsC&printsec

Accessed[30 May 216]

Bjorn Anderson et al.2006. 2nd ed.Root cause

analysis[Online].Avaialalbehttps://books.google.ie/books?id=N7bCQty-yH0C&printsec.

Accessed[20 May 2016]

VG .kondalkar.2009 .organization Effectiveness and change management[Online].Available:

https://books.google.ie/books?id=xOmwrhQSN1oC&pg=PT82&dq. Accessed[30 May 2016]

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Accessed[25 May 2016]

http://www.japantimes.co.jp

https://hbr.org

http://centreforaviation.com

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43

Appendix A:

Glossary of terms:

CM:Consultancy Mangement

JAL:Japan Airline

PID:Project initiation document

PD:project defination

HBR:Harvard Business Review

CSR:Critical succes factors

KPI:Key performance indicators

D/Debt/Equity Ratio

RBV:Resource Based View

IATA:Internarional Air Transport Association

44

Live Consulting Firm The JAL Consultancy Costing

A JAL carried out consultancy work Ref No 02/09/2016

Item Description Days Value

1 £10,000 Initial Meeting with the client to setout requirements in detail, after meeting PID would be presented to underline the Aims And objectives and to analye and

address the concern for All stakeholders.

1

2 Carryout research both primary and secondary.This will include

Financialstatements,industry averages,government regulations,stock market statistics,and would also utilise financial news and forecast.

30 £75,000

3 Meeting with client to ensure project is on track as plan on outset, measure result, analyse variance and investigate KPI, Present report progression to

stakeholders. 1 £75,000

4 Formal Meeting with supply side stakeholders, Such as finance providers,

banks and government officials to discuss the result and communicate future requirments.

1 £60,000

5

Monitor and assist in formation of committes which recommended by corpote governance code of best practies.Assit with technical and personal availability.monitor audit and nomination process of next quarter.

20 £60,000

6 Stringent finacial control and following review monitor the movement in key

variables and KPI'S. 7 £50,000

45

Appendix C:

The JAL Enterprise sales for 2008 and 2009 and consultant forecast for 2010:

Consolidated Financial Highlights

Year Ended Mar 31

Projected

For the year 2009 2008 2007 2006 2010

Operating Revenues 1951198 2230416 2301915 2199385 5000000

Operating Expense 2002043 2140403 2278997 2226220 3000000

operating income -50884 90013 22917 -26834 2000000

Ebitda 67159 206593 140478 98292 854000

Net Income -63194 16921 -16267 -47243 700000

Depreciation and amortization 118043 116580 117561 125126 200000

At Year End

Total Assets 1750679 2122784 2091233 2161240 1500000

Total Net Assets 196771 471070 331873 194746 150000

All figures are presented in equivalent YEN currency

¶

Total Values plus days

All Prices are exclusive of VAT 60 330000£

46

Appendix D.

SWOT analysis used as a part of project.

This evaluation generally surrounded by swot analysis of JAL plc. Model which

sufficiently covered all aspect of macro environment which shape the overall

market help to evaluate internal strength and surrounding environments

identification of best fit and configuration of resources according to external

stimuli.

Strengths:

JAL operational network is vast cover 220 destinations worldwide and hence

has a strong global presence.

Carried over 50 millions customers annually.

Major Japanese institution facilitating JAL revival and providing enormous

financial and management support for revival.

High calibre employees world wide.

Weakness:

Too rigid structure hampering its ability to respond to changes

After bankruptcy 1/3 of workforce would be redundant hence reduce

competitiveness of JAL.

Brand image/goodwill shall impaired as a result of reconstruction.

Opportunities:

Growing airline traffic in Asia pacific and globally.

Increase service to more international destination via code sharing agreement.

Threats:

Rising fuel and labour cost.

Recent tsunami in japan reduce the number of air travellers going in japan

drastically.

Volcanic eruption also reduce air traffic in Europe.

47

Appendix E

A hierarchy of consultancy purpose

Improve Organisational Effectiveness

Facilitate ClientLearning

Build Consensus andCommitment

Assist Implementation

ProvideRecommendations

Conduct Diagnosis that May

Redefined Problem

Provide Solution toGiven Problem

Provide Requested Information

A Hierarchy of Consultancy Purpose

1

2

3

4

5

6

7

8

48

Appendix .F

Fuel Impact on operating cost Historical & Forecast Figures

% of operating cost Total Fuel Cost

2003 14% $44 billion

2004 17% $65 billion

2005 22% $91 billion

2006 26% $116 billion

2007 27% $133 billion

2008 33% $187 billion

2009 26% $123 billion

F2010 25% $139 billion

F2011 28% $176 billion

F2012 32% $210 billion

F2013 31% $211 billion

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Appendix G

Crude Oil and Jet Fuel Price Trends