F LY I N T O T O M O R R O W

JA L REP ORT 2 0 1 8
Fiscal year ended March 2018

JAL REPORT 2018

The JAL Group will strive to achieve corporate rationale and follow it
as a universal business purpose and fundamental goal by practicing
the JAL Philosophy.

J A L G R O U P C O R P O R AT E P O L I C Y

JAL PHILOSOPHYThe JAL Group will:

PART 1 In Order to Lead a Wonderful LifeCHAPTERPursue the material and intellectual
growth of all our employees;

CHAPTERCHAPTER2 Have the Right Attitude
Base Criteria for Decision-Making on“Doing What Is Right as a Human Being”
Have a Beautiful Mind
Be Humble and Honest
Always Be Cheerful and Positive
A Small Good Is Like a Great Evil, While aGreat Good May Appear MercilessWrestle in the Center of the Ring
Grasp Matters Simply
Possess Opposing Extremes

customers; andIncrease corporate value and contribute
CHAPTERCHAPTERCHAPTER2 Have a Keen Sense of Profitability
Maximize Revenues and Minimize Expenses
Elevate Our Cost-Consciousness
Pursue Profit Fairly
Manage the Company Based on Accurate Figures

CHAPTER

3 Unite Our Hearts
Make the Best Baton Pass
Align Mental Vectors“Workfloor” Management
Follow the Merit System

3 Accumulate Tedious Efforts
with Passion
Work Earnestly
Accumulate Tedious Efforts
Work with Voluntary Attention
Fire Yourself Up
Strive for Perfection

1 Each of Us Makes JAL What It Is
Each of Us Makes JAL What It Is
Discuss Frankly
Lead by Example
Be the Center of the Vortex
Valuable Lives Are Entrusted to Us in Our WorkBe Thankful
Put Yourself in the Customer’s Position

The Result of Life and Work = Attitude x
Effort x Ability

Deliver unparalleled service to ourto the betterment of society.

1 The Formula for Success(The Formula for Life and Work)PART 2 To Become a Wonderful JAL

CHAPTER

4 Possess a Fighting Spirit
Maintain an Ardent Desire
Never Give Up Until We Succeed
Boast and Make It Come True
Possess True Courage

4 Ability Will Improve
Ability Will Improve
CHAPTER

5 Be Creative in Our Work
Today Should Be Better Than Yesterday,
Tomorrow Better Than Today
Conceive Optimistically, Plan Pessimistically,and Execute OptimisticallyThink Through to Visualize the Results
Decide and Act with Speed
Face Challenges with Courage
Aim High01

JAL REPORT 2018

JAL REPORT 2018

Message from the Chairman

CONTENTS
Message from the Chairman .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .

About the JAL Group

Looking Back at My Time as President

03

04

I served as President for approximately six years since February
2012. During this time, I worked together with every JAL Group
staff in pursuing our goal of becoming the world’s most preferredHistory .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .

04

and valued airline group. By arousing a sense of profitability

At a Glance . .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .

06

through the introduction and penetration of the Amoeba

Financial and Non-financial Highlights .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .

08

Management System and building a shared set of values through abetter understanding and practice of the JAL Philosophy, I believe

Management Strategies Designed to Create Value

12that we have succeeded in laying the foundation for a newcorporate awareness within the JAL Group.

Selecting My Successor &Expectations for the New President

Message from the President . .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .

12

Value Creation Process . .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .

18

Message from the CFO .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .

32

Medium Term Management Plan Rolling Plan 2018 .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .

36

During my six years in office, we have seen the company deliver

Human Resources Strategy. .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .

44

stable, positive financial performance. However, to realize further
growth as defined in our Medium Term Management Plan, I felt

A Business Base that Supports Value Creation

that now was the right time to pass the baton to the next

50

generation and appointed former General Manager of theEngineering & Maintenance Division Yuji Akasaka as the new

ESG Management .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .

50

President effective April 1, 2018. In the nomination process for the

Board of Directors and Officers.  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .

64

position of President, it was important to select the individual best

Directors .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .

64

able to implement the JAL Group Corporate Policy and    Audit & Supervisory Board Members.  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .

67

management strategies, and it was only after exhaustive discussions

External Directors . .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .

68

with the external directors that the Nominating Committee madeCorporate Governance . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

70Compliance / Risk Management . .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .

74

Business Outline

76International Passenger Operations .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .

76

Domestic Passenger Operations .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .

78

Cargo and Mail Business / Other Businesses .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .

81

Financial / Data Section

82

its decision. Mr. Akasaka has many years of experience in JAL
Group’s managing divisions for maintenance and safety and has
worked hard to improve the quality of maintenance and maintain
Editorial Policy
This JAL Report 2018 is an integrated report on JAL’s
financial performance and CSR activities, based on
various guidelines, to provide a deeper understanding of such matters as the JAL Group’s corporate
value and growth potential.

flight safety. He is a man with a strong sense of responsibility for

Period covered by the report
Primarily April 2017 to March 2018 (fiscal 2017)individual who, as JAL President, will be able to amply display the

Scope of the report
The JAL Group
Date of publication
August 2018
JAL corporate website
www.jal.com/en/
Offering a comprehensive insight into JAL’s businessapproach and activities, as well as investor and CSR
information.

safety and a passionate commitment to frontline operations.
Furthermore, he has gained top level management experience as
President of JAL Engineering Co., Ltd. I am confident that he is anleadership qualities he has developed during his career.

How I See My Role
Going forward, I will leave business operations and execution in the

Financial Data — Seven-Year Summary .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .

82

Evaluation and Analysis of Financial Conditions .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .

84

Consolidated Financial Statements .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .

96

Consolidated Subsidiaries. .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .

119

fulfil his duties. By enhancing the presence of the JAL GroupESG Data .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .

120

through external activities, I remain committed to making

International Route Map .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .

122

contributions to increasing corporate value. I would appreciate yourDomestic Route Map .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .

124

continued warm support.

Glossary . .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .

125

Data on Incidents . .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .

126

Stock Information / Corporate Information. .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .

127

02

hands of the President, while I, as Chairman, will ensure thatmeetings of the Board of Directors are run appropriately to increaseboard effectiveness and fully support the President as he works to

Yoshiharu Ueki
Representative Director, Chairman

03JAL REPORT 2018

JAL REPORT 2018

HISTORY

1951～2010

August: Establishment of Japan Airlines

Rebirth of JAL

2013

2014

2013

March: Completes corporate
reorganization proceedings
March: Launches Tohoku Support
Project
April: Commences operations witha new “Tsurumaru” logo
April: Commences a joint businesswith American Airlines

2016

2017

2017

2015

June: JAL SKY SUITE named Best BusinessClass Airline Seat worldwide at
Skytrax’s 2013 World Airline
AwardsJuly: Launches Narita = Helsinki route
October: First Japanese airline to receive
certification for operational
procedures that reduce
environmental impact from
ASPIRE (San Francisco route)

2011

2015

September: Opens the JAL Nadeshiko Lab
November: Inaugurates Tokyo = Dallas/
Forth Worth route

JAL Nadeshiko Lab

1970

2014

February: Lists‌on the first section of anumber of stock exchanges

April: Commences a joint business with Finnair
July: Begins offering inflight internet service
on domestic flights

JAL’s new "Tsurumaru" logo (foreground)

1985

2012

August: ‌JAL flight 123 accident

2010

January: F‌ iles for reorganization
proceedings under the Corporate Reorganization Act

April: Launches Kumamoto
and Oita Support
Project
October: Commences a joint
business with Iberia

Delivery of JAL’s first Boeing 787

For more details, please refer to JAL’s History online
http://www.jal.com/en/outline/history/(Billions of yen)

1,309.3
1,204.804

1,344.7

Financial / Data Section

Operating Revenue

January 19, 2010 Press Conference

Business Outline

April: Inaugurates the Boeing 787-8 on the
new Tokyo (Narita) = Boston route
July: Begins offering inflight internet
service on international flights
September: Relists on the first section of the Tokyo
Stock Exchange, two years and eightmonths after filing for bankruptcy
protection
October: Commences a joint business with British
Airways
December: Inaugurates Tokyo (Narita) = San Diego
route

2016

January: Awarded most punctual major
Asia-Pacific airline by FlightStats, Inc.
in the Mainline category and Network category (fifth consecutive year,
seven wins in total)
February: Selected as a Health & Productivity
Stock for the third consecutive year
March: Selected as a Nadeshiko Brand forthe third consecutive year
May: Selected as a Competitive IT Strategy
Company for the second consecutive
year
June: Begins offering complimentary inflightinternet service on domestic flights
June: Receives Skytrax award for the Best
Economy Class Airline Seat for thesecond time
September: Launches Narita = Melbourne route		Launches Narita = Kona route
December: CONTRAIL atmospheric observation
project receives the Environment
Minister’s Award for Global Warming
Prevention Activity in the International Contribution Category

A Business Base that Supports Value Creation

Head Office Building at the time of establishment

2012

Management Strategies Designed to Create Value

1951

2011

About the JAL Group

Since its establishment, the JAL Group has developed its business to meet the needs of the times.
Following bankruptcy in 2010, the Group was given the opportunity to restructure, and since thenhas been progressing steadily focused on the goals of delivering unparalleled service to customers
and contributing to the betterment of society.

1,383.2
1,336.6
1,288.9

1,238.805

JAL REPORT 2018

JAL REPORT 2018

AT A GLANCEInternational Passenger Operations

Domestic Passenger Operations

Other businesses

Other businesses

22.3%

International passengers

Cargo and mail33.5%

Fiscal 2017
revenue by
category

6.7%

37.5%

(Billions of yen)

+11.5

600

%

9,000

8,460

7,793

7,723

+3.9

(Billions of yen)

600

8,585

8,394

Passenger revenues

6,000

400

3,000

200

487.5

501.2

498.6

+4.5%

Revenue passengers carriedvs. fiscal 2016

(Thousand passengers)
35,000vs. fiscal 2016

487.4

462.9

%

518.2

31,21831,644

32,11432,570

2013

2014

2015

2016

34,03325,00015,000

200

5,000
0

0
2013

2014

2015

2016

2017

2014

2015

2016

2017

Revenue Passenger Kilometers* / Available Seat Kilometers*（%）(Million passenger km / Million seat km)

90.0

60,00085.0

vs. fiscal 2016

79.7

80.0

76.5
75.0

80.3

81.0

vs. fiscal 2016

vs. fiscal 2016

46,23540,000

+3.4

+2.4%

%

35,39047,696

36,10950,56340,30550,621

40,633

2014

2015

80.0

60,000

+2.5

75.0

(FY)

40,000

2014

2015

2016

2017

(FY)

■Revenue Passenger Kilometers ■Available Seat Kilometers

37,08436,30669.3
20,000vs. fiscal 2016

23,74523,99335,86924,34135,71435,42324,55025,643

64.0

60.0

2013

+0.8%
%

0
2013

2014

2015

2016

2017

(FY)

2013

2014

2015

2016

2017

(FY)

■Revenue Passenger Kilometers ■Available Seat Kilometers* ‌From fiscal year 2015, revenue passengers carried, load factor, revenue passenger kilometers and available seat kilometers include code-share tickets sold byother companies for JAL-operated flights.

06

07

Financial / Data Section

2017

(FY)

vs. fiscal 2016

vs. fiscal 2016

66.1

0
2016

+4.5

pt

71.8

65.0

2015

2017

Revenue Passenger Kilometers / Available Seat Kilometers

67.9

2014

(FY)

(Million passenger km / Million seat km)

51,83642,0132017

Load factor

20,000

75.7

2016

（%）

70.0

70.0
2013

2013

(FY)

Business Outline

Load factor*+0.8pt

0

0
2013

(FY)

A Business Base that Supports Value Creation

415.2

vs. fiscal 2016

(Thousand passengers)

vs. fiscal 2016

400

+2.3%

Revenue passengers carried*

448.7

Management Strategies Designed to Create Value

Domestic passengers

Passenger revenues

454.8

33.5%

Fiscal 2017
revenue by
category

6.7%

37.5%

437.5

International passengers

Cargo and mail

Domestic passengers

About the JAL Group

22.3%

JAL REPORT 2018

JAL REPORT 2018

FINANCIAL AND NON-FINANCI AL HIGHLIGHTS
Non-financial Data (As of March 31, 2018)

Financial Data (As of March 31, 2018)   
Operating profit margin

135.4

￥

%

■ Operating revenue (Billions of yen) ■ Operating profit (Billions of yen)
Operating profit margin (%)

billion■ Profit attributable to owners of parent (Billions of yen)
■ Total dividends (Billions of yen)

Equity ratio

Number of Group companies

57.2

%

Consolidated staff headcount134 33,038
companies■ Shareholders’ equity (Billions of yen)
Equity ratio (%)（⇩3 companies year over year） （⇧285 people year over year）

Traffic results
Domestic passengers

people34.03

mil ionpassengers（⇧1.46 million passengers year over year）

77 subsidiaries

About the JAL Group

12.6

Profit attributable to owners of parent(including 51 consolidated subsidiaries)

13.4%

13.2%

174.4

166.2

12.6%

51.5%

164.1

52.7%

53.4%

1,309.3

1,344.7 1,336.6

1,288.9

57.2%

776.4

Number of Group aircrafts

843.0

179.6

2013

2014

209.1

2015

38.7

33.2

MediumBoeing 787/767

174.5

170.3

2016

Large
Boeing 777

2017 (FY)

2013

2014

2015

2016

2017 (FY)

2013

2014

2015

2016

2017 (FY)

Small
Boeing 737

Regional jet

ROIC*Free cash flow*

10.1

101.3

￥

%

ROE
（%）

billion■ Cash flow from operating activities (Billions of yen)
■ Cash flow from investing activities (Billions of yen)*Free cash flow (Billions of yen)

22.1

Average fleet age%

Operational rate
Domestic and International routes total

98.6（⇩1.1 pt year over year）

years

26.5%

81.2

61.8

247.9

20.3%

231

12.7%

08

2014

253.1
△207.2

2016

22.1%

281.0

292.7

286.2

%

（⇩2.1 pt year over year）

Flight destinations△180.1(including code-share flights)

343

10.1%
9.7%

* Return on invested capital (ROIC) (%) =Net operating profit after tax (NOPAT)/
fixed assets (including future rental
expenses under operating leases)

85.1

305.4

13.3%

2017 (FY)（⇧1 aircraft year over year）△215.5△166.7

10.7%

2015

△199.2

321.1
281.5

261.1

18.1%

10.3%

2013

21.8%

22.2%

2013

Financial / Data Section

12.0%

14.0%
13.7%

12.8%

21.5%

24.0%

Domestic and International routes total

37.5
312.3

21.5%

13.0%

101.3

On-time arrival rate

TOTAL

■ EBITDA (Billions of yen)
EBITDA margin (%)

aircrafts

105.1

%

Business Outline

ROIC
（%）
ROA
（%）

EBITDA margin

40
71
65
55
9.3

A Business Base that Supports Value Creation

166.7

37.7

mil ionpassengers（⇧0.19 million passengers year over year）

690.2

29.0

8.58

(including 14 accounted for by the equity method)

972.0

135.4

43.5

International passengers

57 affiliates

1,060.3

149.0
1,383.2

56.2%

2014

Management Strategies Designed to Create Value

12.7%

15.7%

2015

2016

2017 (FY)* Excludes deposits and withdrawals
from fixed deposit account

2013

2014

2015

2016

2017 (FY)

cities（⇧5 year over year）

09

JAL REPORT 2018

JAL REPORT 2018

FINANCIAL AND NON-FINANCIAL HIGHLIGHTS

Aircraft accidents / Serious incidents

1.7

pt⇧ Domesticpt⇧0* ‌For details of aircraft accidents and serious incidents,
please refer to P.126: Data on Incidents.

2

47

51

cases

82.2

3,266

（⇩2.4 pt year over year）

Ministry of Health, Labour and Welfare

FlightStatswork with PrideBest Major Airline for On-time Performance in the
Asia-Pacific Region 2017
1st in Mainline category (sixth consecutive year,
eight wins in total)
1st in Network category (sixth consecutive year,
eight wins in total)

tonsTokyo Metropolitan Government

43,512435（⇧7 people year over year)

16.3

%

(±0 year over year)*1 Net Promoter Score; a popular method of measuring the customers’ intention to recommend*2 All international and domestic routes operated by the JAL Group
*3 Data for domestic offices, airports and maintenance facilities*4 Excludes overseas offices and airports

10

Global Traveler

thousand m3

Voted Best Trans-Pacific Airline 2017
Voted Best Airline to Japan 2017

Certified as a company that supports and promotes sport■ Business Reform
Procurement LeadersWorld Procurement Awards 2018
The GEP Procurement Team Award Winner■IT
Nikkei Business Publications
IT Japan Award 2018 Grand Prix（⇧9 thousand m year over year)
3

Ratio of paid holiday taken(Japan Airlines Co., Ltd.)

89.5

OAG

■Web Communications

Ranking of best on-time performance (OTP)
First in Mega Airlines category

Japan Institute of Design Promotion
Good Design Award■Diversity
German Design Council%（⇧4.0 pt year over year)

Ministry of Economy, Trade and Industry of Japan(METI) and the Tokyo Stock Exchange (TSE)
Nadeshiko Brand 2018 (fourth consecutive year)

Financial / Data Section853

peopleInternational Airlines category
First for customer satisfaction
First for loyalty (reuse intention rate)

Tokyo Metropolitan Government

Business Outline

9.14(Japan Airlines Co., Ltd. and 51 consolidated subsidiaries)■ ‌Workstyle Innovation, Health and Productivity
Management

Shiny telework prize, Minister’s Special Prize for Promoting Telework

11th MLIT Award for Promoting Barrier Free Measures toimprove the usability for the disabled customers

Water use*3

Number/ratio of women in management positions

S
E AWARDThe 2018 Travelers’ Choice™ awards for airlines
Best Airline in JapanTop 10 World`s Best Airline – 4th Place

Ministry of Land, Infrastructure, Transport andTourism (MLIT) of Japan

Heat use (crude oil equivalent) *3（⇩1,424kl year over year）

2017
VIC

Award for Promoting Staggered Commuting (Jisa Biz)

CO2 emissions (Scope 1 and 2) *4（⇧0.32 million tons year over year)

SE
R

Certified as a Gold Company in the Pride
Rating System 2017 (second consecutive year)

PERFORM
A

Ministry of Health, Labour and Welfare（⇩170 tons year over year）

Kiloliters

ME
TI

Trip Advisor

JCSI (Japanese Customer Satisfaction Index)
Surveymillion tons

“Kurumin” certification

A Business Base that Supports Value Creation

Industrial waste*3%

5-Star Airline - The World Airline Star Ratings
Best Economy Class Airline Seat 2018(second consecutive year, three wins in total)（⇩15 cases year over year）

CO2 emissions per revenue ton kilometer*2
vs. fiscal 2005

）

cases

（⇩1 case year over year）“Eruboshi” certification

Skytrax

Management Strategies Designed to Create Value

Irregular operations

Ministry of Health, Labour and WelfareCE

Irregularities due to human error■Services

N

Customer injuries（⇩6 cases year over year）

case（Aircraft accidents⇩1 case year over year,
serious incidents ⇧1 case year over year）

（

cases

1

seriouscases, incidents

About the JAL Group

2.0

International

Aircraftaccidents

Awards and Recognition

ON
-

NPS*1

German Design Award 2018
Excellent Communications Design
Winner, Web Category

Ministry of Economy, Trade and Industry ofJapan (METI)■Socially Responsible Investment (SRI) Index

New Diversity Management Selection 100 Selection

The MSCI Japan Empowering Women (WIN) Select
Index

11

JAL REPORT 2018

JAL REPORT 2018

MESSAGEFROM THE PRESIDENT
We will embrace challenge to become a truly global airline,

Introduction: Safety and Sense of Security

customers” and “contributes to the betterment of society” asstated in our Corporate Policy.
About the JAL Group

create new values one step ahead of competitors andWe thank you for your continued warm support of the JAL Group.

achieve sustainable growth through the joint efforts of every staff.

I have recently been appointed President of Japan Airlines in June

JAL Vision: JAL in 10 Years’ Time2018. Since joining JAL, I have spent a major part of my career in
In April 2017, the JAL Group established the JAL Vision, whicha deep conviction that flight safety is the basis of existence of theoutlines the company we aspire to be 10 years from now. In the

JAL Group and our social responsibility. Before my appointment as

Medium Term Management Plan- Rolling Plan 2018 announced in

President, I held dual positions as General Manager of the JAL

February 2018, we incorporated the concept of the Grand Design,

Engineering & Maintenance Division and President of JAL

which describes JAL in concrete and quantitative terms when theEngineering Co., Ltd. I was engaged in organizational operations

JAL Vision turns into reality.

and corporate management, and also aircraft maintenancetechnological development. Going forward, I will draw on my past

(1) Transform JAL into a truly global airline

experience to fulfill my duty of leading the Group along the rightAt present, 60% of users of JAL Group international flights arepath as JAL President.

Japanese passengers, indicating that the JAL Brand has yet to

The most important role as President is to rigorously pursue

penetrate overseas markets. Meanwhile, the number of inboundvisitors to Japan is growing rapidly, presenting an excellent

for growth, implement the Medium Term Management Plan andopportunity to inspire them to use JAL flights and discover the

get positive results. JAL’s strengths lie in the competencies of themerits of flying with JAL. To become an airline that is recognized

frontlines to deliver safe operations and the abilities of every staff

and supported internationally, we aim to serve 500 major cities

who supports daily flight safety. On the other hand, theworldwide and achieve 50% of revenue from overseas sales in ourmanagement team will create work environments, where eachinternational passenger business. To achieve these targets, we will

staff can achieve self-growth, demonstrate his or her ability as alaunch initiatives to nurture professionals who understand diverse

professional and work with a sense of responsibility, pride andcultures and flexibly adapt to diversity, which has gained

motivation. I will work together with them and do my best to

momentum worldwide.

A Business Base that Supports Value Creation

safety and sense of security, and further, on developing a road map

Management Strategies Designed to Create Value

the Maintenance and Corporate Safety divisions. Therefore, I havecreate a company which “delivers unparalleled service to ourBusiness Outline

Corporate Policy

To customers worldwide, From region to society

JAL Vision
Medium Term
Management Plan
Financial / Data Section

Yuji Akasaka

To continue to be “the world’s most preferred and valued airline” in order to realize the
JAL Group Corporate Policy, we will maintain flight safety and strive to achieve thefollowing goals through the joint efforts of every staff who supports the “Wings of JAL”:

Representative Director,
Executive President

12

JAL into
1 Transforma truly global airline×new values one
2 Create
step ahead of competitors＝3

Achieve sustainablegrowth13

JAL REPORT 2018

JAL REPORT 2018

MESSAGE FROM THE PRESIDENT(2) Create new values one step ahead of competitors

Meanwhile, the most important factor to attain growth in
the airline industry is to ensure flight safety. Therefore, we willtechnologies to their operations. Likewise, the airline industry will

expand our safety systems and safety culture, which we havequickly adopt cutting-edge technologies in its services and business

cultivated through long years of experience, and on thisprocesses to create new values that cater to customers and social

foundation, drive development in the airline industry.

needs and to deliver fresh, new experiences. For example, I think

About the JAL Group

Various industries are promoting the use and application of new

Furthermore, as the sustainable growth of a company isfounded on a sustainable society, we will contribute to resolving

stressed at the airport, on board or before and after their trip whensocial issues by incorporating initiatives to achieve the SDGs in ourusing aircraft. By incorporating new technologies and systems, I

business activities. For example, as the airline industry consumes

feel that we can resolve these problems and provide stress-freelarge amounts of fossil fuel, we have an obligation to responsibly

services to every customer. To achieve this, JAL has opened adeal with CO2 emissions and climate change. We will respond byfacility that tests and verifies new technologies and services calledswitching to highly fuel-efficient, operating eco-flights (fuel-saving

JAL Innovation Lab. Through these efforts, we aim to stimulate air

flight methods) and promoting the practical use of biojet fuel on a

travel demand and create new businesses.

full scale.

(3) Achieve sustainable growth

To meet the expectations of all our stakeholders, we will realize the

To continue to grow in the intensely competitive airline industry, it

JAL Vision. Further, we will increase corporate value throughis essential that we place emphasis on profitability and maintain ainitiatives to increase both the economic and social value of the JAL

sincere apologies for the damage or inconvenience caused and will

distribute management resources strategically to increase corporate

firm financial base. Therefore, we raised the notch for profitability,

Group.

make every effort to prevent a recurrence. We will scrutinize thisvalue. Regarding capital investment, we compiled a 440 billion yen

and all past incidents as well as incidents occurring at otherbudget for growth investments, which represents roughly two-

airlines, and make continuous efforts to achieve our safety targets.

thirds of 660 billion yen, or total investment for a three-year period

To respond systematically, the Flight Safety Research Department

from 2018. Following the revamp of our passenger service system

was established in April 2018. We will also share JAL Group’s

for the first time in 50 years in November 2017, we will steadily

know-how on safety with society.

make improvements in other areas, including route expansion, thetwo trillion yen, operating profit of 250 billion yen and market
capitalization of three trillion yen.
This would place us among the world’s top five airline

Medium Term Management PlanRolling Plan 2018: An Important Process toRealize the JAL Visioncompanies and I believe this level is attainable.

A Business Base that Supports Value Creation

targeting an operating margin of 10% or above, sales turnover ofManagement Strategies Designed to Create Valuethat there are still many people who feel inconvenienced or

introduction of highly fuel-efficient aircraft, service quality

The JAL Group Medium Term Management Plan for Fiscal Years
Customer satisfaction targets: Amid efforts to achieve the world’s

upgrades and new business launches.

realizing the JAL Vision. The year 2020 is the final year of the Plan

top level of customer satisfaction, JAL was awarded the highest

and represents a milestone when flight slots at Tokyo’s two airports

5-star rating for its service from the international airline rating

will be expanded, coinciding with the Olympic and Paralympic

company SKYTRAX on July 17, 2018. This certification represents

Games Tokyo 2020. To build momentum to realize the JAL Vision,

global recognition of JAL’s service rooted in Japanese-style

The full service carrier business has been and will continue to bewhich goes beyond the period of the Medium Term Management

hospitality. Going forward, we will continue to listen to global

our core business. Efforts to continuously refine our FSC business

Plan, we have established management targets in three areas;customer feedback and strive to provide the world’s finest quality

are essential for growth.

safety, customer satisfaction, and finance.

of service.

(1) ‌Full Service Carrier business: Refining our network,
products and services

Business Outline

2017 to 2020 is an important step in laying the groundwork for

As we see a major business opportunity in 2020 when flightslots at Tokyo’s two airports will be expanded, we will seize the

Financial targets: To maintain the current high level of profitability,

opportunity to improve our international routes. In particular, we

the targets of zero aircraft accidents and zero serious incidents.

our financial targets are an operating profit margin of 10% orwill improve routes linking Southeast Asia, a market with

Regrettably, however, a serious incident occurred on May 24,

above and Return on Invested Capital (ROIC) of 9% or above, bothsignificant growth potential, and North America.

2018, in which a 767 aircraft suffered engine damage afterof which we successively recorded in our financial statements fortake-off from Kumamoto Airport and engine parts fell to thethe fiscal year ended March 2018. On maintaining profitability andforge partnerships with overseas airlines and expand our global

ground over Mashiki Town in Kumamoto Prefecture. We offer ourbalancing a firm financial base and high capital efficiency, we will

network. By using our partners’ resources, we aim to improve

Further, in addition to JAL Group-operated flights, we will

15

Financial / Data Section

14

Safety targets: We are pursuing a wide range of initiatives to reach

JAL REPORT 2018

JAL REPORT 2018

MESSAGE FROM THE PRESIDENT

haul international routes, which we announced in May 2018.

humans to determine and decide how to combine human

vectors of all staff have been aligned and team skills and teamwork

otherwise take time to achieve through our own efforts.

Adopting a new business model, the new company will cater toresources and technology and what projects best suit the JAL

have improved significantly. I strongly feel that we have reacheddiversified needs and price-sensitive customers. It will be a newGroup. Likewise, to apply new technologies to new systems, thethe stage to fully demonstrate our strengths for the benefit ofA350 will be put into service on major routes from 2019. As thetype of airline, which balances low costs and high quality,

willpower and creativity of humans will be required. I see the key

society and become a company, where every staff feels fulfilled,

A350 is fitted with the latest, advanced cabin facilities, we hope toharnessing JAL’s know-how and strengths. We will differentiate theto success as human engagement in system operation. To create

valued and happy working for JAL and seek long-term employment

deliver a totally new passenger experience. We are also making

new LCC from our FSC business by further refining our FSC

sustainable innovations consecutively, it is essential that wewith sense of security.

efforts in domestic network operations and routes linking outlying

services. We are in the preparatory phase to launch operations indemarcate human domains and technological domains in aislands to spread inbound visitors across regions in Japan. During

the 2020 summer timetable with hopes of impressing customers

balanced manner and nurture human resources capable ofairline,” never forgetting the support we received from many

the period of the Medium Term Management Plan, we will renew

and have them say, “JAL’s LCC has high standards.”

adapting to new systems and creating innovations for the future.

people in society. We will do our utmost to live up to the
expectations of our stakeholders. I would appreciate yourIn domestic passenger operations, the cutting-edge Airbus

Further, amid the increase of foreign carrier entrants into the

The most important qualities of human resources in thethe latest model, equipped with outstanding levels of safety andJapanese market, we will actively invest in infrastructure to cater tofuture will be willpower and creativity. And to stimulate these

efficiency.

their needs, such as the maintenance business, airport handling

qualities it will evidently be increasingly important to develop

business and tourism-related business for inbound visitors.

individual abilities and diversity.

(2) ‌New businesses: Expanding business domains

By developing our FSC, LCC and incidental businesses, weof job types, and by its nature, is composed of team members with

develop and foster new businesses and growth businesses. While

government; make Japan a tourism-oriented nation and attract 40

diverse willpower. I feel that we can develop their willpower andambitious goals are vital, it is essential that the businesses serve themillion inbound visitors a year, and realize growth of the JAL Group

creativity by utilizing them in society as well as in each job type,needs of the relevant region and are profitable. To achieve this, wefrom fiscal year 2021 onward.

and by collaborating with other airlines, while applying theirknowledge and know-how.

JAL’s assets our know-how and customer base and where we can(3) Innovation:‌
Human resources × Technology

leverage our strengths.

The JAL Vision expresses the base for innovation generation as

human resources who can harness new technologies and reform“Human resources × Technology.” A wide range of technologicalcorporate awareness with speed.

low-cost carrier (LCC) business to operate on medium- to long-

A Business Base that Supports Value Creation

will contribute to achieving the targets of the Japanese

One of these new challenges is the establishment of a newcontinued support.

The JAL Group is a team of professionals working in a variety

To offer customers and regions with new values, we will actively

will expand businesses in areas where we can make optimal use of

We aspire to become “the world’s most preferred and valued

Management Strategies Designed to Create Valuesmall aircraft operating on outlying island routes, in particular, toAbout the JAL Group

connectivity and raise presence in overseas markets, which would

In addition to introducing new technologies, we will nurtureadvancements have been made in recent times, but it is the role of

In Closing: In Pursuit of New Challenges
We have been able to move to a new phase of embracing new

Business Outline

challenges for growth through the support of many parties since
our bankruptcy. I would like to make our challenges come true andcreate new values that will genuinely benefit society. This is alsopart of my responsibility as an engineer.
The JAL Group has a management philosophy known as the
JAL Philosophy. I repeatedly remind JAL Group staff that in addition
to practicing it, they must never forget the background that led toits formation. The JAL Philosophy was created based on reflections

Financial / Data Section

and lessons learned from our bankruptcy. With this in mind, eachstaff will remain committed to thinking about what he or she cando for the customer and for society.
In any era, JAL’s greatest asset is its human resources. Our
workplaces are wide-ranging and staffed by extremely outstanding
professionals. By introducing the JAL Philosophy, the mental

16

Yuji Akasaka
Representative Director,
Executive President

17JAL REPORT 2018

JAL REPORT 2018

VALUE CREATION PROCESSTo realize the JAL Group Corporate Policy and continue to be “the world’s most preferred andvalued airline,” we use the JAL Group’s capital for business development, bringing together theindividual strengths of the JAL team to offer new value to customers and society. With flight safety
as our very foundation, we support value creation through the JAL Philosophy andthe amoeba management system.

Value delivered to customers

ON-

S
E AWARDManagement Strategies Designed to Create Value(Diverse human resources)

2017
VIC

Cargo & Mail

ComfortOffers services adapted to thenature of the cargo in the air
freight and airmail transport
sectors

Reservations
and Sales

Human capital

SE
R

CE

On-time operations

Supports sense of
security and comfort in
the skies

Input

PERFORM
A

N

Airports

ME
TI

About the JAL Group

SafetyConvenience

SafetyCharterDevelops services tomeet customer needs(Operational and fleet management)

Natural capital

Allocationof resources

Maintenance(Natural resources)

JAL
Philosophy

Social capital(Route network)

Production capital(Aircraft, ground facilities)

Ensures aircraft safety
through proactive action
to prevent accidents

The Amoeba
Management
System

Coexist with
the Earth

Contribute to Nurture Future
Communities
Generation

Back offices
Plans service of unparalleledquality and supports
frontline staff to deliver it

Business Outline

Financial capital

Value delivered to society

Cabin
Attendants(Firm financial foundation)

FlightOperations

Delivers to passengers arefreshing and inspiring
flight experience

Financial / Data Section

Delivers to passengers
safe flights of highquality

Financial foundation
Corporate governance18

A Business Base that Supports Value Creation

Intellectual capital

19

JAL REPORT 2018

JAL REPORT 2018

SAFETY CHARTER

JAL PHILOSOPHY

Safety Advisory Group

About the JAL Philosophy

The JAL Group established the Safety Advisory Group in August

We adhere to the JAL Philosophy as the shared mindset, values and2005 to receive advice from an objective perspective following an

attitude of every person engaged in JAL products and services. As

The annual JAL Philosophy Presentation Meeting marks its eighth

Safety Charter

operational improvement order issued by the Ministry of Land,

JAL Group staff deepen their personal understanding of the JAL

session in 2018. It is greeted enthusiastically each year as staff share

Safety in flight operations is the very foundation and social
responsibility of the JAL Group. To carry out our mission ofassuring safety, the management will exert its strong resolve andstaff will bear an awareness of their individual roles andresponsibilities, and together we will combine our utmost
knowledge and capabilities to ensure the safety and reliable
operation of each and every flight.
In order to carry out our mission, we will;

Infrastructure, Transport and Tourism. The Safety Advisory Group is

Philosophy and employ it as a common basis for decision-making intheir thoughts on the JAL Philosophy and examples of how theya panel of five experts from outside the JAL Group who haveeveryday work, it becomes a uniting force enabling them tohave applied it. Participants come not only from Japan; each year

extensive knowledge and experience in areas such as humanadvance together toward the ambitious goal of “becoming thethere are also many applications from China, Southeast Asia andfactors, analysis of failures and imperfections, organizational

world’s most preferred and valued airline.”

other regions. The presentations by colleagues performing a wide• ‌Perform our duties in compliance with regulations, faithfully
following the basics.
• ‌Be sure to make checks, without relying on assumptions.
• ‌Relay information thoroughly, promptly and accurately, andensure transparency.
• ‌Respond to problems and issues quickly and precisely.
• ‌Maintain a constant awareness of issues, and make necessaryreforms without hesitation.

Follow-up meetings with management

Flight safety is the foundation and social responsibility of the
JAL Group. To fulfill this responsibility, JAL established the

Kunio Yanagida, a non-fiction writer.

opportunity for participants to reflect on how to practice the JAL

operatives in Japan and overseas who handle JAL products andPhilosophy in their duties. Starting from fiscal year 2016, the various

services. The JAL Group spans a wide range of job categories, but

departments and Group companies have begun planning and

The members of the Safety Advisory Group hold annual follow-up

all participants in these seminars sit at the same table, regardless of

implementing independent initiatives to ensure practical application

meetings with management. The progress of JAL Group’s safety

seniority, position or department, which helps generate anof the JAL Philosophy. In addition voluntary study meetings aremeasures is examined and the members offer advice where appropriate.

atmosphere of mutual understanding.

organized by staff on a continuous basis as part of activities toMembers also carry out observations and staff dialogs at adivisions, from Cockpit Crew and Cabin Attendants to Engineeringand other issues that need to be addressed.

& Maintenance, Airports and Sales. They hold seminars in the Tokyo

Prof. Yotaro
Hatamura

carry out safety awareness education to nurture staff equipped with

Prof. Shinichi
KamataProfessor, Kogakuin University, Professor Emeritus, Universityof Tokyo / Areas of expertise: nano-micro machining,production processing, medical support engineering, failurescience, study of danger, creative design theory
Professor Emeritus, National Defense Academy of Japan /Areas of expertise: organizational theory, businessadministration

Prof. Shigeru Haga Senior Technology Advisor, Research Institute for Social Safety,
Professor Emeritus, Rikkyo University / Areas of expertise:traffic psychology, industrial psychology, human engineering
Prof. Akinori
Komatsubara

Safety seminars

Safety Promotion Center

through diverse activities that promote the wider application of theteaching materials to the specific needs of the participants.

JAL Philosophy. This will enable every JAL Group staff to provide

Education seminars in the United States, Europe, Asia-Oceania andcustomers with unparalleled service, increase corporate value andChina are given using Japanese or English teaching materials.

contribute to the betterment of society.

In addition to JAL Philosophy Education, study meetings areheld once a month for directors and divisional general managers
and three times a year for other managerial staff.

Overview of the approach to instilling the JAL Philosophy
Executives /General Managers

JAL Philosophy
Education

Based on the so-called the “Three Actuals” (the actual site, item
Osutaka, the scene of the JAL flight 123 accident. This forms part of

Osutaka and 520 precious lives were lost. To reaffirm the importancea safety seminar in which participants directly confront the aircraftof flight safety and to instill the lessons learned from this accident inaccident and learn for themselves what they can do and what they

our minds, we established the Safety Promotion Center in April 2006.

need to do to maintain flight safety. In fiscal year 2017, a safety

For all JAL Group staff, this facility serves as the “safetyseminar for new recruits was completed by 1,902 participants, afoundation” from which they work to deliver safe and reliablesafety awareness seminar by 459 and a safety seminar for newly

operations in response to society’s needs, constantly mindful thatappointed managerial staff by 289.

precious lives are entrusted to us in our work.

Managers

General posts

Leader Workshops
JAL Philosophy Education
At a JAL Philosophy study meeting held in an overseas region

Independent activities in departments and Group companies
to promote practical application of the JAL Philosophy
Penetration
activities

JAL Philosophy Presentation Meeting / in-house newsletters /Intranet / Employee Awareness Surveys
Independent voluntary workshops by staff

Financial / Data Section

On August 12, 1985, JAL flight 123 crashed on the ridges of Mount

The JAL Group will continue to nurture human resources

region and also travel to other regions of Japan, adapting theProfessor, Waseda University / Area of expertise: humanlife engineeringand people), we organize a commemorative ascent of Mount

the JAL Philosophy.

Business Outline

a constant high level of safety awareness.

create a culture that promotes the study and practical application of

The Safety Promotion Center is open to the general public. In

JAL Group emergency evacuation training

fiscal year 2017, the Center received

Since November 2016, all JAL Group staff have undergone

20,091 visitors from inside andemergency evacuation training to acquire knowledge of emergency

outside the Group, bringing thesituations and ensure the ability to respond appropriately. Up to the

cumulative total since fiscal year

end of fiscal year 2017, the training had been completed by 5,339

2006 to 216,780.

participants. The cumulative figure is due to reach 10,000 by theend of fiscal year 2018.

20

A Business Base that Supports Value Creation

Safety Advisory Group members

day.

impart the knowledge and skills required in everyday duties. We

JAL Philosophy Education facilitators are selected from various

wide range of worksites, where they pick up on points for discussion

Mr. Kunio Yanagida Non-fiction writer, critic(Chair)To maintain flight safety, the JAL Group provides education torange of roles are enlightening and instructive, and serve as a good

JAL Philosophy Education seminars three times a year for all

Safety Charter, on which they base their conduct at work each

Safety Awareness Education

To deepen understanding of the JAL Philosophy, we conduct

Management Strategies Designed to Create ValueAll JAL Group staff carry a safety card imprinted with the

management and culture, and safety. The panel is chaired by Mr.

About the JAL Group

Safety Charter.

Promoting More Intensive Practice andPenetration of the JAL Philosophy

21

JAL REPORT 2018

JAL REPORT 2018

THE AMOEBA MANAGEMENT SYSTEM

Future Initiatives

Under the amoeba management system, corporate management is

Up till now, we have focused on operating and embedding the

not the responsibility of top management alone; all staff areamoeba management system, but to ensure future growth andinvolved. Organizations are divided into the smallest possible units

promote human resources development, we will work on

and the results of activities conducted by each unit are presented inconsolidating divisional profitability based on full staff participation,an easily understandable manner. The system thus encourages

which is one of the five key initiatives selected for specific action

participation in management by every staff, that is, “management

under the “JAL Action” in the new Medium Term Managementby all.”Plan.

OUTPUT

service. Unparalleled service means delivering the world’s highest levels of safety,
SafetyOn-time operations
ComfortOutline of the Amoeba Management System
and How the Management Cycle Works

Rigorous profitability management

flight safety and inspire customers to place their confidence in the JAL Group. On thisconvenience, and thus offer customers a safe and comfortable flight.

Group department and company. We will also reinforce cost control
in response to changes in the market environment and fluctuations
resilience.

Management by alleach department can see the results of their efforts clearly reflected

We will work to bring together individual strengths, increasein the revenue and costs, they develop a sense of responsibility forpractical effectiveness in reaching our targets, visualize

the results and feel more motivated and creative in their work
attitude.

Safety targets
In the awareness that flight safety is its foundation and social responsibility, the JAL Group maintains flight safety byaccumulating safety layers as the leading company for safety in the transport sector.
Maintaining flight safety (numerical targets)

Accumulating safety layers (behavioral targets)■

Aircraft accidents: zero■

Evolve the Safety Management System to the world’s highest standard

management data more accessibly and encourage all staff to display■

Serious incidents: zero■

Evolve the Security Management System to the world’s highest standard

creativity and initiative in reaching targets. We will also devote* Target of “zero” for each fiscal year.

■

Pass on lessons learned from accidents

increased energy to nurturing leaders with the managerial flair to* For each of the above policies, specific endpoints will be selected and targeted in each fiscal year.

motivate staff.

a monthly management cycle (PDCA) to accomplish the annual
plan. The monthly management cycle requires each unit to set

Increase effective use of management resources

action targets at the start of each month for the coming month

We will work as a team to implement “muscular management” bybased on the current environment. After business results for the

improving profitability within each Group department and company,

month are released, the difference between the target and result isundertaking effective investments, improving asset utilization,

calculated and reasons for the difference are clarified. The findings

optimizing inventories and implementing other measures toare utilized to prepare targets for the following month. Thus, inincrease return on invested capital (ROIC).

monthly targets are also set, which facilitates prompt response tochanges in the environment. Operating a stage-by-stage monthly
management.
are checked by the relevant department, they are presented tosenior management by the relevant divisional managers or affiliatedcompany presidents at the Group Earnings Announcement Session.

serious incidents. In addition to our focus on efforts to prevent
recurrence of similar accidents, we will work to proactively prevent

President, all directors, presidents of major affiliated companies andsystematic analysis, evaluation and management of security risks.
④ ‌Cultivate security awareness among all staff

aircraft accidents by detecting precursors to accidents and serious

We will improve security awareness and knowledge among all

incidents.

staff to ensure appropriate action and reporting.

Pass on lessons learned from accidents

Group Earnings Announcement Session as part of the Amoeba Management
System

Evolve the safety management system to the world’s
highest standard

We will ensure that lessons learned from past accidents are① ‌Introduce an integrated safety database for risk management

passed on and will provide education on safety awareness based

Actuals Philosophy

Integrating and analyzing disparate safety data will improve theon the Three Actuals Philosophy (the actual site, item andquality of analysis and response and raise the efficiency of risk

people) that captures the essence of the issues.

management.
② ‌Take measures against human error through the Human Factor⑥ ‌Conduct emergency evacuation training
We will provide training in how to respond to an emergency

Analysis and Classification Systemsituation so that all Group staff know how to assist cabin

This analysis method seeks to prevent human error by including

attendants and customers in the event of an emergency.

environmental and organizational factors in its analysis andresponse measures.

22

We will maintain a high level of security across the Group throughFinancial / Data Section

The session is attended by around 160 participants, including the

Policy.

③ ‌Ensure reliable operation of the security management system

we will continue working to realize zero aircraft accidents and zero⑤ ‌Implement safety awareness education based on the Three

After passing through a stage where the results and targets

management with the common aim of realizing the Corporate

To maintain flight safety, which is the foundation of the JAL Group,

Accumulating Safety Layers

management cycle of this kind enables all staff to participate inobservers, who join in earnest discussions on JAL Group

Evolve the security management system to the world’s
highest standard

Business Outline

addition to the annual plan prepared at the start of each fiscal year,

Maintaining Flight Safety

A Business Base that Supports Value Creation

possible to identify the revenue and costs of each unit. As staff inan annual plan for revenues and costs (Master Plan) and implements

responsibility as a member of the JAL Group. By ensuring that all departmentsof hourly profitability, unit revenue and productivity within eachthe roles and responsibilities of each organization and made it

Under the amoeba management system, every unit prepares

relies on each staff sharing clear values and possessing an awareness of his or her

foundation, we seek to deliver improved on-time performance, comfort andUnparalleled Service

We will pursue initiatives to continue and intensify the improvement

in revenues to optimize the balance sheet and improve risk
The introduction of the amoeba management system has clarified

given to guaranteeing safety, which is the foundation of the JAL Group. Flight safety

Management Strategies Designed to Create Valuethat encourages full staff participation.

on-time operations, comfort and convenience. Of these, absolute priority must be

cultivate a safety culture and continuously accumulating safety layers, we will maintain

Convenience

We aim to achieve sound and flexible corporate management
by bringing together individual strengths in a style of management

The JAL Group Corporate Policy commits us to providing customers with unparalleled

About the JAL Group

About the Amoeba Management System

SAFETY* ‌“Conduct risk management of Flight crew fatigue” was one of the safety targets addressed infiscal year 2017. We have now completed the creation of corresponding systems within the JAL
Group and have therefore completed the response to this issue as a safety target. It will now
be implemented as a policy measure by the Flight Operations Division and Group companies.

23

JAL REPORT 2018

JAL REPORT 2018

Mr. Kunio Yanagida × Yuji Akasaka Dialog

Mr. Kunio Yanagida
Chairperson of the Safety
Advisory GroupManagement Fulfills Its Responsibility for
Safetyfrom you. In the management crisis of 2005, I had the strong
impression that JAL’s safety had fallen into a crisis, whereas in thebankruptcy of 2010, JAL’s financial base triggered the crisis. They
were both crises but quite different in nature. In the sense that thecompany’s pillars had both nearly collapsed, it was a period when
you delved into the heart of the problem and asked yourselves
what JAL aspired to be. Under the leadership of the then President,
Mr. Ueki, the entire staff worked together to rebuild the company
and we are starting to see the results of your efforts. Now thebaton to fulfill management responsibilities has been passed on toyou. I feel that it is extremely important that you decide what you
intend to do in the next five and ten years, and not merely carry on

Akasaka: I agree. In the current social environment, the second tofrom your predecessor.

third person perspective which you advocated has gained greater

Akasaka: We introduced SMS to reflect on the series of safetyattention. For instance, people today have access to real-time
Akasaka: Up till now, we worked hard to recover what we lost in

information. But we live in an insecure world, where the impact

currently placed on so-called “organizational factors” when

the aftermath of our safety issues and bankruptcy. Our initiatives

and fear arising from this accessibility is not happening to others

Yanagida: Over the course of ten years, Safety Management

dealing with accidents and problems such as malfunctions. Against

are moving in the right direction and we have gradually regained

but could even happen to us. In other words, events seen through

System (SMS) has become a keyword in safety issues and it has

this background, the essence of SMS is to properly clarify

customer trust. I honestly think that this was the result of thethe eyes of the third party not long ago can be seen through our

become widely recognized that organizations as well as frontline

management’s direct involvement and responsibility for safety. As

competencies of our frontline workers. It was an accomplishment

own eyes. From here on, we must consider how to deliver sense ofworkers have a responsibility for safety. The JAL Group has also

President, I, too, will fulfill my direct responsibility for safety. This isthat came from hard work, while management backed them up.

security from the first and second person perspectives.

introduced SMS. What are your thoughts on SMS?

how I interpret SMS.

The frontlines are JAL’s life lines that must never be changed.

Kunio Yanagida

Yuji Akasaka

Chairperson of the Safety
Advisory Group

Representative Director,
Executive President

Going forward, we will move to the next phase of creating

Yanagida: Access to real-time information will even change theunprecedented innovations in management and safety. My

quality of information. No matter how technically safe operations

responsibility is to deliver innovations and values, centered on

may be, it is the passengers who feel uneasy and wonder what thesafety and an ease of mind, in particular.

consequences would be if something went wrong. I feel that

Deal with Events in Society
with a Sense of Ownership
Yanagida: When the former President, Mr. Ueki, took office, he
asked the then Honorary Chairman Mr. Inamori, “On implementing

management requires a new factor of quality; the ability to instill
an organizational culture where minor events are thoroughly dealt
with from the users’ first and second person perspectives.

A Business Base that Supports Value Creation

issues that arose in 2005. As you mentioned, I feel the emphasis isManagement Strategies Designed to Create Value

Born in Tochigi Prefecture in 1936. Graduated from the Faculty of Economics, The University of Tokyo. Worked as a city news reporter for NHK until 1974. Became an author and winner of major awards including the Oya Soichi Nonfiction Award in 1972 for Mahha
no Kyofu (The Horror of Mach), the Kodansha Nonfiction Award in 1979 for Gan Kairo no Asa (Morning on the Cancer Corridor),the Vaughan-Ueda International Journalist Prize in 1984 and the Kikuchi Kan Prize in 1995. Honored with the 50th Anniversary of
Civil Aviation Development Minister of Land Infrastructure, Transport and Tourism Commendation in 2002 for disseminating aviation
safety philosophies. Chairperson of JAL’s Safety Advisory Group since 2005.

Yanagida: It’s reassuring to hear your firm commitment directly

About the JAL GroupThe Safety Advisory Group, an external panel of safety specialists established in 2005, provides
JAL with advice based on the members’ vast experience and extensive knowledge. We invited Mr.
Kunio Yanagida, who observed JAL’s safety initiatives for many years as Chairperson of the Safety
Advisory Group, to talk about the safety philosophies he advises the JAL Group to adopt and theissues to be addressed toward their realization.

Sharing Lessons Learned from Accidents Widelywith Society

think there is a dangerous situation?” I think this was the first step

Akasaka: I would like to share our past experiences andin rebuilding the company. As Mr. Ueki has had countlessknowledge with other companies, instead of keeping them toexperiences, as a pilot, of making speedy decisions under pressure,

ourselves, and have them applied in society.

Business Outline

reforms, will you give me the authority to ground all flights if I

he is a man of decisive character. This served as the driving force ofreforms and motivated staff to join hands to revitalize the

Yanagida: JAL opened the Safety Promotion Center in 2006, andcompany. This attitude inspired customers to put their confidence

since then has welcomed approximately 220,000 visitors. Half ofin JAL. To me, it seems significant that in this era you, Mr. Akasaka

the visitors were from other companies. This is meaningful in thatwith your engineering background, will be standing at the helm
precondition, but in order to increase trust, you need to add theelement of an ease of mind. I feel that JAL’s next goal will be toseek ways of building sense of trust. Safety is not simply
establishing manuals but delivering something extra as well. In
reality, I think that it will be very challenging work.

24

* The
‌
second to third person perspective: a concept advocated by Mr. Kunio
Yanagida. The first person perspective is how the passenger would feel,the second person perspective is how the staff’s family and closely related
people would feel, and the third person perspective is making decisions
and taking actions as professionals, based on expertise and procedures.
The second to third person perspective means to put yourself in the firstand second person perspectives, while maintaining a cool, objective
attitude as a professional.

25

Financial / Data Section

and manage the company as top management. Safety is a

JAL REPORT 2018

JAL REPORT 2018

the Center not only symbolizes our resolve to prevent theGreat East Japan Earthquake is how to “expect the unexpected.”recurrence of aircraft accidents, but also signifies the public nature

We must include factors that were previously excluded based onvery important change.

of our business, that is, widely sharing lessons drawn fromthe probability theory in all probable situations, instead of making

was created in the Corporate Safety and Security Division. This

accidents with society. As JAL stands at the forefront of safety, thisexcuses for failures because it was beyond expectations. Likewise,

strikes me as being an important unit. By creating an independent

all staff members approach their work enthusiastically and withis an important corporate activity and social contribution activity.

when it comes to safety, we should not maintain safety by simply

department within an organization and not outside it like amotivation. I think this is where the root of safety issues will lie.

The Center is exactly the base for conducting CSR activities.

following the manual. We should factor in the possibility of pitfalls

research center, communication with frontlines can be maintained

Scientific studies show that human error decreases when people

In fiscal year 2018, a Aviation Safety Research Department

information-gathering capability, I urge you to nurture staff withintuitive ability to say, “This is a case that JAL needs to look into.”

in the manual or consider procedures for situations that cannot be

and risk information can be analyzed, accumulated and fed backfeel motivated and are given the freedom to act independently at

Akasaka: JAL has reached the phase of sharing vast experiences

dealt with the manual alone. I think this feeds into the question of

without being rushed by day-to-day events.

work. It might be difficult, but, for example, if you were to ask

and knowledge from the past with external parties. Therefore, wecreating employee education programs and work environments,

must continue to make optimal use of the Safety Promotion Center

where individuals learn to think of the essence of problems for

Akasaka: Information from the past and outside the organization

reporting their mistakes, it would become a shared asset of thefor the benefit of society. When I used the words, “a nation

themselves, instead of merely obeying orders. When this approachis a true gold mine. The biggest goals of the Aviation Safety

organization. I think that creating an environment of praise andoriented toward safety and an ease of mind” I meant delivering

has penetrated organizations, genuine safety will permeate

Research Department are to comprehensively handle andvitalizing the workplace would lead to motivating staff to worksafety and an ease of mind to Japanese society. It is significant thatorganizations and an ease of mind will improve. We live in an

disseminate internal and external information, and nurture humanwith a sense of fulfillment.

we are engaged in creating, improving and delivering safety andInternet society, where information can be searched and obtained

resources capable of carrying out this task.

an ease of mind.

online. This can mislead people into thinking that all work can be

staff to conduct self-analysis and indicate the cause when

Yanagida: I look forward to seeing this Department become an

showing an understanding for individual situations, we will work

Yanagida: In this sense, I see the opening and development of thenurture independent thinking, but I feel that the first step is toimportant pillar of JAL’s safety initiatives. From the outset, thetogether in an atmosphere of mutual respect. We need each and

Safety Promotion Center as symbolic and an indication of a change

raise self-awareness.

Safety Advisory Group has recommended the importance ofevery staff. As President, I would like to create workplaces where

drawing on past lessons within and outside the company. Now thiseach staff feels motivated at work.

Akasaka: We see it as a problem when people become over-a future-oriented attitude of learning from past failures in adependent on the Internet and data. It has also become a major

positive manner and issuing forward-looking messages. In the past,issue in human resources development. I would like to build amany companies wasted a great deal of energy on concealing orframework for the young generation to learn ways of thinking

ignoring their mistakes to protect their organization or cover up forthrough training so that they can recognize the fun and value ofindividuals. In the coming age, management will play the role ofthinking at an early stage.

task is being performed by an independent department. As JAL has

A Business Base that Supports Value Creation

lives and transport them with an ease of mind, you should cultivate

flag bearer, who takes the initiative to cultivate a safety culture in
the company and in society.

Yanagida: Yes, this is very important. As automation proceeds, wehave been hearing for some time now that reading skills andAkasaka: Management especially should see and feel the severity

creativity are declining. With advances in AI such as self-drivingof the aircraft wreckage and victims’ belongings and stretch theircars, it will become very difficult to nurture humans who thinkimagination until they can envision the serious impact their

independently. All the more, we should seriously come to grips

decisions and judgment could have on safety. This is the attitudewith this problem.
Business Outlinethat they must possess.

Nurturing Staff Who Can Think for Themselves

Akasaka: If we only believed in what instruments and figuresindicated without looking at the actual situation on the frontline,
we would not be able to detect what is actually happening. The

Yanagida: One of the important lessons we learned from theManagement Strategies Designed to Create Value

Akasaka: We need to utilize the individuality of every staff. Whiledone through the Internet. JAL is implementing initiatives toin corporate value. In order to be entrusted with precious human

About the JAL Group

Furthermore, what is naturally very important for JAL is that

greatest risk at present is over-dependence on machines when
making decisions. If we can clarify tasks required by humans, wewill be able to create a society where human resources andtechnology can coexist. We are in a transition period, but we needto take scientific approaches and rectify the current situation.
Financial / Data Section

Learning from Case Studies at Other Companies
Yanagida: The specialized in-house magazines, published by JAL’s
Flight Operations and Maintenance divisions have undergone amajor change. The heart of problems at other airlines is presented
carefully in detail, as if the incident occurred at JAL. Further, lessons
learned are expanded horizontally across divisions. I think that is a26

27

JAL REPORT 2018

JAL REPORT 2018

ON-TIME OPERATIONS
Achieving further improvement on our record of on-time
ME
TI

PERFORM
A

ON-

performance is the subject of day-to-day cross-departmental

About the JAL GroupCE

activities. In January 2018, the US-based company FlightStats,

N

Flight safety and on-time operations are our most important customer commitments and must be stringently
observed so that customers can use our services with trust and confidence.
Through collaboration across job categories and proposed improvements, we work continuously to achieve theworld’s highest levels of safety and on-time operations.

part of FlightGlobal named JAL the most punctual Asia Pacificairline in both the Mainline and Network categories based on
the on-time arrival rate. It was JAL’s sixth successive year in theSER

top position and its eighth year overall.

2017
VIC

S
E AWARDManagement Strategies Designed to Create Value

Previous day

Spot-in
The aircraft marshallers work withthe wing tip wardens to guideaircraft to the proper parking spot
after landing.

Pre-arrival,
immediately post-arrival

Check-inCheck-in personnel manage
passengers, baggage check-in
procedures and providing information of the location of the boardinggate and the boarding time.

Fueling
The appropriate amount of fuel isloaded depending on weather
conditions, the number of passengers and crew and cargo weight.
Avoiding waste to promote ecofriendly operations is an importantconsideration in this procedure.

Security checkpoints

Operations control

Obtaining passenger cooperation inadvance enables the security checkto be conducted both smoothly andrigorously in order to maintain flightsafety.

All relevant information (such as
information on weather and airport
conditions) is gathered and passed
on to the cockpit crew for use indetermining the appropriate route,
flight path and altitude.

Predeparture

Pre-departure

Cockpit crew
After receiving reports from the
cockpit crew on the previous flightand the aircraft’s condition frommaintenance engineers, the cockpit
crew decides the flight plan andbriefs the cabin attendants.

Inflight

Baggage pick-up
Passengers are asked to make surethey pick up the correct baggage.
Every effort is made to ensure asmooth end to the trip by avoiding
unnecessary delay in baggage
reclaim.

A Business Base that Supports Value Creation

Reservations and ticketing
Trained personnel provide accurate
reservation and ticketing services
and inform customers of thedeparture time and other necessary
information.

ArrivalBusiness Outline

AirportTo ensure a smooth boarding
procedure the following day, seat
assignments for passengers travelingin groups and passengers requiring
assistance are checked in advance.

Cabin cleaning and stocking
The personnel who clean the seats,
restrooms and other facilities andtidy and replenish cabin service
goods such as blankets, pillows andinflight magazines play a vital role inmaintaining a comfortable cabin
environment.

Catering
To ensure not only hygiene but also
on-time operations, the catering
trucks must leave the processing
center and deliver the meals
according to a strict timetable.

Boarding gate
Before boarding begins, ground staff
pass the passenger informations tothe cabin crew. Efficient procedures—for instance arranging fordifferent groups of customers toboard in the optimal order— ensure
a smooth boarding process.

Load control
Baggage and cargo loading
Swift and accurate loading is carriedout with the help of a detailed plan
based on data showing the numberof passengers, the size and weightof baggage and cargo, etc.

Cabin attendant
The cabin attendant quickly prepare
to welcome the passengers. By
directing passengers to their seats,making sure that baggage is stowed
appropriately and carrying out othersafety checks, the cabin attendantfacilitate on-time departure.

Welcoming passengers at
the arrival gate
Connecting passengers are informedof the shortest route to their next
flight’s boarding gate to help ensure
a smooth connection. Support isprovided to facilitate disembarkationof passengers requiring help.

29

Financial / Data Section

28

Maintenance
Maintenance engineers inspect theaircraft after landing based on some
50 designated checkpoints, including
looking for dents or other damage.
Measures are taken in response to
any reports of problems or
malfunctions from the cockpit crew.

JAL REPORT 2018

JAL REPORT 2018

COMFORT

For a More Comfortable Travel Experience

CONVENIENCE

compliant inflight meals for Muslim customers are now offered on

Becoming the Network of Choice for Customers

all international routes from Japan as part of an enhanced response
to diverse needs.

domestic routes.
We believe that the JAL Group route network is one of its strengths

Elsewhere, in addition to further expanding the number ofand an important factor when customers choose the JAL Group. As

routes operated with Embraer 190 aircraft, chiefly on flights to andand pleasant, our staffs are strongly encouraged to have theDomestic routes

well as offering a route network and timetable that meet the needsfrom Itami Airport, we have introduced the most advanced

customers perspective to improve our products and services.

In the pursuit of “convenience and simplicity,” all 77 aircraft servingof customers and society, we also deliver highly convenient products

turboprop ATR42-600 aircraft on routes to outlying islands inJAL’s domestic routes are now JAL SKY NEXT-configured aircraft

and services that accurately meet customer needs at every stage up

Kagoshima Prefecture operated by Japan Air Commuter Co., Ltd.

with leather-covered seats and complimentary inflight Wi-Fi.

the JAL Group. To ensure customers` experience more comfortable

Specific Initiatives

These measures make a significant contribution to improved

value” through high-speed transportation—one of the great

comfort and convenience on regional network routes.

International routes

Premier Lounge—the top-class lounge for domestic passengers—atadvantages of air transport—we believe that delivering quality

Going forward, the JAL Group will continue to respect theWe have expanded the number of international routes operating

Naha Airport. The lounges at Kagoshima, Komatsu, Matsuyama,service for an appropriate fare is also an important factor incustomer perspective as we work to improve customer convenience

with JAL SKY SUITE-configured aircraft—whose concept is to offer

and other airports have been upgraded to elegant spaces of highimproving customer convenience.

and comfort by embracing the challenge of further expanding ourall customers a “one-class quality upgrade”—thus realizing an

quality based on a Japanese-style design concept, with the catering

unprecedented level of inflight comfort.

service also enhanced. In the Spring of 2019, the refurbishment isAmong our lounge facilities, the Sakura Lounge in the Narita

Specific Initiatives

scheduled for the lounge at Itami Airport (Osaka).

all customers may enjoy a refreshing and inspiring travel experience.

refurbishment, while the First Class lounge at Haneda Airport now

As a result of these initiatives, the JAL Group was able to improve

On international routes, we increased seasonal flight frequency tooffers a new exciting teppan grill dining experience featuring fresh

its level of customer satisfaction in fiscal year 2017 as measured bymeet robust demand on the Narita = Guam, Narita = Bangkok andfish caught in the morning at Tokyo Haneda Market.*1 At overseas

Net Promoter Score (NPS).*2

Kansai = Honolulu routes. On the Haneda = Honolulu route, FirstClass service was offered during the summer peak demand period,

Awards for the world’s favorite airlines, JAL was chosen as Japan’swith promotional measures stepped up to deliver a high-quality

while Sakura Lounge at airports in Honolulu, Bangkok, Frankfurt,

best airline, while in the 2017 World Airline Awards operated bytravel experience for customers flying to Hawaii. To meet highand San Francisco has been given an upgraded menu and improved

SKYTRAX, JAL won the award for the world’s Best Economy Class

demand during the July to October summer period, frequency on

furnishings and layout.

Airline Seat.

the Narita = Moscow route was increased to daily operation.

*1 Tokyo Haneda Market: http://hanedaichiba.jp*2 ‌International routes: 2.0 point improvement; domestic routes: 1.7
point improvement

Domestic routes

and Southeast Asian routes, we are collaborating with professional
chefs to deliver top-quality inflight meals based on the concept of

A Business Base that Supports Value Creation

Additionally, in the TripAdvisor 2018 Travelers’ Choice™

Airport has been given a complete redesign and an improved menu,

For inflight meals on European, North American, Australianremain firmly committed to delivering unparalleled service so that

International routes

Airport satellite zone has benefited improved food menus, andairports, Sakura Lounge at Manila’s Ninoy Aquino Internationalroute network and improving products and services. In this way, we

On domestic routes, flight frequency was increased on the Haneda= New Chitose and Haneda = Naha routes during some busier

very positive customer response to the Shiseido Parlour for theperiods such as the summer, the year-end period and other periods

Resort inflight menu being offered on Premium Economy andof expected high demand. We began adding the new JAL SKY

Economy Class flights on JAL’s Honolulu route, as well as to the AIR

NEXT-configuration to our fleet from fiscal year 2014 and are now

Series menu offered on Premium Economy and Economy Class

successively introducing it on the 737-800 aircraft operated byflights to Europe, North America, Australia and Southeast Asia.

Japan Transocean Air Co., Ltd. We are also switching to

Meanwhile, the brand new BEDD for Kids range and halal-

complimentary inflight Wi-Fi service available on JAL SKY NEXT-

Business Outline

an “exclusive restaurant in the sky.” Specifically, there has been aManagement Strategies Designed to Create Valueto arrival at the destination. As well as offering customers “timeIn our lounge service we have opened a new Diamond

About the JAL Group

Flight safety and on-time operations are absolute fundamentals forconfigured aircraft as part of initiatives to offer new value on

TOPICSJAL Awarded 5-Stars in SKYTRAX World Airline Star Rating
Economy Class Airline Seat for the second consecutive year andwon the top ranking of 5-Stars in the World Airline Star Rating,the third time overall. Not content with our 5-Star rating, we

acknowledging that JAL equals the highest standards of quality

will continue refining our efforts to offer the world’s highest

among world airlines. Additionally, JAL received the Bestlevel of service.

Financial / Data Section

30

At the SKYTRAX 2018 World Airline Awards ceremony, JAL

31

JAL REPORT 2018

JAL REPORT 2018

MESSAGE FROM THE CFO
We will strategically allocate capital to increase corporate value,
while maintaining a frim financial structure as well as high capital efficiency at the same time.

competitiveness, generate strong returns, and thereby increase

Group Medium Term Management Plan from the second year

corporate value. To ensure effectiveness of our investments, we areonwards. The Rolling Plan 2018 includes a new concept called thetargeting ROIC of 9% each fiscal year.
In principle, capital investment will be conducted within

the company itself when we achieve the JAL Vision. Based on aoperating cash flow and we will ensure there is always sufficient

stable profitability and a sound financial structure, we will aim for a

free cash flow to fund dividends for our shareholders. We are also

The JAL Group is aiming to be an airline equipped with bothsales turnover of 2 trillion yen, an operating profit of 250 billion

well aware of the need to improve capital efficiency. We intend tostability and growth in the highly competitive and fast-changing

yen, and total market capitalization of 3 trillion yen throughuse debt financing flexibly, taking advantage of the current

airline industry. As the Chief Financial Officer of the JAL Group, mymaking growth investments actively, while emphasizing profitability

favorable financial environment that allows us to secure funds at

mission is to ensure that the company thrives with our customers,

with a target of operating profit margin of at least 10%.

low interest rates over long periods. We will use debt financing in a

My Role as the CFO of the JAL Group

shareholders, society, staff and all other stakeholders throughIn the Medium Term Management Plan, we have set a

disciplined way, taking into account the Group’s ability to repay

strategically allocating capital to enhance corporate value, while

financial target of at least 9% ROIC (return on invested capital), as

debts by operating cash flow and maintaining our shareholders’maintaining the high level of profitability and solid financial

a measurement of investment efficiency to check its contribution in

equity ratio at the current level in order to maintain financial

structure that we have been working hard to bring to the current

the enhancement of corporate value, together with an operatingstability. Also, we are targeting a Single A Flat credit rating or

outstanding levels.

profit margin target of 10% or higher for every year in order tohigher (issued by a Japanese credit agency) to support the Group’s

achieve high profitability.

strong funding capabilities.

The Grand Design aims for a market capitalization of 3
trillion yen 10 years from now. In finalizing the Grand Design, we
took into account dialogues held with our investors and otherIn the fiscal year 2017, overall air demand continued to be robust

stakeholders, concluding that it was important to express JAL

through increasing domestic passenger demand and inboundGroup’s corporate value by adopting a quantitative target such as

In the previous JAL Group Medium Term Management Plan forpassenger demand, backed up by moderate economic recovery.

market capitalization. Currently, JAL’s valuation is at a disappointing

Fiscal Years 2012 to 2016, we had placed a priority on increasing

The JAL Group recorded higher revenues and operating profits

EV/EBITDA multiple of roughly 4 times, which is lower than theequity capital amounts and building a solid financial base thatthan the previous year. In November 2017, we revamped ourindustry average of around 6 times for global airlines.

would establish a sound financial structure and high resilience to

To close this gap, we have set quantitative targets forrisk. We targeted operating profit margin of 10% or above and aprocedures for both domestic and international passengers – thecorporate value that should reflect our strong will to transform JAL

shareholders’ equity ratio of at least 50%. We have achieved afirst major upgrade in about 50 years. We invested 80 billion yen

into a truly global airline. Guided by the above indicators, we will

shareholders’ equity ratio of around 60%, showing the progressand spent six years to complete the system transformation project,steadily implement management initiatives to increase profit andwe have made in creating a solid financial base. We have steppedbringing us in line with global standards. The new passenger

achieve our targets through their realization.

forward to the next stage, considering the improvement of capitalrevenue management, also bringing with it the renewal of the JAL

investment plan in detail in the Rolling Plan 2018. In the three

cash and deposit amounts on hand. Therefore, our basic policy is

e-commerce website, and it is expected to increase revenue further

years of the plan (fiscal years 2018 to 2020), we intend to invest ato strategically allocate capital to increase corporate value, while

while reducing IT system maintenance costs. Through the improved

total of 660 billion yen, of which 440 billion yen, or two-thirds ofmaintaining a sound financial structure and high capital efficiency.

usability of overseas websites, we are already seeing benefits, suchthe total, should be spent for growth investments to generate new

as a sharp increase in sales through those websites.

cash flows and increase corporate value. For example, we will

the level of liquidity we need to maintain. From the perspective ofinvest in the following: state-of-the-art aircraft to increasestable operation, we aim to maintain cash and deposit on hand at

efficiency and expand capacity to cater to robust demand,an equivalent level of roughly 2.6 months of annual sales turnover

enhancements in safety, quality and service, ground facilities and IT

and to treat any exceeding amounts as additional capital that candrive greater efficiency and expansion into new business domains.

be allocated. To reach this amount, we considered the amount of

In addition to our capital investment plan, we have budgetedliquidity required for normal operations, including seasonality and

Financial Strategy in the Medium Term
Management Plan - Rolling Plan 2018
In April 2017, we presented the JAL Group Medium Term

32

efficiency that includes the management of an appropriate level ofIn the Rolling Plan 2018, we made it clear to our investors

Management Plan for Fiscal Years 2017 to 2020 and the JAL

50 billion yen for strategic growth investment to support the JAL

possible declines in cash flow, in the event of an economic crisis as

Vision, which describes the conceptual image of the company weGroup in embracing new challenges. It will be allocated tosevere as the global financial crisis in 2008.

aspire to be. Furthermore, in February 2018, we presented theinvestment projects which would dramatically improve

As explained earlier, we plan to use interest-bearing debts to33

Financial / Data Section

Director, Senior Managing Executive Officer
General Manager of the Finance & Accounting Division

We have undertaken to more clearly explain our capitalBusiness Outline

passenger service system for reservations, ticketing and boarding

service system allows for greater precision and sophistication in

Norikazu Saito

Strategic Capital Allocation to Increase
Corporate ValueA Business Base that Supports Value Creation

Review of Fiscal Year 2017 Ended March 31,
2018Management Strategies Designed to Create Value

Grand Design, which provides quantitative and specific details of

About the JAL Group

Rolling Plan 2018 as a roadmap covering the period of the JAL

JAL REPORT 2018

JAL REPORT 2018

MESSAGE FROM THE CFO

Building Trust with Our Investors ThroughClose Communication

To Our Shareholders and Investors

employees, we introduced a new system that pays annual bonuses

strategically allocate the additional capital consisting of the freebased on the Group’s performance achievement to its profit target.

cash flow to be generated and debt usage. Specifically, we plan to

As the quality of human resources is the most significant key factor

inject about 80 billion yen into the corporate pension fund tothat differentiates us in the airline business, we trust that our

To provide investors a clearer picture of our business and make it

steadily work to maintain safe operations. Meanwhile, the airline

strengthen the fund’s financial base and proactively mitigate

shareholders and investors recognize the importance of investing ineasier to evaluate, we have improved the quality of informationindustry, particularly in Japan, is now an industry experiencing

potential financial risk. We have also set a strategic growth

human resources.

content provided at briefings of our management plan andgreat growth. As demand for air travel is strong domestically andfinancial results, and increased opportunities for communication.

internationally, the expansion of airport slots at Tokyo’s two

We also proactively disclose data which had not been previously

airports represents a major business opportunity for the airline

investment line of 50 billion yen, and the remaining capital will be

Appropriate Risk Management

used to further improve shareholder returns.
Shareholder returns are one of our highest priority

Flight safety is the top priority of the JAL Group and we will

industry. The JAL Group will challenge this opportunity with

Airlines are exposed to various risks in their operations. We arerates on profit and expected benefits of our new passenger service

courage. To ensure success, we will develop a clear financial policy,

around 30%. In addition, with our ROE benchmark of 10% or

steadily working to strengthen the Group’s risk resilience. Our

system, including costs and revenue forecasts and projected timing

strategically allocate our capital to increase corporate value, flexibly

above, and the maintenance of a dividend on equity ratio (DOE) of

policy is to conduct business operations focused on profitabilityof those benefits.

respond to changes in the market and stay ahead of our rivals, andat least 3%, we intend to pay stable and highly predictable

rather than business scale. We have also established a Financial

dividends. We will always consider and conduct share repurchase

Risk Committee as a management organization, which runs adetailed than it had previously been, including the amount of

in a timely manner, considering factors that include liquidity levels,

financial simulation each month based on global economic trends,

capital available for allocation, and the basis for our calculations.

better understanding of the financial strategies of the JAL Groupprojected funding needs (growth investment, etc), free cash flow

fuel prices, exchange rates and recent demand trends, and shares

Based on this clearer disclosure policy, we intend to build a more

and raises your expectation toward the increase of the JAL Group’s

forecasts, and share prices at that time.

the simulation results with top management. In this way, we havetrustworthy relationship with our investors through more

corporate value and shareholder returns, as we grow into theestablished a system to respond quickly to any event risk.

opportunities for direct feedback and interactive communication.

future.

sustainable growth of the JAL Group. As the JAL Group values its

In addition, we use derivatives and other tools to mitigate

human resources, we view the management resource allocation torisks which have a major impact on the financial performance of

require more feedback from our investors. Therefore, we collecthuman resources as important as returns for other stakeholders. In

airlines, such as those related to fluctuations in fuel prices andinformation from meetings with investors such as the topics

fiscal year 2017, we introduced and disclosed a new performance-

exchange rates. As a result, we have been able to eliminate most

discussed and questions raised, and report back to the Board.

linked stock remuneration system for executive officers. Forof the market risks over a three-year time span.

660(1) Maintain approx. 2.6 months’ worth of revenue as standard cash on hand required for stable management
and recognize the excess amount as additionally allocatable capital.
(2) Actively promote further growth investments and create maximum free cash flows(3) Utilize interest-bearing debt for growth investments and improve capital efficiency(4) Strategically allocate additional capitalbillion yen

Replacement investments

Growth investments

220 billion yen

440 billion yen(Unit: billions of yen)

Generate new cash flow(2) Replacement investments

Existing debt
repayments
dividends paid,
etc.

1

4

(3) Growth investments

Strategic
growthinvestment line

50 billion yen

3

Improve quality, service orefficiency. Develop new
business domains, etc.

FY2018~2020 Additional Capital Available
for Allocation

3
Utilizedebts*24130Additionallyallocatable capital

Ground · IT, etc.

Aircraft
450 billion yen (1) + (2)Strategic
growthinvestment
line

Set a 50 billion yen strategic growth investment line

300

Cash and deposits at
end of fiscal year 2017

210 billion yen (3) + (4)Consider approx. 80 billion yen
injection ahead of schedule

Investments to achieve
extraordinary growth

Further increase shareholder returns

Approx. 2.6 months’ worth of cash

1 on hand required for stable

Pay stable and highly predictable amounts of dividends,
taking into account DOE (Dividend on Equity Ratio) *3 inaddition to the payout ratio●‌Consider and execute share repurchase in a timely manner●‌

management(4) Replacement investments

Improve the corporate
pension fund financially

Financial / Data Section

2

Ground·IT, etc.

34

2Free cash
flow*1

Investment to achieve
extraordinary growth

Replace old regional prop
aircraft, aircraft parts, or etc.

Replacement of existing old
facilities or for complianceto laws and regulations, etc.

At the same time, the Board of Directors has said theyBusiness Outline

Total(1) Growth investments
Introduce aircraft that willcontribute to route
expansion, flight frequency
increase, or operational
efficiency improvement.

I hope this message gives our shareholders and investors a

Capital Allocation

Capital investments
for fiscal years 2018-2020
Aircraftmaintain stable management and a sound financial base.

A Business Base that Supports Value Creation

Human resources are the most important factor which drives

Additionally, capital policy disclosure has been made moreManagement Strategies Designed to Create Value

disclosed, e.g., simulations of impacts of fuel prices and exchange

management matters. We are targeting a dividend payout ratio of

About the JAL Groupfund growth investments, while ensuring financial stability. We will

Cash and deposits at
end of fiscal year 2020

*1 Free cash flow (3-year aggregate) = Cash flow from operating activities - Cash flow from investing activities*2 3-year aggregate new debts used (new procurements - repayment of new procurements)*3 Indicates dividends yield of shareholders’ equity DOE (Dividends on Equity Ratio) = Total Dividends ÷ Equity

35JAL REPORT 2018

JAL REPORT 2018

MEDIUM TERM MANAGEMENT PLAN ROLLING PLAN 2018
Positioning of Rolling Plan 2018

The company we aspire to be

The pursuit of our vision continues

Announced in April 2017, the JAL Group Medium Term Management Plan for Fiscal Years 2017-2020 presented the JAL

In fiscal year 2017, the first year of our Medium Term Management Plan, we accelerated initiatives to “transform JAL

Vision of the company we aspire to be. In Rolling Plan 2018, we presented a new concept called the Grand Design, which

into a truly global airline” and launched initiatives to “create new values one step ahead of competitors.” We haveoutlines the concrete, quantitative profile that will result from realization of the JAL Vision.

identified fiscal year 2018 as a year to accelerate growth through innovation. The JAL Group’s initiatives will contribute

About the JAL GroupJAL Vision

to the success of the Tokyo 2020 Olympic and Paralympic Games and to reaching the target of attracting 40 million
growth from fiscal year 2021.

JAL Vision

FY

To realize the JAL Group Corporate Policy and become “The world’s most valued and preferred airline,”
we will focus on the following while continuing our unwavering efforts and determination in maintaining flight safety

global airline

×2 one step ahead of =Create new values
competitors

2020

2021 〜

Challenge to transform JAL into a truly global airline

Achieve
THE

Challenge to create new values one step ahead of competitors
Challenge to achieve sustainable growth

Achieve［So far］

growthService system

3 sustainableAs a Japanese carrier, we will leverage

We will continue to embrace new

Being in a competitive and volatile

Japan’s uniqueness and strengths, many

challenges and be one step ahead

industry, we will continue our focusof which are acclaimed around theof competitors in the industry. We

on balancing growth and stability. To

world, and further expand our businesswill continuously work to create

accomplish this, we have set dual

in global markets. We aim to become

relevant and inspiring value offer-goals of both high profitability andan airline that is recognized andings. To accomplish this, we will

financial stability. We will actively

supported by customers in both Japan

treat each and every customer

invest in future growth, pass on

and around the world. To accomplish

encounter as unique, and provide

benefits to customers, shareholders

this, we will promote diversification of

unparalleled travel experienceand staff, and contribute to regions

values and human resources, and adapt

through intertwining highest service

and the society at large.

flexibly and speedily to global changes.

quality and latest digital technology.

[Growth Initiatives]

JAL Focus

JAL Focus

Full Service Carrier Business

Launched aworld-classpassenger
servicesystemPartnerships
Expandedpartnerships
with global
partners

New Businesses

Innovatebetter products
and services

Expandnetworks
Expansion of global traffic
using the dual hub networkof Narita and Haneda, andcooperating with ourpartner airlines.

Expandbusinessdomains

A personalized and timely
delivered service that will
provide an exceptional
travel experience tocustomers worldwide.

Develop and cultivate
growth businesses byleveraging JAL’s assets;knowledge and customerbase.

FY2020 Targets
yen
1,600 billion
180 billion
yen
EBITDAR350 billion
yen

Revenue
OperatingprofitFoundation for innovation
Human Resources

×Technology•‌Provide a stress-free travel
experience for all our customers•‌Have 50%*2 of revenue fromoverseas sales for international
passenger operations•‌Create new businesses and services
that stimulate air travel demand

Refine Our Full
Service Carrier
Business*1 ‌As of March 2018, 343 cities, including alliances andcodeshares*2 FY2016 30%+

36•‌Aiming to maintain the target ofprofit margin 10% or above, achieve
Operating Revenue 2 tn yen/
Operating profit 250 bn yen/Market
capitalization 3 tn yen•‌Maintain safe operations and leaddevelopment of the airline industry

Olympic and Paralympic Games Tokyo 2020
Additional slots at metropolitan
Inbound demand2017 result 28.69 million

2020 target 40 million

2030 target 60 million

Financial / Data Section•‌As a group of professionals that areable to dynamically accommodate
with multi-cultural and diversified
markets and environments•‌Adopt new technology and source
capabilities to improve quality andproductivity, and to innovate
customer experience

Business Outline

Expand BusinessDomains

Within this 10-Year Grand Design period, we will•‌Service over 500*1 major cities in theworld

A Business Base that Supports Value Creation

Transform JAL

1 into a truly

2018 〜2019

2017

Management Strategies Designed to Create Valueoverseas visitors to Japan annually. In parallel, we will make steady progress with our sights set on the next stage of•‌Actively contribute to tackling social
issues such as SDGs*3*3 Global Sustainable Development Goals

37

JAL REPORT 2018

JAL REPORT 2018

MEDIUM TERM MANAGEMENT PLAN ROLLING PLAN 2018

JAL Focus

Refine Our Full Service Carrier (FSC) Business [Top Out]FSC businessNetworks

Expandnetworks

We see the expansion in functions scheduled for 2020 at metropolitan

Foundation for innovation

potential to expand economic contacts with Japan and increase the number of

Products and services

FSC businessTo ensure that all customers enjoy a stress-free experience, we aim to provide
customers worldwide with a comfortable travel environment combined with×

personal and timely service. In fiscal year 2018, we will introduce inflight satellite
television, and from fiscal year 2019, when we introduce Japan’s first Airbus
A350-900 aircraft, each seat on domestic routes will have an individual monitor

overseas visits to provincial areas. In addition to our own flight operations, weand power supply. We will also enhance multilingual service provision and expand

will also actively expand tie-ups with new business partners beyond the scope

the range of inflight menus catering to diverse dietary needs as part of measuresof existing alliances to enhance our global network.

to support an optimal travel experience for all customers.

2018―2020 Challenge to create new values one step ahead of competitors
As of February 2018 90 cities• ‌Improve services to ensure peace of mind forevery customer, meeting diverse needs,
including the provision of multilingual
services and variety of meal choices.

• ‌Increase international flights, with the
expansion of flight slots scheduled for 2020
at metropolitan airports.

*1 As‌ of March 2018, 343 cities, including
alliances and codeshares

Personal & Timely

VISTARA

Vietjet Aviation AeroMexico
Joint Stock
Company• ‌Forge partnerships with new airline partners
and increase destinations of codeshare
flights in the Hawaiian Islands, Asia, Russia,
etc.
• ‌Coordinate with each partner to increase
JAL’s presence in overseas markets.

Having 50%*2 of revenue
from overseas sales forinternational passenger
operations*2 FY2016 30%+

• ‌Provide timely information on flight delays,
cancellations, etc., to each customer, andensure a smooth recovery procedures withmobile apps from FY2018.

Providing a stress-freetravel experience for all
our customers• ‌Introduce new mobile device functions suchas providing timely travel information andcampaign coupons that suit customer needsfrom FY2019.
• ‌Provide stress-free service at touchpoints
such as at the airport, leveraging IoT,
biometric authentication and high-precision
position technology.

Financial / Data Section

38

Hawaiian
Airlines• ‌Introduce the A350, fitted with cutting-edge
inflight facilities on domestic routes from
FY2019.

Business Outline

AEROFLOT
RussianAirlines

From FY2018

Airbus A350

Servicing over 500*1
major cities in the world• ‌Expand global network with existing joint
business partners, oneworld members andother codeshare partners.

2021― Challenge to achieve sustainable growth• ‌Introduce inflight satellite TV in FY2018 andpersonal monitors and seat power supply on
domestic routes in FY2019.

• ‌Serve new destinations on the west coast of
North America in FY2019 and improveconnectivity between North America andAsia.

Airline Partners As of February 2018 253 cities

×

Excellent Quality & Comfort• ‌Increase flight frequency on internationalroutes such as Asia and resort routes, andoperate additional charter flights, in
FY2018. Open new routes between Amami
Islands, aiming to become a registered
World Natural Heritage Site, and Okinawa.

New Partners

2018―2020 Challenge to create new values one step ahead of competitors

Foundation for innovation

A Business Base that Supports Value Creation

JAL Operation

2021― Challenge for sustainable growth

New businesses

Refine products
and services

Management Strategies Designed to Create Value

airports as a business opportunity and will be rolling out new routes with

New businesses

About the JAL Group

2 key drivers for growth

39JAL REPORT 2018

JAL REPORT 2018

MEDIUM TERM MANAGEMENT PLAN ROLLING PLAN 2018

Foundation for Innovation
Human Resources × Technology

Aspiring to be a company that offers new value to customers, local communities, and society,
the JAL Group will seek to launch growth businesses that build on its store of expertise and its

FSC businessNew businesses
Expand businessdomains

customer base. We will therefore work to promote joint projects with partners in other industry
sectors that stimulate demand for inbound travel to Japan and support regional revitalization.
We will also seek to expand the provision of commissioned services in airline-related business×

2018―2020 Challenge to create new values one step ahead of competitors

2021― Challenge for sustainable growth

Airline-related and New business domain revenue target +100 billion yen (1.3 fold increase from FY2016)

Develop new revenue sources

Stimulate inbound travel demandand support regional revitalization

LCC Partner strategy
Deepen relations withforeign-affiliated Japanese LCC partner tocapture overseas travel demand and contributeto bringing more inbound visitors and dispersing
travel across Japan by offering inexpensive fares.

Participate in developing travel business

Expand ground handling businessContribute to expansion of regional
nonresident population throughinvestment and collaboration with
ALL JAPAN Tourism Oriented Country
Fund, Hyakusen Renma Inc., etc.

Expand ground handling services tomeet the increasing number offoreign carriers ahead of the Olympic
and Paralympic Games Tokyo 2020.

concepts, we will work to create a constant flow of new products, services, and businesses,

Human Resources ×

Cultivate innovation in every possible domain
and become a company that sustainably grows

Innovation Lab

Contribute to theairline industry

New Business domains

Create new values offerings

Expand provision and support of
MRO*, including managementadvisory, leveraging JAL’s knowledge.

Expand capacity toprovide pilot training.
Alleviating pilot shortages will allow theindustry to meet growing travel demand.

Maintaining safe
operations and leaddevelopment of theairline industry• ‌Put ideas into action with cutting-edge
technology by collaborating with over 100
partner companies.

• ‌Establish JAL Innovation
Lab and promote open
innovation.

• Innovate businesses reform leveraging data value.

• ‌Put ideas into action
speedily and turn unknown domains intobusiness opportunities

		AI, Robots, VR/AR, IoT, Big Data, Blockchain, Wearable
Devices, 3D Printing, Drones, etc.

Establish Fin Tech
Company

New business development
opportunities

Enter the international brandprepaid card business through thejoint business /provide new financial
products and services as a neobank.

Enter into new businesses leveraging JAL’s
strengths. Collaborate with external partners,
and cutting-edge technologies to achieve
improved customer services and materialize
new business creation opportunities.

Participate in supersonicaircraft development

Participate in spacedevelopment

Creating new businesses
and services that
stimulate air travel
demandAs one of our initiatives to expand our business domains, we have

Preparations are under way with a target of operational launch forestablished T.B.L. Co., Ltd., to prepare the launch of a low-cost carrier

the 2020 summer schedule.

business operating medium- to long-haul flights to and from Japan.
The new carrier, a JAL consolidated subsidiary, will be based at
Narita International Airport and will operate medium- to long-haul
services to Asia, Europe, North America, and other regions.

Corporate Name: T. B. L. Co., Ltd.
Location of Head Office: Narita, Chiba Prefecture
Investment Amount: 980 million yen (Shareholder: Japan Airlines 100%)
Representative Director: Shingo Nishida

Human Resources

Employee’s wisdom and aspirations on “This is what I want to do or be”
Highly aspiring organizations• ‌Build a highly specialized
professional team utilizing
technology and the individuality andtalents of each employee.
• ‌Improve the quality and speed ofdecision-making throughautonomous breakthrough leadersincorporating OODA*2 principles.

The power of individuality• ‌Improve services to achieve theinbound visitors target by improving
intercultural communication skills.
• ‌Create environments where diverse
human resources can take active part,as a leading company of diversity
management.
• ‌Achieve JAL Group
female manager ratioof 20% by FY2023
and 30% thereafter.

Job satisfaction and highproductivity•P‌ ractice new workstyles ahead ofother entities such as the“workation” model throughcoordination with local governments.
•R‌ ealize operation process
innovation utilizing AI and robotics.
•C‌ reate a health management modelthrough industry-academia
collaboration.

Embody the JAL Philosophy*1 Proof of Concept*2 OODA：Observe/Orient/Decide/Act. A decision-making process to enhance speed and creativity through the OODA Loop.

41

Financial / Data Section

Establishment of a New International Low-Cost Carrier Business in the Medium- to Long-Haul Market

PoC*1

Idea & Action

Business Outline

Airline-related businesses

Expand capacity for providing pilot
training

Technology

To build a foundation that cultivates innovation by joining Technology
and Human Resources together

Partners* Maintenance, Repair, Overhaul

Foundation for innovationin this way achieving sustainable growth.

Appealing air transport
products and services for
global markets

TOPICS

40

resources who can link individual ideas and customer needs with the creation of new

Technology & Data

Expand provision of comprehensive
maintenance services

New businesses

A Business Base that Supports Value Creation

Airline Business

Inbound demand・
Regional revitalization

Introduce high-quality
Japanese products
collaborating with theagriculture and fishing industry.

FSC businessstrength, we aim to realize innovation and thereby accelerate growth. By nurturing humanManagement Strategies Designed to Create Value

domains, and to create new businesses and services that stimulate air travel demand.

Foundation for innovation

By combining advanced technology with the human resources which are JAL Group’s

About the JAL Group

Expand Business Domains [Stretch]

JAL REPORT 2018

JAL REPORT 2018

MEDIUM TERM MANAGEMENT PLAN ROLLING PLAN 2018

Medium Term Revenue and Profit Targets

The JAL Group will work to achieve management targets in three areas, safety, customer satisfaction and finance, while

Looking ahead toward fiscal year 2020, we expect to gradually increase capacity such as upgauging on domestic flights,

upholding our policy to maintain flight safety, the basis of the Group’s existence, and to realize our overarching management

given the increase of international flight slots at Narita and Haneda airports. We also aim to increase revenue in operations

goal, the Corporate Policy.

outside the full service carrier business. As a result, our targets for fiscal year 2020 are sales turnover of 1.6 trillion yen and

About the JAL Group

Progress of Medium Term Targets

operating profit of 180 billion yen.

3 management targets

SafetyRealize “Zero Aircraft
Accidents” and “Zero Serious
Incidents”

Achieve world top-level
customer satisfaction by
FY2020FinanceAchieve “10% or above
operating profit margin” and“9% or above ROIC (Return on
Invested Capital)”

FY2017 result

1.7

Domestic +NPS（Net Promoter Score）

2.0

International +Operating profit
marginReturn on
Invested Capital(ROIC)• ‌Reinforce recurrence prevention and proactive
prevention utilizing new human factor analysis
methods.

1

Serious incidents

12.6
10.1

1,288.9• ‌Implement a risk management system which grasps
signs of serious trouble based on data, utilizing amost advanced integrated safety database.

0

Aircraft accidents

Actions

296.8

Revenue(JPY billion)• ‌Continue to hold safety awareness education
seminars based on the “Three Actuals” (the actual
place, items, people).
PointsPoints* Compared with FY2017Q1 scores%%* ‌Figures reflect the effects ofproration of domestic sector
revenue in international tickets
and revised proration rules(Domestic routes -6 billion yen,International routes +6 billion yen)• ‌Further refine JAL’s strengths and utilize ICT/IoT
capabilities to deliver exceptional customer service
and meet needs of diversified customer groups
around the world.
• ‌Improve NPS by +5.3pt* on domestic flights and+4.5pt* on international flights by FY2020.
• ‌Continue profitability-focused management,
maximize revenues and minimize expenses, andachieve “10% or above operating profit margin.”■： Other■： Cargo and mail revenue■： Domestic passenger revenue■： International passenger revenue

498.6

Operatingprofit▲：Operating profit margin

310.0
92.0
518.2

326.0

1,600.0
400.0

94.0
520.0
1,200.0

415.2

462.9

515.0

FY2016 result

FY2017 result

FY2018* plan

FY2020 target

11.5

11.3

13.2

170.3

12.6

FY2016 result

180.0

174.5
167.0

(JPY billion)• ‌Undertake “Lean management” with emphasis on
asset efficiency while investing for growth, andachieve “9% or above Return On Invested Capital(ROIC).”• ‌Consider optional application of International
Financial Reporting Standards (IFRS).

78.2

1,383.2

1,455.0

FY2017 result

FY2018 plan

FY2020 target

A Business Base that Supports Value Creation

Customer
Satisfaction

Indicator

Management Strategies Designed to Create Value

JAL Target

125

ASK

109
100
FY2016 result

102
102
101
FY2017 result

107
103
FY2018 plan105
FY2020 target

Business Outline

(%)

117

●： International●： Domestic●： Total

Financial / Data Section

42

43

JAL REPORT 2018

JAL REPORT 2018

HUMAN RESOURCES STRATEGY
We support all staff in their efforts to pursue the JAL Vision by creating work environments andsystems that allow each individual to work independently and be highly motivatedpromote diversity in order to make JAL a truly global airline where

who use their own discretion and judgment and providing themwith opportunities to voluntarily meet challenges. Therefore, weCreating Systems to Practicethe JAL Philosophy and Embrace Challenges
for Personal Growth■ ‌Build challenging organizations that realize value
creation

have established evaluation criteria to accurately evaluate theirchallenges and entirely reviewed our employee education
programs. We will build a framework to nurture diverse humanorganizations that possess a challenging spirit. Given the

resources to welcome a diverse range of guests under the

The most important goal of the JAL Group is to realize thedramatically changing environment, we will nurture leaders who

management policy, “Transform JAL into a truly global airline.”

Corporate Policy, which first states that we will “Pursue themeet challenges and spontaneously propel reforms. We will alsomaterial and intellectual growth of all employees.” First of all, my

encourage professional development among staff. In these ways,

greatest mission as General Manager of Human Resource

we aim to become a company that has gathered momentum forManagement is to create an environment where every staff isvalue creation and where staff work enthusiastically to turn theiractively involved in and enthusiastic about work.

ideas into reality.

Workstyle innovation is the very essence of our Corporate Policy
and an issue we have tackled based on a roadmap planned out inOn creating a positive work environment, we will work tonurture human resources who challenge themselves with courage.
This will be approached from two aspects: cultivate staff awarenessSupporting JAL Professionals and Realizing
the Corporate Policy■ ‌Practice the JAL Philosophy more intensively to achievetargets

2015. Our target total work hours* is 1,850 hours and we are very
close to hitting it. Regarding health management, a Health

The basis of these measures is to practice the JAL Philosophy moreManagement Officer was newly appointed last year and began

opportunities to take on challenges.

intensively. For the philosophies to permeate the company, we will

releasing messages from the management concerning employee

encourage each staff to practice them on improving his or her

health. We also expanded our support system for mental healthand appropriately to the rapidly changing external environment,

understanding and link their efforts to the achievement offrom cockpit crew and cabin attendants to ground staff and Group

we have introduced JAL OODA as a tool to improve the quality andindividual and organizational targets.

company staff.

Human Resources u Technology = Innovation

human resources are already a professional team. On top of this, it

To develop human resources capable of adapting speedily

In the sense that we operate aircraft safely, JAL Group’s

speed of decision-making. We took the elements of OODA,
Observe, Orient, Decide and Act, and arranged them to create JAL

can be said that human resources who can meet challenges to

OODA. To promote this decision-making process, we havelaunched three initiatives: promote employee autonomy throughAn important issue in our human resources strategy is building

realize the Corporate Policy are true professionals. By supporting

education seminars, demonstrate autonomy and independence

systems which promote independent thinking to create newtrue professionals, we will support the company in realizing thewithout waiting for orders, and support autonomous self-businesses and services. The basis of generating new ideas andCorporate Policy.

governing organizations by reviewing business practices.

innovations is termed as “Human Resources x Technology.” Inother words, we will combine the ambitions of “what I want to becontribution of individual strengths to value creation,” we willor do” of each staff who practice the JAL Philosophy and the rapid

further refine and vigorously promote the following four measures

evolution of technologies to design, create and deliver new value.

* ‌Total work hours (annual) = standard number of work days per year x
standard number of work hours per day (8 hrs) + overtime and rest day
work hours – [(number of days of annual paid leave + number of days of
special leave + number of days of work absence) x standard number ofwork hours per day (8 hrs)]

as set out in Rolling Plan 2018.

■ ‌Build mentally and physically healthy, highly

Takuya Oda

Link the contribution of individual strengths to value creation

We will develop highly productive work environments throughworkstyle innovation, wellness activities and other measures toprovide opportunities for the active participation of diverse humanresources and create an environment essential to the attainment ofsustainable growth.

■ ‌Encourage expression of individuality in an
atmosphere of mutual respect
We will continue working to cultivate global human resources and44

Goal of human resources strategy (Slogan)
7 initiatives (Action)(1) ‌Nurture leaders who promote innovation

4 declarations(Commitment)

1. Challenging organizations
Build challenging organizations torealize value creation

2. Diverse human resources
Encourage expression of individuality in an
atmosphere of mutual respect
3. Environments to increase labor productivity
Build mentally and physically healthy, highly motivating
and productive work environments(2) ‌Create a professional team to realize value
creation

Financial / Data Section

Executive Officer, General Manager
of Human Resource Management

motivating and productive work environments

Business Outline

Under the slogan of our human resources strategy, “Link the

A Business Base that Supports Value Creation

to think and act independently and provide them withManagement Strategies Designed to Create Value

To “create value one step ahead of competitors,” we will build

About the JAL Group

diverse human resources express their individuality.

Our greatest emphasis is on developing human resources(3) Nurture global human resources(4) Promote diversity(5) ‌Accomplish workstyle innovation leading to growth(6) Promote health management

4. BasePractice the JAL Philosophy more intensively to achieve individualand organizational targets(7) Practice the JAL Philosophy

45

JAL REPORT 2018

JAL REPORT 2018

HUMAN RESOURCES STRATEGY

Diversity and Inclusion

LGBT* initiatives

Opportunities for people with disabilities

With the aim of developing human resources who respect and can

The JAL Group works to promote understanding of LGBT and also

The JAL Group actively promotes the employment of people with

In 2014, JAL Group top management declared their commitment toadapt to diverse cultures, we are working to nurture a mental

to ensure that its in-house systems are LGBT-friendly. As part of this,disabilities and aims to create an environment in which having adiversity. Since then, we have aspired to be a company whereapproach that is understanding of other cultures and to improvein fiscal 2017, JAL established a system under which staff candisability is not seen as a career barrier. For the JAL Group,

everyone can work in a positive atmosphere regardless of gender,intercultural communication abilities.

register their same-sex partner, who then, along with their family

promoting opportunities for people with disabilities is important as

members, enjoys the same benefits as afforded to the legallya means of ensuring diversity in human resources. Initiatives are

we offer other opportunities to experience working in or interacting

married opposite-sex partners of staff and their families. The JAL

implemented on a Group-wide basis, with training given toage, nationality, race, ethnicity, religion, social class, disability, sexual
orientation, gender identity, career or other personal attributes.

For staff in our Japan region, in addition to overseas postings,

Group believes in offering professional opportunities to diverse

reinforce coordination with the human resources managers ofthrough the JAL Global Challenge Program, a program launched inhuman resources and continues to roll out initiatives to create aGroup companies. In this way, we ensure that each Group company

create a foundation for welcoming diverse human resources.

fiscal year 2017 through which young mid-level staff can accesswork environment where all staff can feel secure and confident.

actively promotes the employment of people with disabilities.

Regarding individual measures, we decide on key performanceinternships at overseas enterprises. In fiscal year 2018, we will also

indicators and then check their progress in meetings attended bypromote e-learning programs in understanding other cultures and* ‌A general term for the sexual minority groups Lesbian, Gay, Bisexual andTransgender.

Opportunities for senior staff

the relevant directors.

introduce initiatives to raise the overall level of English-language

The JAL Group has put in place systems that offer active

skills and stimulate foreign language study.

opportunities to staff who wish to continue working after

In initiatives to date, we have established an organization for

Building on this foundation, we will extend measures topromote human resources diversity going forward with the aim of

For staff in overseas regions, we provide training courses toretirement age. Around 75% of those reaching retirement age takeget to know the whole of JAL and long- and short-term postings to

becoming a leading company in diversity management.

advantage of these systems (as of July 2018).

the Japan region. Additionally, we promote interaction with staff in

To demonstrate that JAL is an organization with highCareer opportunities for female employees

the Japan region and create opportunities to cultivate mutual

aspirations, we will expand opportunities for senior staff in the

We announced numerical targets of a 20% ratio of female

understanding. By progressing with this global approach, we aim to

future. We believe that it is important not only to benefit from the

managers within the JAL Group and a 15% or higher ratio of“stay one step ahead in value creation.”experience and knowledge which they have built up over their2023. We are continuing with related initiatives centered on
improving work environments, strengthening human resources
cultivation and developing the corporate culture. The current
number of female executives is 10.

2013

Number of Female
Managers in the JAL Group
691

Ratio of Female Managers
in the JAL Group
14.1

756

15.1

2015

799

15.6

2016

846

16.3

2017(FY)

853

16.3

The JAL Nadeshiko Lab entered its third year of operation in fiscal
year 2017, during which it extended the range of activity of its
researchers beyond the Tokyo region to bring its activities closer to agreater number ofstaff.

46

Participation in Tokyo Rainbow Pride 2018

Financial / Data Section* ‌The JAL Nadeshiko Lab is a cross-departmental project, includingGroup companies in its remit, which was founded in September
2015 to promote professional opportunities for women and otherdiverse human resources.

This training program has as its objective to develop humanresources who will help JAL “stay one step ahead in value
creation” as it transforms into a truly global airline. It offers staff
the opportunity to experience working at an overseas venturebusiness in a different industry sector.
I went to work at a venture business in India that employsaround 200 people in IT development. Before then, I had only avague idea of India, but after I started actually working withthem, I was impressed by the keenness to study and thefriendliness of Indian people.
From my experience of working at the venture businessand living in India, I learned to take the unexpected in my stride
and to cultivate a wide variety of interests. I also understood thatbuilding relationships of trust with people regardless of language
and culture is importantwhen operating in aninternational context. I
feel that my mission now
is to share my experience
with as many colleagues
as possible to ensure that
JAL can build trust withpeople around the world.
Munefuyu Tokitsu

Business Outline

2014

approach and attitudes to work that are the mark of veterans.

■ Participation in JAL Global Challenge Program

A Business Base that Supports Value Creation

many years of service, but also to transmit to junior staff the special

female managers at section head level or higher in JAL by fiscal year

Management Strategies Designed to Create Value

with other cultures. These include external training schemes, chiefly

the promotion of diversity in the Human Resources Division to

About the JAL Group

Cultivating global human resources

Passenger System Planning Division

47

JAL REPORT 2018

JAL REPORT 2018

HUMAN RESOURCES STRATEGY

Workstyle Innovation

Promotion of Health Management

workstyles and create a basis that enables everybody to work withpositive efficiency. Innovations include the utilization of IT tools,changes in the office layout and enhancement of teleworking
systems, which of all allow staff to determine when and where theywork.
In fiscal year 2017, we introduced the “workation” system, inwhich teleworking is used to enable staff to spend some time on
staff to take longer vacations.
In fiscal year 2018, we will launch initiatives using artificial
intelligence and robotics to speed up the review of work processes
and the integration of common tasks.

Total work hours*
By encouraging varied workstyles and creating a corporate ethosthat is fair to staff whose time is limited by duties such as childcare
or nursing care, JAL seeks to become a company where all can
We advocate a healthy work-life balance that allows all staff
to perform their duties efficiently in order to improve productivity
and use the time saved for physical and mental recreation andself-development. We believe that when these experiences are fed
back into the workplace, new value will be created, which will inturn lead to corporate growth. Consequently, we are taking
measures to encourage to plan taking paid leave and to limit work

stimulate insights from new perspectives.
As part of workstyle innovation, we have a system ofteleworking in place, so we were able to use the in-houseinfrastructure and materials in
the usual way, but the relaxedmood in the rich natural
setting of the camp led tolively discussions.
It became clear to me
that workstyle innovation not
only leads to flexible work
patterns, but is also a way ofstimulating new ideas.

The good mental and physical health of all staff is an essential
precondition for driving forward efforts to become the world’s most
preferred and valued airline and also for promoting the material andintellectual growth of all staff as advocated in the JAL Group
Corporate Policy.
Accordingly, the JAL Group has formulated the JAL Wellness
2020 health promotion plan in coordination with the Medium Term
Management Plan. Focusing on the key themes of lifestyle-related
illness, cancer, mental health, smoking and women’s health, we
cooperate through the plan with staff, companies and healthinsurance associations to enhance the health of the precious asset
represented by our staff and their families.

Corporate officers take a leading role in “wellness” activities, such as Sports
Day events held in each region.

In recent years, we have coordinated with initiatives indiversity and inclusion and in workstyle innovation to support staff
to continue working when they face a range of issues, including thechallenge of combining work commitments with cancer treatment.
Going forward, the JAL Group will redouble its efforts topromote health management through two main approaches: strong

A Business Base that Supports Value Creation

participate.

The department I work for is responsible for systems including
the personnel evaluation system and the salary system. As these
are important topics for both the company and for staff, we are
expected to undertake wide-ranging discussion of the best way
to design and operate the systems.
As we approached the new fiscal year, we decided to holdan overnight camp where we could remove ourselves from the
day-to-day work routine and take time to discuss the issues weneed to tackle.
When we were discussing the camp venue, we found outthat a satellite office had been set up at Kamiyama in Tokushima
Prefecture. We decided to use it for our camp in the hope thatthe location would allow us to take a broader view and wouldManagement Strategies Designed to Create Value

work tasks during vacations. It is hoped that this will encourage■ New workstyle using satellite office

About the JAL GroupWe continue to move forward with a range of initiatives to innovate

leadership from management headed by the Health Management
Officer, and initiatives introduced at individual locations by Wellness
Leaders, who are appointed to workplaces throughout Japan topromote health.

Fumikazu Nagashima
HR Strategy Department

hours to an appropriate level.
In fiscal year 2017, the average annual paid leave taken was
17.9 days, or 89.5% of the total entitlement, while the averagemonthly overtime total was 7.9 hours (excluding general JAL staff

Business Outline

on shift work). The actual average for total work hours in fiscal year2017 was 1,888 hours, against a target figure of 1,850 hours,
representing an 81.5% fulfilment of target.
* ‌Total work hours (annual) = standard number of work days per year x
standard number of work hours per day (8 hrs) + overtime and rest day
work hours – [(number of days of annual leave + number of days of special
leave + number of days of work absence) x standard number of work hours
per day (8 hrs)]

Monthly average
overtime andrest day work
hours

Number of
telework cases(Total numberof staff)

2015

84

11.4

1,729

2016

85.5

12

2,922

2017 (FY)

89.5

7.9

5,701

48

Financial / Data Section

Ratio ofannual paid
leave taken(%)

49

JAL REPORT 2018

JAL REPORT 2018

ESG MANAGEMENTBusiness operations in harmony with the environment and society
We are striving to create a sustainable society through the rigorous pursuit of safety and sense of
security, and business operations in harmony with the environment and society.

Importance of internal penetration of the SDGs
In our initiatives to achieve the SDGs, it is important that
About the JAL Group

With the aggravation and intensification of social issues in recent

Initiatives to Achieve the SDGs
Basic stanceawareness of SDGs have filtered throughout the JAL Group. We

As JAL Group’s businesses are an integral part of air transport

are working to share and penetrate the SDGs by disseminating

infrastructure, I feel that tackling issues related to our operations

information through in-house newsletters and the Intranet, andfirst and foremost will contribute to social and economic

in-house training programs such as initial training for new

development.

employees and new managers and seminars by outside lecturers.

Based on this thinking, we will pursue initiatives to achievecommitted stance to realize business operations in harmony with

the SDGs in three areas, on the premise of maintaining flight safety

the environment and society. We feel that we need to be a

– Coexistence in Harmony with the Earth, Regional Contributions

company which gains the trust of society through efforts toand Nurturing the Next Generation. In addition, we will actively

rigorously pursue safety and sense of security and proactively

tackle social issues defined in the SDGs such as diversity andtackle social issues. Therefore, we have included “Contribute toinclusion, respect for human rights and corporate governance,

resolving social issues” such as the SDGs* in our 10 Year Grand

which support our business base, while fulfilling our role as an air

Design, which encompasses the three years covering the newtransport operator.

Management Strategies Designed to Create Value

years, it has become a vital mission of companies to adopt a more

In-house newsletter

Medium Term Management Plan for Fiscal Years 2017 to 2020 as
well as our goals after the year 2020.

embedded at the heart of the SDGs must be achieved by 2030. It
is inevitable that we implement measures to combat climate

ESG Categories

Issues to be AddressedGoalschange such as CO2 emission reduction, which is closely linked toaviation. I also feel that the JAL Group can play a major role inE nvironment●‌Coexist with the Earth(P54-57)●‌CO2 emissions that are 23% lower than fiscal year 2005 by fiscal year
2020●‌Contribute to Communities(P62, P78-81)●‌Contributions to regional revitalization through the JAL NEW-JAPANPROJECT and other projects

Relationshipwith SDGs

contributing to employee motivation, economic growth andcommunity development.
The JAL Group will take action to raise staff awareness of
their role in society, conduct operations taking into considerationsocial impacts and responsibly disclose financial and non-financial
information. Furthermore, we will fulfill our corporate mission by●‌Nurture Future Generations(P62-63)

Soceity●‌Respect for Human Rights(P59)

externally, deepen the understanding of the SDGs by a greater●‌Building Sustainable Supply Chains(P60-61)

number of people and contribute to the development of a●‌Reach the goal of 1 million SORAIKU® participants by fiscal year 2020●‌Achieve 20% of JAL Group women in manager-level positions byfiscal year 2023
Business Outline

implementing measures to raise SDGs awareness internally and●‌Promoting Diversity and Inclusion(P46-47, P58-59)●‌Swift support for disaster relief efforts and compassionate support
for recovery efforts as air transport infrastructure

A Business Base that Supports Value Creation

The global pledge to “leave no one behind,” which is●‌Appropriately respond to the Sustainable Sourcing Code*1 for the
Tokyo 2020 Games●‌Contribute to building a social legacy*2

sustainable society towards a sustainable earth and sustainable●‌Maintain flight safety(P20, P23-27, P126)

human-environment systems.

Junko Okawa

Governance●‌Increase customer value(P28-31, P76-81)●‌Maximize corporate value throughappropriate corporate governance(P70-75)●‌Zero serious incidents●‌Achieve the world’s top customer satisfaction by fiscal year 2020
(NPS):• Domestic routes +5.3pt• International routes +4.5pt●‌Increase corporate value and achieve accountability through highly
transparent management and strong management monitoring*1 A‌ code formulated by the Tokyo Organizing Committee of the Olympic and Paralympic Games aimed at ensuring fairness and integrity as well as economic
rationale in the sourcing of products and services essential to the delivery of the Games. The code also encourages procurement practices that give due
consideration to sustainability.
*2 Long-term,‌sustainable benefits for society.

50

51

Financial / Data Section

Vice Chairman
Oversees JAL SDGs

* ‌SDGs: Sustainable Development Goals. A framework of realistic andconcrete initiatives aimed at solving poverty, hunger, energy, climatechange, social justice and other social issues. The SDGs were adopted at
the United Nations Sustainable Development Summit held in New York in
September 2015. They comprise 17 goals and 169 targets to be achievedby 2030. Companies are seen as key players in reaching these goals.

●‌Zero aircraft accidents

JAL REPORT 2018

JAL REPORT 2018

Dialog with Our Stakeholders

ESG MANAGEMENTJAL Group Basic CSR Policy

JAL Group Corporate CSR Policy

to resolve social issues, anchored in our firm commitment to flightsafety which is the basis and value of existence of the JAL Group.

The JAL Group will: Pursue the material and intellectual growthof all our employees; Deliver unparalleled service to customers;

About the JAL GroupWe will contribute to realizing a sustainable society through efforts

Through dialogs with external experts, we strive to gain our stakeholders’ understanding of JAL
Group initiatives, and identify and adapt to changes in the business environment to resolve social
issues.

and Increase corporate value and contribute to the bettermentof society.

ESG Management based on the JAL Philosophy
We discussed ESG management with Professor Iwao Taka on April 18, 2018.
Professor Taka pointed out that there are important perspectives and issues

1. ‌Leverage the advantages of our core air transportbusinessthat must not be overlooked when implementing measures expected of us inpromoting ESG management. We also renewed our awareness of the importanceof disseminating information on our activities.

with top priority on ensuring flight safety.

①

Coexist with
the Earth

2. ‌Promote initiatives across the JAL Group
Implement Group-wide initiatives targeting three CSR issues,cooperating with Group businesses as necessary.

Solvesocial issues

Contribute toCommunities

3. ‌Make a broad contribution to society as a memberof society
As a member of society, we will communicate the JAL Group’s
firm commitment to safety and its safety initiatives, while

Nonbusiness
CSR

NurtureFuture Generations

working to resolve a broad range of issues facing society.

Junko Okawa
Vice Chairman
Oversees JAL SDGs
Takahiro Shimojo
Executive Officer
General Manager, Communication Division
Yuko Horio
Vice President, Corporate Brand Promotion Department

4. Focus on JAL’s unique strengths
JAL Philosophy

Develop initiatives and create value that only JAL can deliver④③

shared awareness, values, and thinking of all Group employees.

experts and gain feedback on JAL Group’s initiatives in order to check

Next Generation, and resolve social issues while referring to ISO

the rationality of our priority issues. Through this process, we will

26000 and the Sustainable Development Goals (SDGs).

respond to social needs and issues and realize a sustainable society.

CSR Management

Committee meets every six months according to the promotion

Corporate Brand Promotion Council

PDCA cycle effectively by clarifying JAL Group’s present situation of

direction of responses, and enhances and promotes JAL’s CSR
activities.

52

should press forward based on long-term goals.

(From left)
Naoyuki Yamagishi
LeaderClimate and Energy Group
Conservation Division
WWF Japan
Yosuke Ikehara
Project Leader
Climate and Energy Group
Conservation Division
WWF Japan

framework shown on the left. The Committee implements thefulfilling society’s expectations, clarifying issues, and considering the
CSR Committee

expectations towards the JAL Group. We agreed with WWF Japan that JAL

Takahiro Shimojo
Executive Officer
General Manager, Communication Division
Yuko Horio
Vice President, Corporate Brand Promotion Department< Views from the members >● ‌Institutional investors are looking into the potential of companies in the ultra-longrange (2050-2100), which is accelerating the movement among companies to
respond to this trend.
● ‌Companies are required to take action to achieve long-term reduction of CO2
emissions. It is also important to manage assets across their life cycle and actively
use and disseminate renewable energy.
● ‌To achieve CNG2020* established by the International Civil Aviation Organization(ICAO), JAL is advised to improve fuel efficiency, use biofuel to contribute tosustainable development, disclose details of purchased carbon offset credit andbiojet fuel and reduce CO2 emissions above the targets. Close attention will be paid
to how far JAL can exceed CNG2020 targets● ‌The key points are participation in the establishment of international rules for bio
jet fuel and the selection of high-quality CO2 credit.
* CNG2020:‌
A global CO2 reduction target. ICAO adopted the following goals for aviation:
fuel efficiency improvement of 2% per annum and carbon neutral growth from 2020.

53

Financial / Data Section

To contribute to the realization of a sustainable society, the CSR

low-carbon society after the Paris Agreement and presented issues andBusiness Outline

Harmony with the Earth, Regional Contributions and Nurturing thePresident

Japan) on April 6, 2018. WWF Japan explained global movements to realize a

As social issues will change depending on the times and theenvironment, we expand opportunities for dialog with external

Board of Directors● ‌Bribery and anti-competition practices are the greatest risks when companies
expand their business internationally. Bribery, in particular, undermines disciplineand order and causes administrative corruption of the counterpart country. This
theme leads to the environment and human rights; therefore, you should beparticularly aware of these issues when promoting ESG.

We held a discussion with the World Wildlife Fund for Nature Japan (WWFissue, define our priority issues (materiality); Coexistence in

CSR Promotion
Framework● ‌I am aware that the JAL Philosophy has penetrated into JAL Group staff, but themain doctrine is to think and do what is right as a human being. Given thisobjective, every staff has a responsibility for environmental considerations and ESG.
When briefing staff on ESG, you should go back to Dr. Inamori’s philosophy of “Do
what is right as a human being,” and as a result, staff will get a clearer picture of
the significance of ESG.

A broad perspective contained in environmental problems

JAL Group’s Key CSR Issues (Materiality)
We will maintain flight safety, which is JAL Group’s universal priority● ‌JAL should position environmental initiatives and information disclosure as its
priority initiatives, and further, recognize the direct impact of aircraft renewal, routechanges and other measures on environmental activities.

● ‌I hope that the Olympic and Paralympic Games Tokyo 2020 will leave proud legacies
for children across Japan. As JAL has considerable influence in society, pleaseinvolve your suppliers and promote the creation of a sustainable society.

through efforts that embody the JAL Philosophy, the basis of②< Views from the members >A Business Base that Supports Value Creation

Business
CSR(From right)
Iwao Taka
Professor, Faculty of Economics and Business Administration,
Reitaku University

Management Strategies Designed to Create Value

Work to solve social issues through the air transport business,

JAL REPORT 2018

JAL REPORT 2018

Initiatives to Coexist with the Earth
Reducing Environmental Impact and Promoting Environmental Protection through Business Activities
Basic Approaches

Global Efforts to Reduce CO2 Emissions2) ‌CO2 emission reductions from operational
improvements

fuel economy and regular engine cleaning.

At the general assembly of the International Civil Aviation

JAL Group’s Environmental Guidelines and Concrete
Initiatives

Organization (ICAO) convened in 2010, two aspirational goals wereIn addition to eco-flights by cockpit crew through optimal timing

Fuel-saving Project consisting of activities across organizations.

agreed on for the international aviation sector: 2% annual fueland selection of operational methods with top priority on flight

Progress is monitored and results are shared throughout the

The JAL Group recognizes the impact of its air transport business on

efficiency improvement and carbon neutral growth from 2020

safety, we are also conducting various activities in workplaces tocompany in order to implement the PDCA cycle for reducing CO2

the environment and understands it must work to reduce thatonwards. Airlines throughout the world are working to achieve

reduce CO2 emissions, such as reducing aircraft weight to improve

emissions.

impact and protect the environment through measures in all aspects

these goals.
areas: 1) New aircraft related technology, 2) Operational

To this end we have developed environmental guidelines

improvements, 3) CO2 emissions trading, and 4) Utilization ofaction plan.

biofuel.

*CO2 reducedin fiscal year 2017
Reduced 17,000 tons

The JAL Group is launching new initiatives to further utilize

www.jal.com/en/csr/environment/vision/

We regularly wash aircraft engines to remove dust and other small
airborne particles stuck inside the engines in order to maintainand improve, fuel economy.

Regularmaintenancebiofuel while continuing to enhance its existing measures.

Environmental Guidelines and Action PlanEngine water washing

1) New aircraft related technology
Upgrading to fuel-efficient aircraft such as the Boeing 787 canreduce CO2 emissions by approximately 15-20% compared to

Reduced 900 tons

conventional planes. While further stabilizing its financial base, theJAL Group will continue to upgrade its fleet based on a plan tomore fuel-efficient aircraft to further reduce its CO2 emissions.

While parked

Closing window shades blocks out sunlight, lowers cabin temperatures, and reduces use of air-conditioning. This shortens theoperating time of the APU at the rear of the aircraft, thereby
reducing CO2 emissions.

CO2 Emissions Reduction Target and Progress
To reduce its environmental impact, the JAL Group has established atarget of reducing CO2 emissions from aircraft to 23% per revenue

Share of Fuel-efficient Aircraft in JAL Group’s Fleet100％

ton kilometer below the fiscal year 2005 level by fiscal year 2020.

36%

29%

23%

20%

19%

Reduced 5,800 tons

Other

The amount of water loaded for use onboard our aircraft is being
optimized based on past usage records in order to lighten aircraft
weights. This initiative received the Awards Committee Chairman’s
Special Prize from the Japan Aeronautical Engineers’ Associationin fiscal year 2017.

Before departure

Through measures taken in daily flight operations andscheduled fleet upgrades for improved fuel economy, we reduced
CO2 emissions in FY2017 by 2.4% year over year, and at the end of
FY2017 a cumulative reduction of 17.8% from 2005.

50％
71%

77%

80%

2016

2017

2018

2019

2020 Fiscal year-end

At takeoff

Reduced 5,500 tons

Ascending after takeoff while accelerating from an earlier point
than normal, which is a noise reduction takeoff method, iseffective for reaching cruising altitude earlier in the flight andreducing fuel consumption. Therefore, JAL is actively utilizing thisapproach to reduce CO2 emissions.

CO2 Reductions

CO2 Reductions

0%

110％
CO2/RTK (vs. FY2005)

Fuel-efficient aircraft: A350, 787, 777, 737-800, E170/190
Actual figures to fiscal year 2017; plans from fiscal year 2018

100％

Reduced 35,900 tons

FY2017 82.2%

Reduced 5,500 tons

2020

2019

2017

2016

2015

2014

2013

2012

2011

2010

2009

2008

2007

2006

When certain conditions are met to allow the aircraft to stopsafely, the engines’ reverse thrusters, which are used to decelerate
when landing, are deployed at minimum output (idling) in orderto reduce CO2 emissions.

At landing

Reduced 5,200 tons

While taxiing

54

Reverse thrust measures

Engine out taxi – use of only one engine on the
groundWhen taxiing to parking spots, our cockpit crews shut down oneof the aircraft’s two engines to reduce CO2 emissions, only when
specified conditions are met.

55

Financial / Data Section

2005

70%

2018

Target of 77%

Reduced air resistanceSetting flaps at shallow angles and delaying the timing for lowering the wheels and flaps, while maintaining safety, is being
conducted to minimize inflight air resistance and reduce CO2
emissions.

During descent80%

Ascent with early acceleration

Business Outline

65%

81% Fuel-efficient
aircraftLightened aircraft loads

A Business Base that Supports Value Creation

Tackling Climate Change

Reduced use of auxiliary power unit (APU)(closed cabin shades exercise)Management Strategies Designed to Create Value

highlighting areas that the Group needs to tackle and a concrete

90%

About the JAL Group

Achieving the goals will require initiatives in the following fourof its business.

W EB

CO2 reduction initiatives are also being promoted through theJAL REPORT 2018

JAL REPORT 2018

Using Aircraft to Address Climate Change
CONTRAIL Project atmospheric observations

first biofuel produced from non-edible plant oils. Later, under a

In 2010, we fulfilled our Eco-First Commitment, leading to official

The JAL Group is part of the CONTRAIL Project, run jointly by theInternational Aviation (CORSIA), which mandates that international

government-industry-academia framework for realizing biofuel

certification as an Eco-First Company. We will continue to

National Institute for Environmental Studies, the Meteorological

air transport operators reduce CO2 emissions that exceed a standard

production in Japan, we served as the Secretariat for the working

implement our Sky Eco program,Research Institute, JAMCO Corporation, and the JAL Foundation.

level through emissions credits or use of biofuel.

group which studied the feasibility of biofuel production from citywhich aims to ensure the Earth andThrough the project, greenhouse gas data collected bywaste products. As result, we believe that the most promising

its abundant resources are passed onscheduled international flights, is published by the National Instituteemissions and has started to implement measures to reduce impact

approach is manufacturing biofuel from waste such as city garbage,to the next generation so that theyfor Environmental Studies and utilized in research studies globally.

on profitability, including use of biofuel at prices equivalent towhich has a major advantage in terms of procurement of raw

can continue to view and enjoy ourconventional fuels.

materials and transport costs.

beautiful planet from the skies.

Initiatives in JapanThe ICAO General Assembly convened in October 2016 agreed to

The JAL Group conducted a test flight in January 2009 using Asia’s

institute the Carbon Offsetting and Reduction Scheme for

The JAL Group is redoubling its efforts to reduce CO24) Utilization of biofuel (Sustainable Aviation Fuel: SAF)

of the All Japan Team consisting of government, industry andAs the all-important key to major CO2 reductions, biofuel is being

academia with a view to establishing a roadmap to commercial

Initiatives at Ground Facilities
Waste reduction and recycling

developed in countries worldwide. The full-scale use of biofuel on aflights using domestically produced biofuel by 2020 and full-scale

We promote the 3 R’s (Reduce, Reuse, Recycle) to help achieve a

global scale is expected from 2030, but the JAL Group is alreadycommercial production from 2030.

recycling-based society and continue to conduct activities such as

working to increase its use in order to make major reductions to
CO2 emitted by its aircraft and help realize a recycling-based society.

discontinuation of printed manuals for cabin attendants, recycling

Initiatives in the U.S.
the JAL Group is actively working to develop business relationships
an event* where commercial flights are operated with biofuels

Raw materials(waste material)

Gasification(gasification
reactor)+Eliminationof impurities

SynGasChemical synthesis(Fischer-Tropsch
synthesis)

Fuel conversion
process(upgrading)cabins, and reuse of air cargo packing materials in recycled plastic
Neat
aviationbiofuelproducts.

Biodiversity Initiatives
Inflight meals and other initiatives

A Business Base that Supports Value Creation

As commercial production of biofuel has already started in the U.S.,
with strategic partners to promote biofuel, including participation inof beverage cans, newspapers and plastic bottles from aircraft

Process of converting waste to aviation biofuel

Since December 2017, we have operated Boeing 777-200 aircraft with the
CONTRAIL Project livery and also the logo for the UN’s Sustainable Development Goals (SDGs) in order to further promote awareness of the SDGs.

Inflight meals use food ingredients sourced for sustainability,
Production of ethanolusing fermentation

Conversion to jet fuel(alcohol-to-jet fuel)including coffee beans certified by the Rainforest Alliance on

which meet criteria and are of the same quality as conventional

international and domestic flights.

fossil fuels.

Cellulose (paper)
separation

Production of ethanol using
Isobutanol fermentation

Distillation

Buckingham Palace Declaration
The JAL Group has signed the Buckingham Palace Declaration

Raw materials(waste material)

Production of ethanolusing fermentationprohibiting the transport of illegal wildlife and wildlife products.

Conversion to jet fuel(alcohol-to-jet fuel)Joining with International Air Transport Association (IATA)
Recycling polyethylene sheets used as cargo packing materials

Management Strategies Designed to Create Value

We intend to continue contributing to this effort as a member

About the JAL Group

Initiatives as an Eco-First Company

3) CO2 emissions trading

member companies and related government authorities, we will
work to prevent the transport of illegal wildlife and wildlife

Reducing electricity use

products.

* ‌JAL participated in Fly Green Day 2017 at Chicago O’Hare International
Airport in November 2017, operating its Chicago-Tokyo flight loaded with
biofuel for 5% of the fuel consumed on the flight.

LED and other energy efficient lights, achieving a 2.5% year-on-year

Protecting the red-crowned crane

reduction in domestic electricity use in fiscal year 2017. For the third

The JAL Group works to protect the red-crowned crane, one ofconsecutive year we were awarded certification as an Excellent

Japan’s designated natural monuments. In October 2017, volunteer

Operator for Energy Conservation (S-Class) by the Ministry of

JAL Group staff helped maintain the crane’s winter feeding grounds

Economy, Trade and Industry.

in Tsurui Village, Hokkaido.

Business Outline

We continued to upgrade the lighting in maintenance facilities to

New initiatives
The JAL Group, Tokushima Prefecture and Tokushima Airport
Financial / Data Section

Building concluded an agreement on conducting joint
environmental initiatives at Tokushima Awaodori Airport. We firstplan to establish a hydrogen station at the airport in fiscal year2018 and then begin using hydrogen forklifts that run on fuel cells.

56

57

JAL REPORT 2018

JAL REPORT 2018

Human Resources

Human Rights

Opportunities for Senior Staff

Human Right Initiatives

LGBT Initiatives

Ensuring flight safety, the basis of existence as a company, and

The JAL Group established a framework for continuing employment

To realize the JAL Group Corporate Policy, we are working to

Based on the statement from top management issued in 2016, JALproviding top-level services are ultimately dependent on the physicalwithin the Group after the retirement age for those interested inreinforce respect for human rights across the Group by putting ouris continuing activities to deepen understanding of LGBT-related

and mental health of our staff. The JAL Group promotes healthfiscal year 2012, even before the amended Act on Stabilization ofaction policy – the JAL Philosophy – into practice. Educating ourissues.

management under the strong leadership of top management, led

Employment of Elderly Persons went into effect in April 2013. In

workforce about human rights is a vital step in eliminatingby the Health Management Officer.

fiscal year 2017, we revised our existing program to improve

discrimination based on gender, age, nationality, race, ethnicity,

staff and a discussion session with LGBT students who will be

In addition, starting this year, we have actively participated in

These have included conducting an e-learning course for all

religion, social class, disability, sexual orientation, gender identity,

starting the job search process. We also conducted training that

improvements included allowing staff to continue working at the

career and other personal attributes. To address this issue, we are

involved direct discussions with LGBT individuals for staff who

to proactively incorporate knowledge from external sources andsame company they worked prior to reaching retirement age.

working to raise staff awareness of human rights through various

interact with customers onboard aircraft and at airport countersfurther deepen JAL’s health management practices. One such

Enabling staff to continue to utilize the knowledge and experienceinternal educational programs, such as training courses for new

and participated in external events promoting understanding of

project is the Research Program for Health Behavior Modification by

they acquired over many years while transferring their skills tohires and managers.

LGBT issues.

Utilizing IoT, which is aimed at prevention of severe diabetes.

younger staff as a highly specialized professional team is helping toThrough participation and support for the program, JAL intends tofurther raise the quality of services we provide to customers.

further promote health management with in the company while

Management Strategies Designed to Create Value

working terms and thereby provide greater opportunities. The

joint projects between industry, government and academia in order

In compliance with the U.K.’s Modern Slavery Act, we publicly
disclose initiatives being conducted by the JAL Group and its
suppliers to prevent slave labor and human trafficking.

also broadly contributing to the promotion of health in society.

Within the Group, a hotline has been established accessible to

The JAL Group will continue taking measures to maintain and

all JAL Group staff to report and discuss harassment-related

promote the physical and mental health of staff and contribute tomatters. A promise is also that staff will not be subjected to unfair

society by providing safe and comfortable flights.

treatment if they use the hotline.

and work to maintain processes by which reforms are implemented
should risks materialize.
Participating in KYUSHU RAINBOW PRIDE 2017

Modern Slavery Act Statement
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www.jal.com/en/csr/modern-slavery-act.html

Our initiatives have been highly regarded, and in fiscal year 2017, asin 2016, JAL received a Gold ranking in the Pride rating system,
established by work with Pride, an LGBT volunteer group that

The JAL Group actively promotes the employment of people withdisabilities. Kilatto, a coffee shop run by staff with low-level intellectual
Cabin attendants perform stretch exercises before flight duty

disabilities, operates at the Group’s Haneda and Narita offices and has
recently expanded its activities to include temporary operations at JAL
early morning work is encouraged.
In addition, in fiscal year 2017, JAL was contracted by the Ministryof Health, Labour and Welfare to conduct a program for comprehensive

promotes and supports the establishment of LGBT-related diversity
management at corporations and other organizations.
We will continue working todeepen understanding of LGBT
issues in the JAL Group throughBusiness Outline

Head Office in the Tennozu Building during the summer period when

As a participating company in the
United Nation’s Global Compact,
the JAL Group implements thecompact’s Ten Principles for humanrights, labor, the environment andanti-corruption.

A Business Base that Supports Value Creation

JAL will continue to respect human rights, appropriately
manage risks to prevent actions that infringe upon human rights

Opportunities for People with Disabilities

About the JAL Group

Health Management

such activities as training courses toraise staff awareness andparticipating in external events.

support of teleworking by people with disabilities, which is one of the
Ministry’s model programs for developing expertise on teleworking. For
the program, JAL increased employment and teleworking opportunities
for people with disabilities on a trial basis. Further, as a part of themodel program, “inclusive design training” was held for staff members
Financial / Data Section

at group companies involved in employment of people with disabilities,
employees responsible for training staff who frequently interact withcustomers and other related employees.
Going forward, we intend to increase work opportunities forpeople with disabilities and further establish a workplace environment
defined by mutual respect and cooperation regardless of ability or
disability.

58

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JAL REPORT 2018

Supply Chain Initiatives

Building Strong Partnerships with Suppliers andPromoting Sustainable Procurement Activities
The JAL Group needs the cooperation and support of many

Coexist with the EarthBusiness Partner Day*To verify compliance with the JAL Group Supplier Code of Conduct,

Aviation fuel is one of the key products purchased by our

The JAL Group holds annual communication meeting “Business

we utilize Sedex Information Exchange Limited (Sedex*1), which we

procurement division and many countries are now developing

Partner Day” with suppliers, primarily companies that indirectly

joined in 2015.

biofuel as a highly effective way of achieving large reductions inprovide materials to the Group. The meeting is used as a forum to

CO2 emissions. Utilizing biofuel manufactured from city garbage

ensure suppliers understand the Group’s basic stance on

JAL actively utilizes the CSR information platform provided bysuppliers to operate its flights and provide products and services toSedex. Initially, we requested suppliers that provide products used

and other waste products, JAL will continue to actively work to

procurement and to share information and ideas. In January 2018,

customers on a daily basis. As explained below, we are working todirectly by our customers, such as inflight meals and merchandise,

substantially reduce CO2 emitted by its aircraft and help establish aa total of 48 companies participated in this meeting.

build strong partnerships with suppliers based on mutual trust by

to become Sedex members, and now in 2018 we are further

more recycling-based society.

ensuring fair and transparent procurement activities. Showing our

expanding activities and asking a total of 603 suppliers—selected

appreciation for the work carried out by suppliers is also a key partbased on transaction volume regardless of product type orof our business relationships.

domestic/overseas location—to become a member of Sedex andGoing forward, we intend to conduct supply chain risk

approach to procurement, the JAL Group Supplier Code of Conduct
For details on biofuel, refer to P.56, “Utilization of biofuel.”

and criteria that have to be met to secure orders. We also
encourage suppliers to become members of Sedex and talk about

Procurement Division’s Personnel Training andDevelopment

ways of working with them to optimize the management andincrease the competitiveness of the entire supply chain. Suppliers

assessments based on the results of the self-assessment

The JAL Group annually conducts training on the basics ofare also invited to join JAL maintenance factory tours to give them aquestionnaire using Sedex and request improvements as needed of

procurement for new members of the Procurement Division with adeeper understanding of the JAL Group.

suppliers for which it is determined there is a high likelihood of risks

focus on transaction ethics and supply chain sustainability,

materializing.

recurrent training for all members of the Procurement Division and* “Business‌
Partner Day” are held every year and are organized by theProcurement Division. Similar meetings are also run by the Airport
Operations Division, IT Planning Division and other departments based on
their areas of specialization.

2. To provide safe and reliable services to customers
To ensure sense of security to customers when theyboard our flights, we are cultivating a culture with our
suppliers to put top priority on safety and conduct
rigorous quality management to offer the finest
hospitality.

training on international procurement standards with outside
instructors in order to further educate and develop our procurement

issues facing society. In addition, as an Official Airline Partner of theprofessionals.

Olympic and Paralympic Games Tokyo 2020, we also intend to

In addition, JAL’s Procurement Division is taking the lead in

actively promote initiatives based on the Sustainable Sourcing

workstyle innovation and creating a workplace that allows diverse

Code*2.

personnel to excel. JAL was selected from among a number of*1 ‌Sedex, the Supplier Ethical Data Exchange, is a non-profit organization established in the U.K. in 2004 that provides a platform for managing andsharing corporate ethical information with the aim of ensuring responsible
business practices on supply chains.
*2 ‌A set of guidelines established by the The Tokyo Organising Committee of
the Olympic and Paralympic Games to ensure that services truly necessary
for the Olympics Games are procured while considering not only economic
rationality but fairness, transparency and other ethical principles as well andalso to ensure procurement takes adequate account of sustainability issues.

companies for The GEP Procurement Team Award at the World
Procurement Awards 18 held by Procurement Leaders,* a global
procurement network.
* ‌One of the world’s largest procurement networks with over 700 global corporations participating

A communication meeting for suppliers

Build mutual
understanding
and trust

JAL Group Supplier Code of Conduct

Supplier Satisfaction Survey

View supplier data
and monitor improvements

The JAL Group administered a supplier satisfaction survey to 48
companies in February 2018 in order to confirm that procurement

Provide CSR data
based on international standards*

activities are being conducted fairly and transparently. The survey
found that suppliers both understand and support the JAL Group’s
fair and transparent practices. Some suppliers also indicated a desire

We established the JAL Group Supplier Code of Conduct in April

for improved communication with Procurement Division members.

2016. The code, which is available in Japanese, English, andChinese, is based on the principles of the United Nations Global
Compact and covers four key areas: (1) human rights, (2) healthand safety, (3) business management, and (4) the environment. We

Suppliers

Provide CSR data,submit reports on
improvements

Ceremony for the Procurement Team Award 18

Based on these findings, we will continue to carry out training andother programs for Procurement Division staff.

JAL Group Supplier Code of Conduct
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www.jal.com/en/outline/client/

Financial / Data Section

ask all our suppliers to understand and comply with the Supplier
Code of Conduct.

Business Outline

3. Promoting procurement based on CSR
We are working with suppliers to promote procurement activities in line with the JAL Group CSR Policy.
Specific initiatives are aimed at legal compliance,
protecting the global environment, respecting humanrights, appropriate labor practices, fair businesspractices and responding to consumer issues.

By coordinating with suppliers through Sedex, we hope tocontribute to the attainment of the SDGs and help resolve other

A Business Base that Supports Value Creation

1. Fair and transparent procurement
When selecting suppliers, we assess a broad range offactors, such as the company’s reputation and its
corporate social responsibility (CSR) initiatives, inaddition to the quality and cost of its products andservices and delivery performance. We also work toensure fair and transparent procurement activities byoffering numerous opportunities for many suppliers inJapan and overseas to do business with the JAL
Group.

Management Strategies Designed to Create Value

respond to a self-assessment questionnaire.

During Business Partner Day, we explain the JAL Group’s basic

About the JAL Group

With our suppliers

Building a sustainable supply chain

Evaluate CSR activities,
advise improvements,
monitor progress* ‌International standards: ISO 14001, SA 8000, OHSAS 18001, Ethical Trading
Initiative (ETI) Base Code, etc.

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JAL REPORT 2018

JAL REPORT 2018

Regional Contribution Activities

JAL NEW-JAPAN PROJECT

Support for Disaster Relief and Recovery
Efforts

market hidden tourist spots and distinctive regional products.

JAL will continue to fulfill its role as a company responsible forSpecifically, we not only promote popular local delicacies through ourJapan’s air transport infrastructure by providing support to affected

inflight magazine, website and inflight meals, but also promote flows

areas in the relief and recovery phases after a large-scale disaster.

of goods and people to the relevant regions through tourism
promotion and the Sixth-Sector Industrialization of agricultural, forest

Post-disaster phase – Relief phaseand fishery products*. Our ultimate aim is to realize sustainable

JAL cooperates in the transport of relief supplies and volunteers toregional development and create new demand for air travel.

affected areas in the event of a large-scale disaster as a member ofDisaster Relief. We aim to support flows of people and goods suchas emergency relief supplies and contribute to a swift recovery of
the affected areas.

Recovery phase
In addition to providing economic support to affected areas such as(Iwate Prefecture x Johoji lacquerware x
JAL Joint Development): Japanese sake
pitcher and cup set

Inflight magazine SKYWARD

that providing emotional support to the residents in affected areas
is also our important duty. Based on this idea, we assist withpublicity of regional products in collaboration with prefectural
governments and conduct staff study tours in affected areas tosupport recovery.

JAL is conducting various projects under the theme “Developing

Sports Ability Evaluation Workshops

the Next Generation through Sports.” The projects are

By measuring six different sports abilities with the latest special

conducted nationwide to support children, who will be themeasurement devices, each participant is told which of the 64

leaders of the future, in making their dreams come true andsports best suits his or her strength and in which sport that

promoting discovery and learning.

strength can be applied effectively. JAL plans to hold workshops
at all 47 prefectures by 2020 to enable children from across“Asuchalle” School

Japan to discover their potential and have goals or dreams to

JAL has been providing all-round support to the Challenge For

work towards

Tomorrow School visiting program “Asuchalle” sponsored by
2017. This program was launched by the Center in April 2016

Discovering the Next Generation of Paralympic
Athletesand provides elementary, junior and high school students with

By contacting our special e-mail address, we send staff to holdhands-on para-sport experiences with Paralympic athletes anda Sports Ability Evaluation Workshop using the special

opportunities to listen to their experiences. It is a forum where

measurement devices mentioned above. We have made steadychildren learn the value of having dreams and goals, and theprogress in this activity, as we have been contacted by 73

importance of removing barriers in society and respecting

people, evaluated some of them and referred to the relevant

diversity. With JAL’s sponsorship, the wheelchairs and staff

paralympic sports association. JAL will continue to work for

involved in the forums are transported by air. In fiscal year

Japan’s growth into a caring society.

the Nippon Foundation Paralympic Support Center since April

A Business Base that Supports Value Creation* ‌To comprehensively and integrally promote agriculture, forestry andfisheries (primary industry 1), the manufacturing industry (secondary
industry 2) and the retail business (tertiary industry 3) and create new
added-value by using regional resources. 1+2+3=6 th sector industry.

promoting industrial development and tourism demand, we feel

Developing the Next Generation
through Sports

Management Strategies Designed to Create Value

the Joint Committee for Coordinating and Supporting Voluntary

TOPICS
About the JAL GroupJAL is assisting regions across Japan to discover, commercialize and2017, forums were held for 42,741 children at 263 schools andtour goal is 200,000 children at 1,000 schools by the year

Nurturing the Next Generation

2020.

JAL Next Athlete Project
Launched in April 2017, the JAL Next Athlete Project is built on
two pillars; Sports Ability Evaluation Workshops and Discovering
the Next Generation of Paralympic Athletes.

JAL Factory Tour – SKY MUSEUM

Business Outline

JAL SORAIKU®

JAL Factory Tour – SKY MUSEUM is run at the JAL Maintenance
JAL SORAIKU® is a program which features hands-on programsCenter adjacent to Haneda Airport. The tours are free and giveunique to JAL. It aims at nurturing the next generation by giving

visitors the opportunity to learn about the various types of jobs in an

children insight into the wonders of the sky and encouraging themairline and observe aircraft maintenance services at close distance.

to think about their future. We target a total of one million

The SKY MUSEUM attracted over 130,000 visitors in fiscal year 2017.

participants by the end of fiscal year 2020.

JAL Paper Plane Classes
Content of JAL SORAIKU®

62

volunteers, who are certified instructors by the Japan Origami Airplane

Financial / Data Section● JAL Factory Tour – SKY MUSEUM● JAL Paper Plane Classes● JAL Sky Eco Classes● JAL Career Talk for Students● JAL Safety Demonstrations by Cabin Attendants● JAL Job Interview Simulation for Students● JAL STEAM SCHOOLJAL Paper Plane Classes are held by approximately 1,300 JAL Group staff
Association. In fiscal year 2017, a total of 33,121 people attended theseclasses. The JAL Origami Plane World Competition will be held in 2020.

Scenes from Challenge For
Tomorrow School

Scenes from Sports Ability Evaluation
Workshops

The disabled can also participate in a Sports Ability Evaluation Workshop.

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JAL REPORT 2018

JAL REPORT 2018

BOARD OF DIRECTORS AND OF FICERS
Directors

Yuji Akasaka

Tadashi Fujita

Norikazu Saito

Representative Director,
Chairman

Representative Director, President
Chairman of the Management Committee,
Chairman of the Council for Group Safety
Enhancement,
Chairman of the Corporate Brand Promotion
Council,
Chairman of the JAL Philosophy Committee

Representative Director, Executive
Vice President
Aide to the President,
Chief Wellness Officer,
Chairman of the JAL Wellness
Promotion Committee

Director, Senior Managing
Executive Officer
General Manager of the
Finance & Accounting
Division

Masatoshi Ito

Eizo Kobayashi

Sonoko Hacchoji

External Director

External Director

External Director

Toshinori Shin

Shinichiro Shimizu

Director, Senior Managing
Executive Officer
General Manager of theManaging Division RouteMarketingDirector, Senior Managing
Executive Officer
General Manager of the
Flight Operations Division,
Safety General Manager

Director, Managing
Executive Officer,
General Manager,
Secretary’s Office

Management Strategies Designed to Create Value

Hideki Kikuyama

About the JAL Group

Yoshiharu Ueki

A Business Base that Supports Value Creation
Business Outline
Financial / Data Section

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JAL REPORT 2018

JAL REPORT 2018

BOARD OF DIRECTORS AND OFFICERS

Audit & Supervisory Board Members(As of July 1, 2018)

Representative Director, Chairman

Junko Okawa
Vice Chairman
Oversees JAL SDGs

Representative Director, President
Chairman of the Management Committees,
Chairman of the Council for Group Safety Enhancement,
Chairman of the Corporate Brand Promotion Council,
Chairman of the JAL Philosophy Committee

Tadashi Fujita

Norikazu Saito
Director, Senior Managing Executive Officer
General Manager of the Finance & Accounting
Division

Hideki Kikuyama
Director, Senior Managing Executive Officer
General Manager of the Managing Division
Route Marketing

Toshinori Shin
Director, Senior Managing Executive Officer
General Manager of the Flight Operations Division,
Safety General Manager

Director, Managing Executive Officer,
General Manager, Secretary’s Office

Eizo Kobayashi
Independent External Director

Independent External Director

Sonoko Hacchoji
Independent External Director

66

President Akasaka served mainly in Engineering & Maintenance Division and acquired very high levels offrontline experience and insight into flight safety. He also gained extensive knowledge and a network ofconnections in the airline maintenance industry. He brought his strong leadership and decision-making
capabilities to JAL ENGINEERING CO., LTD. as President since 2014 and strengthened the basis for flightsafety.

Yasushi Suzuka
Audit & Supervisory Board
MemberDuring his career at JAL, Mr. Suzuka has engaged primarily in maintenance
operations such as maintenance planning and engineering. He has made asubstantial contribution to the Board with his extensive insight into production. A
member of JAL’s Audit and Supervisory Board since July 2012, he is also chairpersonof the Japan SAP Users’ Group.

Executive Vice President Fujita worked in sales departments at Head Office and branch offices in Osaka,
Okinawa, Paris and other regions. As Executive Officer of the Managing Division Passenger Sales, he hadoverall responsibility for all Profit Centers and achieved strong results. Currently, while performing theduties of Representative Director and Executive Vice President, he also serves as Aide to the President. He
brings his experience and expertise to the Board in further reinforcing and enhancing management.
Director Saito has specialized for many years primarily in finance and accounting, constantly deepening his
knowledge of finance, accounting, IR, and other fields. In his current position as Director, Senior Managing
Executive Officer and General Manager of the Finance and Accounting Division, he brings his prowess andcompetencies to the Board to assure highly transparent information disclosure that is comprehensible toshareholders and investors and precise management decisions that support shareholders’ interests.

Shinji Hatta
Audit & Supervisory Board
Member(Independent External
Auditor)Director Kikuyama engaged in work ranging from IT systems, passenger reservations, and human resources
and industrial affairs to corporate planning at Head Office and branch offices in Osaka, the U.S. and otherregions. Currently as Director, Senior Managing Executive Officer and General Manager of the Managing
Division Route Marketing, he brings his experience and expertise to the Board in improving and stabilizing
route profitability in a precise and effective manner.
Director Shin acquired high levels of frontline experience and expertise on safe operations, etc. as a pilot.
Today, as Director, Senior Managing Executive Officer, General Manager of the Flight Operations Division
and Safety General Manager, he brings his know-how and capabilities to the Board to strengthen
management of the Group’s safety initiatives and reach appropriate decisions on important safety measuresand investments at Board meetings and other meetings.

Director Shimizu successively engaged in personnel and industrial affairs related to cockpit crew,
cabin attendants and other divisions and exercised strong leadership and planning andcoordination capabilities. As General Manager of Human Resources since 2013 and theSecretary’s Office since 2016, he is making considerable contributions to improving andstabilizing JAL’s presence through precise evaluation of JAL’s position from a high perspective.
External Director Kobayashi provides the Board with sound direction and advice based on his experienceand expertise as top management of a general trading company. He also serves as Senior Representative
for Business Community Relations of ITOCHU Corporation, External Director of OMRON Corporation andExternal Director of Japan Exchange Group, Inc., among other capacities.
External Director Ito has rich experience and deep insight acquired as top management of global
enterprises engaged in marketing from the customers’ perspectives, offering the Board appropriate
supervision and advice from practical and multilateral perspectives. He also serves as Representative
Director and Chairman of Ajinomoto Co., Inc., President of the Japan Advertisers Association Inc. andExternal Director of Yamaha Corporation, among other capacities.

Osamu Kamo
Audit & Supervisory Board
Member(Independent External
Auditor)Shinsuke Kubo
Audit & Supervisory Board
Member(Independent External
Auditor)

Professor Hatta is an authority on financial auditing theory and corporate internal
control and has served as an External Auditor for JAL since July 2012. He also serves
as Professor at Ohara Graduate School of Accounting, Professor Emeritus at Aoyama
Gakuin University, external auditor for the Development Bank of Japan Inc. and acouncil member on the Japanese government’s Financial Services Agency BusinessAccounting Council, among other positions.

Since his certification as an attorney in April 1973, Mr. Kamo has accumulated
extensive experience and expertise in compliance and corporate governance. He hasserved as an External Auditor for JAL since June 2016. He also serves as an attorney
for the Ginza Sogo Law Firm, committee chairperson for CHANS (Office forGovernment Procurement Challenge System, under the jurisdiction of the JapaneseCabinet Office), and External Auditor for Azearth Corporation, among otherpositions.

After joining Sanwa & Co. Tokyo Marunouchi Office (current Deloitte Touche
Tohmatsu LLC), Mr. Kubo cultivated extensive experience and achievements andgained deep insight into accounting through his involvement in many corporate
audits, share listings, corporate reorganization proceedings, M&A deals and otherprojects. He has served as an External Auditor for JAL since June 2018, as well as
Managing Partner of Kyoei Accounting Office and Representative Director of JapanEnterprise Sustainable Transformation Advisory Co., Ltd., among other positions.

Financial / Data Section

Masatoshi Ito

Ms. Okawa acquired first-hand experience and insight as a cabin attendant, and from 2010, as General
Manager, Cabin Attendants Division, she accomplished various divisional tasks and goals drawing on her
strong managerial perspective and high performance ability. Currently, as Vice Chairman overseeing JAL
SDGs, she contributes significantly to promoting business in harmony with the environment and society inorder to help bring about a sustainable society.

Business Outline

Shinichiro Shimizu

Audit & Supervisory Board
MemberMr. Taguchi has served in various departments, including sales, personnel affairs andflight operations. He was appointed Executive Officer and CEO for the Americas
Office in April 2007 and Executive Vice President in February 2010. He has been amember of the Audit & Supervisory Board since February 2012.

A Business Base that Supports Value Creation

Representative Director, Executive Vice President
Aide to the President,
Chief Wellness Officer,
Chairman of the JAL Wellness Promotion Committee

Hisao Taguchi

Management Strategies Designed to Create Value

Yuji Akasaka

From his start as a pilot, Chairman Ueki has accumulated extremely high levels of frontline experience andknowledge on flight safety. As Representative Director and President since 2012, he oversaw the
preparation of the Medium Term Management Plan and accomplished the Plan through .his strong
leadership and decision-making capabilities. He brings his experience and expertise to the Board instrengthening its supervisory function as a member of the Nominating Committee, Compensation
Committee and other committees.

About the JAL Group

Yoshiharu Ueki

(As of July 1, 2018)

External Director Hacchoji draws on extensive experience in financial product development, loans and risk
management at banks, customer-centric marketing and management strategy in hotel management andeducation reforms at universities to oversee and provide advice to the Board from diverse perspectives. She
also serves as External Director of Nisshin Steel Co., Ltd. and Special Advisor to the President and Chief
Strategy Officer of Tsuda University.

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JAL REPORT 2018

JAL REPORT 2018

EXTERNAL DIRECTORS

I hope to use my experience at a trading company to support
JAL in implementing its growth strategies.
It was very clear to me during discussions at Board meetings concerning the Rolling Planfor the Medium Term Management Plan that JAL is serious about tackling management
During our review of the Medium Term Management Plan, various problems wereplaced on the table without exception and we held frank and open discussions. As we are

Eizo Kobayashi
External Director

The JAL Group has three External Directors, who supervise Group management from anexternal perspective and provide appropriate advice. In this section, the External Directors
present their views and recommendations such as their evaluation or expectations towards the
JAL Group.

contributes to engaging and meaningful discussions of a higher level than I have seen atother companies. Taking into account the unpredictable operating environment of the JAL
Group, I feel that it is highly recommendable to hold substantial discussions such as thoseat JAL Board meetings.
JAL tends to take a somewhat cautious approach when tackling management issues,
which might reflect the very painful period it went through in the past. The businessenvironment is currently buoyant due to the steep rise in inbound visitors to Japan. The
biggest issue currently facing JAL is how to change the thinking of every staff, from top
management right down to frontline staff, and implement the next growth strategies.
Technology, human resources and other business resources will be needed, but what isnecessary at this stage is to forge partnerships domestically and internationally in areas
where resources are not immediately available and collaborate in order to seek “the best
for all” with partners, instead of “the best for one” company alone. Building thesepartnerships will be challenging, but as I have extensive experience in forming domestic
and international partnerships, I would like to provide advice through the Board of
Directors based on my knowledge.

I assumed the position of External Director in June 2018. Since starting work afterI have confidence in JAL’s Board effectiveness as seen in open,
in-depth discussions and execution of the succession plan.

graduation, I built a career in the financial sector for over 30 years and the hotel sector fornearly 10 years. In both sectors, I dealt with new business launches such as financial
product development and business development, that is, wildcat businesses rather than

Sonoko Hacchoji
External Director

and encourages frank opinions. I think this comes from its history of overcoming difficulties

business partners, take notice of different corporate cultures and listen to the views andand a forward-looking attitude to create a new company. During discussions by the Board

decisions of management and staff. Although learned a little bit of everything, I realized

about the Medium Term Management Plan, I also felt a culture of meticulousness. The

that although Japanese companies appear to be the same on the surface, many different

members first exchanged views and then held repeated discussions, while going back to
any concerns for verification. Furthermore, at Board meetings, the directors do not merely

values, perspectives and ways of thinking existed within.
I hope my knowledge would be useful to the JAL Group, which upholds the slogan“Challenge, Leading to Growth” in its new Medium Term Management Plan towards
realizing the JAL Vision.
Working on the frontline in other industries was rewarding at times and exhaustingat other times. But it was always clear to me that the thoughts and efforts that frontline
workers including myself put into products and services had a major impact on corporate
value. Most importantly, I learned that when frontline workers and management aligned
mental vectors, corporate value could be maximized.
JAL works faithfully to penetrate the JAL Philosophy into frontlines each day. It acts as
the source of energy for every staff in his or her performance of job duties. I have highhopes that the JAL Philosophy will contribute significantly to aligning the mental vectors offrontlines and management.
I still have much to learn about the airline industry, but I will keep in mind myMasatoshi Ito
External Director
April 1971 Joined Ajinomoto Co., Inc.
April 2003 Representative Director, President of
Ajinomoto Frozen Foods Co., Inc.
June 2009 Representative Director, President &Chief Executive Officer of AjinomotoCo., Inc.
June 2015 Representative Director & Chairman of
the Board of Ajinomoto Co., Inc. (topresent)
February 2016 Chairman of the JAA Council, Japan
Advertisers Association Inc. (to present)
June		 External Director of Japan Airlines Co.,ltd. (to date)June		 External Director of Yamaha Corporation (to date)listen to explanations but also hold dialogs with the External Directors. In addition to thedirectors, External Auditors actively present their views, resulting in highly effective Board.
One of JAL’s management issues is the importance of possessing a long-term
perspective. The Medium Term Management Plan is a rolling three-year plan, but given thelarge amount of investment required in the airline industry, three years is too short a timeto verify the results. We need to have a 10-year perspective. Another issue is stakeholder
engagement with your shareholders, customers, partner airlines and other stakeholders. Uptill now, JAL has been focused on revitalizing the company. Going forward, I feel that theGroup needs to deepen stakeholder engagement to adapt to the rapidly changing
operating environment. The consumer goods company where I previously worked for faced
similar issues. Therefore, I feel my experience will be useful in this area.
JAL’s new President was appointed through the execution of the succession plan by
the Nominating Committee, which I chaired, including other External Directors andexperiences as an aircraft user at different stages of my life and use the experience gained

directors. The Committee organized the requirements of the succession plan, interviewedby shifting industries to fulfill my role as External Director and help increase JAL’s corporate

the candidates and checked their views as President and other points. This process took

value as it pursues its growth strategies.

some time, but functioned effectively.

69

Financial / Data Section

68

JAL has a corporate culture which allows open discussion, facilitates information-sharing

unknown world. But the upside was that I had opportunities to interact with various

Business Outline

April 1972 Joined The Industrial Bank of Japan,
LimitedNovember1993 Director, Vice President of IBJ International plc, a U.K. securities subsidiary of
The Industrial Bank of Japan, Limited
June 1997 Deputy Manager and Associate Director,
Market Risk Management Office of The
Industrial Bank of Japan, Limited
March 2002 Executive Officer, General Manager ofInformation Equipment Business Department of IBJ Leasing Company, Limited,a domestic subsidiary of The Industrial
Bank of Japan, Limited
April 2004 Senior Consultant of The Kyoritsu Risk
Management Co., Ltd.
January 2006 Director and General Manager, Administration Div. of Yuki Management &Research Co., Ltd.
April 2008 Non-executive Internal Auditor of Aetos
Japan, LLC
April 2009 Executive Officer of Fujita Kanko Inc.
March 2010 Director and Executive Officer of Fujita
Kanko Inc.
March 2011 Managing Director and Managing
Executive Officer of Fujita Kanko Inc.
March 2015 Advisor to Fujita Kanko Inc.
June 2016 External Director of Nisshin Steel Co.,
Ltd. (to date)
April 2017 Special Advisor to the President andChief Strategy Officer of Tsuda
University (to date)June 2018 External Director of Japan Airlines Co.,
Ltd. (to date)cash cows. I gained experience in controlling, so to say, the accelerator and brake in an

A Business Base that Supports Value Creation

I will use my frontline experience in other industries and user
perspective to contribute to increasing corporate value of the
JAL Group.

candid views from the perspectives of common sense and different industries. I believe thisManagement Strategies Designed to Create Value

Corporate governance that actively draws on external perspectives

April 1972 Joined ITOCHU Corporation
June 2004 President and Chief Executive Officer of
ITOCHU Corporation
April 2010 Chairman of the Board of ITOCHU
Corporation
July		 External Audit & Supervisory Board
Member of Asahi Mutual Life Insurance
Company
June 2011 Director Chairman of ITOCHU
Corporation
June 2013 External Director of OMRON Corporation (to date)June 2015 External Director of Japan Airlines Co.,
Ltd. (to date)June 2016 Chairman of ITOCHU Corporation
External Director of Japan ExchangeGroup, Inc. (to date)
April 2018 Senior Representative for BusinessCommunity Relations of ITOCHU
Corporation (to date)allowed to share problems from an external perspective with the Board members, we offer

About the JAL Groupissues guided by the JAL Philosophy.

JAL REPORT 2018

JAL REPORT 2018

CORPORATE GOVERNANCE
Basic Stance on Corporate Governancefor the positions of Director, Corporate Auditor, and Executive Officer,
decides their remuneration, and makes important decisions.

standpoint, with the cooperation of internal audit departments andaccounting auditors.

Those who do not qualify as highly independent as defined by theoperations. As the leading company for safety in Japan’s transportbusiness executive functions, the Board appoints a Director who does

“Standards for Independence of External Directors” (described below)

sector, we work to ensure safe operations – the cornerstone of ournot serve concurrently as an Executive Officer as Chairperson, and an

established by the Company are not appointed. Furthermore, one

business – while offering the highest level of service to customers. We

appropriate number of three or more External Directors who qualify as

External Director among the External Directors is appointed Lead

Establishment of Various Committees
Corporate Governance Committee (Chairperson: Eizo
Kobayashi, Lead Independent External Director)

also endeavor to fulfill our economic responsibility to all stakeholders byhighly independent to provide appropriate advice.

Independent External Director to improve coordination with the

The Corporate Governance Committee inspects initiatives under the JAL

Corporate Auditors and internal divisions.

Group Fundamental Policies at least once a year, conducts analyses andIn order to carry out efficient decision-making, the board may

generating an adequate level of profits through the provision ofdelegate decision-making concerning matters set forth in themeeting our wider responsibilities to society.

Administrative Authority Criteria Table to the President pursuant toBoard of Corporate Auditors

enhancement of corporate value in the medium to long term, and provides

Regulations for Kessai (written approval) and Administrative Authority

The Board of Corporate Auditors makes appropriate judgments from annecessary recommendations and reports to the Board of Directors. The

in accordance with the JAL Group Corporate Policy, “The JAL Group willapproved by the board. The Management Committee has been establishedindependent, objective perspective, based on their fiduciarycommittee comprises three External Directors (Eizo Kobayashi, Masatoshi

pursue the material and intellectual growth of all our employees, deliver

for the purpose of contributing to appropriate and flexible decision-making

responsibilities to the shareholders, when fulfilling their roles and

Ito and Sonoko Hacchoji) in addition to Chairperson Yoshiharu Ueki.

unparalleled service to our customers, and increase corporate value andconcerning management issues by the Board of Directors and the President.

responsibilities, such as auditing the execution of Directors’ duties,

The Board of Directors has established the Corporate Governanceappointing or dismissing accounting auditors and executing rights

In line with this thinking, we have established the JAL Philosophy

contribute to the betterment of society.” We will strive to enhanceevaluations to verify whether they contribute to sustainable growth andNominating Committee(Chairperson: Masatoshi Ito, External Director)

Committee, which comprises the Chairperson of the Board and External

governance system that results in a high level of management

Directors, to evaluate the effectiveness of the Board of Directors withtransparency and strong management oversight, while at the same timereference to self-evaluations by each Director once a year, review the

Corporate Auditors

concerning the appointment of candidates to the positions of Director andengaging in speedy and appropriate management decision-making.

operation, and so forth, of the board appropriately, and disclose a

The Corporate Auditors monitor important matters concerning corporate

Corporate Auditor, the Nominating Committee makes a comprehensive

summary of its findings.

management, business operations and the execution of duties by reviewing

judgment of the personality, knowledge, ability, experience andimportant Kessai (written approval) documents, as well as participating in

performance of the candidate in response to inquiries from the Board of

The Board of Directors has established corporate governance thatadheres to the Fundamental Policies of Corporate Governance as a key set

concerning auditors’ remuneration.

When submitting a proposal to the General Meeting of Shareholdersof rules subsequent to the Companies Act, relevant laws and regulations,

Directors

board meetings and other important meetings. Furthermore, the Corporate

Directors and reports back to the board. The Nominating Committee also

and the Articles of Incorporation, and reviews it at least once a year.

Legal considerations are explained to the Directors to ensure that they

Auditors, together with staff members of the Corporate Auditors Office,continually discusses potential successors to the president and otherare aware of their responsibilities, including the “fiduciary duty of

conduct an annual audit of each business site, subsidiary and affiliatedcompany leaders responsible for reforming the Group and driving growth

loyalty” and the “duty of ensuring prudent management.” The term ofcompany and report the results to the Representative Directors. They also

in order to ensure the Corporate Policy and management strategies are

office is set at one year in order to confirm their accountability eachshare information with the internal audit departments and accounting

maintained, and reports on these discussions to Directors. The committee

Board of Directors

fiscal year. The Company has also introduced a remuneration system forauditors and hold regular meetings with Corporate Auditors of subsidiaries

comprises three External Directors (Eizo Kobayashi, Masatoshi Ito and

The Board of Directors ensures a high level of management transparency

Directors (excluding External Directors) based on sound financial

to improve and strengthen auditing of the JAL Group.

Sonoko Hacchoji), Chairperson Yoshiharu Ueki and President Yuji Akasaka.

and strong management oversight through the election of candidates

incentives designed to promote sustained growth.

Corporate Governance System

The Corporate Auditors are provided with the means to acquire a

Compensation Committee(Chairperson: Eizo Kobayashi, External Director)

Corporate Governance Systemregular participation in external training and external associations, and

The Compensation Committee discusses matters concerning theso forth, for which the Company bears the necessary expenses.
General Meeting of Shareholders

amounts of compensation paid to Directors, Executive Officers andAppointment/
Dismissal

Appointment/Dismissal

Auditing

Board of Directors
Appointment/Dismissal/
Instruction/Command

Appointment/Dismissal/
Instruction/Delegation of Authority

ReportAdvisory

President

Recommendation

Management Committee

Recommendation

Appointment/
Dismissal

Board of Audit &Supervisory Board Members

Instruction/
Delegation of Authority

Group Operational
Safety Promotion
Committee

Tokyo 2020
Olympic andParalympic
Promotion
Committee

Executive Officers Board
Departments and Subsidiaries

Corporate Brand
PromotionCouncilthe same as the Nominating Committee members.

Independence of External Directors” (described below) established by
the Company are not appointed. Eternal Corporate Auditors ensure

Personnel Committee (Chairperson: Yuji Akasaka, President)

sound management by conducting audits from a neutral and objective

When appointing or dismissing an Executive Officer, the Board of Directors

Collabo- ReportrationCompensation Committee
Personnel Committee

Composition of Voluntary Committees

Management
LiaisonCommittee

Audit

Accounting Auditor

Collaboration
Collaboration

Risk Management Committee
CSR Committee

not qualify as highly independent as defined by the “Standards for

Financial Risk Committee
Investment Monitoring Committee
JAL Wellness Promotion Committee

Guidance/Advice

Legal Advisors

The Chairperson◎
Board Member○

Director, Chairperson

Representative
Director, President

External Director

External Director

External Director

Yoshiharu Ueki

Yuji Akasaka

Eizo Kobayashi

Masatoshi Ito

Sonoko Hacchoji

Corporate Governance Committee

○

◎

○

○

Nominating Committee

○*

○

○

◎

○

Compensation Committee

○*

○

◎

○

○

Personnel Committee

○*

◎

○

○

○

Officers Disciplinary Committee

○*

○

◎

○

○

*As a Director

70

71

Financial / Data Section

ReportSignificant
IssuesGroup Council for
Safety Enhancement
General Meeting

reports back to the board. The Compensation Committee members are

Nominating Committee

Financial Audit

JAL
Philosophy
Council

Corporate Auditors based on requests from the Board of Directors andwith vast knowledge and experience in various fields, and those who do

Corporate Governance Committee

Officers Disciplinary Committee

Group Earnings
Announcement
SessionEternal Corporate Auditors are appointed from among persons

Business Outline

through the provision of corporate information and opportunities for

sufficient understanding of their required roles and responsibilities

A Business Base that Supports Value Creation

corporate value and achieve accountability by establishing a corporate

Management Strategies Designed to Create Valuehigh-quality products and services based on fair competition, while also

About the JAL GroupIn order to separate the management oversight function and

The JAL Group aims to contribute to society through its business

External Directors are appointed from among persons with vast
knowledge and experience in various fields in order to ensure diversity.

JAL REPORT 2018

JAL REPORT 2018

CORPORATE GOVERNANCE

during the Company’s next stage under a new president and new

response into account before making a decision. The Personnel Committee

management team, it was found that the board needs to increase its

members are the same as the Nominating Committee members.

discussions on the Company’s long-term vision, growth strategies andTraining Policy for Directors and Corporate
Auditors* ‌This amount excludes allowances in cases where an Executive Officer servesconcurrently as a Director or where an Executive Officer has representative
authority.

Framework for Incentive Remuneration
1. Annual incentives (performance-linked bonuses)

Legal considerations are explained to the Directors to ensure that theyGroup as whole, including the Board of Directors, enhance training forare aware of their responsibilities, including the “fiduciary duty of

Directors, and create a training and development program for the next

loyalty” and the “duty of ensuring prudent management.” The

The amount to be paid every fiscal year as an annual incentive will

Any disciplinary action imposed on Directors or Executive Officers is

generation of Directors. The Company intends to steadily carry out theseCompany provides opportunities for Corporate Auditors to sufficiently

vary from approximately 0 to 200 depending on the degree ofdetermined by the Officers Disciplinary Committee. The Officers

and other related initiatives going forward.

understand their roles and responsibilities by providing corporateachievement, with 100 representing the amount to be paid when

information and opportunities for participation in external training

achievement is in line with performance targets. The indices for

programs and associations, the cost of which is covered by the Company.

evaluating performance will include net profit attributable to owners

To give External Directors and Corporate Auditors a deeperof parent, indicators related to safe flight operations and individual

We have set out the following standards to determine whether External

understanding of the Company’s operations, they are encouraged toevaluation indices for each director. These indicators will be reviewed

Directors qualify as independent (in principle, a person to whom none

participate in internal meetings and opportunities are created foras necessary in accordance with changes in business conditions, theof the following apply shall be judged to be independent).

workplace inspection tours and discussions on key issues.

roles of directors and other factors.

Disciplinary Committee members are the same as the Nominating
Committee members.

Evaluating the Effectiveness of the Board of
Directors

Standards for Independence of External Directors

Under its Fundamental Policies of Corporate Governance, every year the
JAL Group assesses the effectiveness of the Board of Directors andappropriately reviews its functioning while making reference toevaluations of individual Directors and other resources. The effectiveness1. ‌A person who executes or has executed business in the Company ora consolidated subsidiary during the past 10 years.

Remuneration Policy for Directors (excluding
External Directors) and Executive Officers

2. ‌A person who could be described by any of items a~f during the past

2. ‌Long-term incentives (performance-linked sharebased remuneration)
The number of shares to be granted every fiscal year as a long-term
incentive will vary from approximately 0 to 220 depending on thethree years.

Basic Policy

degree of achievement, with 100 representing the number to bedetails are as follows.

a. A‌ business counterpart or a person executing business for a

1. To‌ support the sustainable and steady growth of the Company and the

granted when achievement is in line with performance targets. The

business counterpart whose transactions with the Company for one

JAL Group and to increase corporate value over the medium and long

performance evaluation period will be three years, with performance

Assessment Processbusiness year exceeded 1% of the consolidated revenue of theterm, the Company will encourage the performance of duties consistentfor three consecutive fiscal years evaluated every year. The indices for

The prior two assessments consisted only of questionnaires, but for theCompany or the business counterpart.

with its Corporate Policy and management strategies and provide strong

evaluating performance will be items prioritized in the Medium Term

incentives for the achievement of specific management targets.

Management Plan, including consolidated operating profit margin,

most recent assessment, the third conducted thus far, a questionnaireb. ‌A major shareholder of the Company or a person executing business for

was combined with an interview in order to review initiatives to enhancea shareholder holding an equity ratio of 5% or more in the Company.

2. To‌ encourage a healthy entrepreneurial spirit, the Company will establishc. ‌A major lender to the Company or a person executing business forappropriate proportions for annual incentives (performance- linked

governance that came out of the previous effectiveness assessments
and to make further improvements to governance. In addition, theinterviews were performed by an independent organization in order tomaintain anonymity.
The primary items for assessment on the questionnaire were thesuch a lender.
d. ‌A person who receives over 10 million yen in donations annually from theCompany, or a person belonging to an entity receiving such donations.
e. ‌A person receiving remuneration of over 10 million yen, excluding

composition, operation, culture, supervision and discussion about

Director’s remuneration, from the Company or a person belonging to an

management strategies by the board. Additionally, the interview

organization receiving remuneration exceeding 1% of the consolidated

the board.
The independent organization reported to the Board of Directors
on the results of the assessment, and the board then discussed response
measures and its future format. Based on these discussions, theCorporate Governance Committee formulated recommendations thatwere then further discussed by the board. As a result of this process, theboard decided on the following initiatives for the future.

With respect to common stock granted to eligible Directors and(performance-linked share-based remuneration) linked to corporate value

Executive Officers through the share-based remuneration plan, thein accordance with medium- to long-term performance, designed toCompany will establish a target number of held shares for eachpromote alignment of interests with its shareholders.

position and impose limits on share sales in order to further promote

3. The‌ Company will reward the management team appropriately based on

business for another company as External Director.
3. ‌The spouse or a relative within the second degree of kinship of anindividual described in 1 or 2.
(Note) ‌“A person executing business” refers to an executive director or executive officer.

Reason for Election of External Directors

Procedures for Determining Remuneration
Remuneration Levels and Composition

Matters related to remuneration for Directors and Executive Officers will

1. The‌ Company will set appropriate remuneration levels based on the

be decided by the Board of Directors following a deliberation andCompany’s operating environment and with reference to objective data

recommendation process by the Company’s voluntarily establishedon remuneration in the marketplace.

Compensation Committee. A majority of the members of the

2. Taking‌
into account factors including the position of the Company’sbusiness and the effectiveness of incentive remuneration, the Company
sets proportions for (1) the amount of fixed basic remuneration*, (2) theamount of annual incentives (performance-linked bonuses) to be paid
according to the degree of achievement against targets, and (3) the

Compensation Committee will be External Directors and the
Chairperson will be appointed from among the External Directors.

Succession Planning for CEO andOther Senior Management Positions

It was confirmed that the Board of Directors conducts discussions withDuring the election process for External Directors, the Company

amount of long-term incentives (performance- linked share-based

the opinions of External Directors respected by internal Directors, who

consistently strives to ensure comprehensive diversity while nominating

remuneration) to be issued according to the degree of achievement

The Nominating Committee holds continuing discussions on potential

have been appointed in a good balance from frontline divisions given

candidates with a wealth of experience in various fields who are also

against targets, as follows:

successors to the president and other company leaders responsible forthe importance of flight safety. In addition, External Directors have beenequipped with insight, specialized knowledge and other strengths.

highly accessible to information as requested, and the roles of External
Directors are being appropriately fulfilled through efforts centering on
the Lead Independent External Director.
At the same time, in order to further increase corporate value

72

Guideline in the case of 100% achievement against targets:reforming the Group and driving growth in order to ensure theElection of nominees is also based on the Standards for Independence(1) : (2) : (3) = 50% : 30 % : 20%

Corporate Policy and management strategies are maintained, andof External Directors presented above.

The above ratio is for guidance only and adjustments can be made toreports on these discussions to Directors.

For the reasons for selection of External Directors, please refer to P.6667: Board of Directors and Officers.

reflect changes in the price of the Company’s shares or other factors.

For key corporate governance data, please refer to P.102-103: ESG Data.

73

Financial / Data Section

Summary of Assessment Results and Initiatives Going Forward

the aligning of interests with shareholders.

the Company’s business performance.

revenue of the Company.
f. ‌A person executing business for the Company who also executes

considered for review in every medium term management plan period.

bonuses) linked to fiscal year performance and for long-term incentives

Business Outline

focused on questionnaire responses and awareness of problems withconsolidated ROIC and customer satisfaction. These items will be

A Business Base that Supports Value Creationof the Board of Directors was assessed this year for the third time;

Management Strategies Designed to Create Valuerisk management, further instill a shareholder’s perspective within the

Officers Disciplinary Committee(Chairperson: Eizo Kobayashi, External Director)

About the JAL Group

consults the Personnel Committee and takes the Personnel Committee’sJAL REPORT 2018

JAL REPORT 2018

COMPLIANCE/RISK MANAGEMENT
Promoting Compliance

Risk Management

Business Continuity Plan (BCP)

5. Financial Risk Committee
The Financial Risk Committee is chaired by the Executive Officer

To respond to specific risks that threaten our ability to fulfill our

The JAL Group manages risks by dividing them into threeof Finance and Accounting and includes the President, Executive

responsibilities as a public transport operator such as pandemic

rules governing our corporate activities, we have designated thecategories: (1) corporate risks associated with management inVice President and leaders of relevant departments and divisions.

influenza, unidentified infectious diseases or earthquakes, we have

General Affairs Department of Japan Airlines Co., Ltd. to oversee all

general, excluding risks related to air transportation; (2) operational

The Committee identifies financial risks as appropriate and strives

established a business continuity plan (BCP) that enables us tocompliance matters and are focusing on elevating staff awarenessrisks associated with aviation safety, aviation security and otherto facilitate improvements in corporate management. Morecontinue business effectively in emergency situations based on

through various measures.

issues related to air transportation; and (3) strategic risks associatedspecifically, it conducts regular simulations of financial conditions

guidelines established in collaboration with regulatory bodies andwith business management that may have a material impact on

and reviews the results. In the event of a major financial crisis,

other relevant institutions. The BCP covers basic matters such as

corporate revenues and expenditures.

large-scale disaster or other major risk-generating event that thepolicies and procedures necessary to ensure the safety of JAL Group

Committee expects to exert a large, quantifiable impact on thestaff and their families and maintain air transport operations

Every JAL Group staff is encouraged to practice the JAL
Philosophy in their day-to-day work and can view regulations andhandbooks related to compliance on the Group’s Intranet such as

We have established the following five committees in order to
identify, analyze and assess existing risks and implement appropriate

Group, it calculates the estimated financial impact and, if

essential to the JAL Group, including reservations, information

Handbook on Protecting Personal Information, Information Security

measures to mitigate those risks.

necessary, pursues collaborative responses with the Risk

provision, payments and settlements. It is reviewed regularly andAction Handbook, Guide to the Antimonopoly Act and Group

1. Risk Management Committee

Management Committee.

revised as required to improve its application.

Hotline Regulations.

The Risk Management Committee is headed by the Executive

During the outbreak of Ebola hemorrhagic fever in West

Information Security Measures

Africa in 2014, we activated our BCP regarding responses to

the Company and a law firm, which can be used by any person

managers of divisions responsible for managing frontline

The JAL Group fell victim to a data security breach in September

pandemic influenza or unidentified infectious diseases. We

working for the JAL Group. This enables us to promptly identify anddepartments. The Committee takes responsibility for overall risk

2014. Hackers attacked the JAL Mileage Bank’s systems and gained

coordinated our actions with relevant government bodies,

remedy cases of misconduct, power harassment and other issues

management encompassing corporate risks, operational risks,

illegal access to the customer information management system. We

developed necessary systems and added the Policy for Handling theand reinforce compliance management.

and strategic risks to stabilize Group-wide management

deeply regret the inconvenience and concern caused to customers

Ebola Virus Disease (International Flights) to our BCP.

activities. It has also established the JAL Group Basic Policies on

and all those affected by this incident. In response, we areto support this framework. For example, we hold classroom

Risk Management. When existing risks are identified, it reports

strengthening information security as a top priority issue and taking

staff and their families in the event of a large-scale disaster, we

compliance training courses for every JAL Group staff at everyon the progress of responses and shares information with Groupsteps to prevent recurrence.

introduced a safety confirmation system in 2007. The Group-widebusiness office, publish quarterly compliance newsletters, arrange

management via the Management Liaison Committee.

Furthermore, we are implementing a wide range of initiatives

seminars about laws and regulations organized by the Legal Affairs

2. Information Security Committee

Specifically, information security measures were moved up

To facilitate speedy confirmation of the safety of all JAL Groupsystem was upgraded in 2014 to make safety-related informationahead of schedule to build a robust system to detect and monitor

more readily available. Communication exercises and other drills are

Department, conduct practical exercises on how to deal withThe Information Security Committee is headed by the Executive

increasingly sophisticated and complex cyber-attacks, while

conducted regularly throughout the JAL Group to foster staff

targeted email attacks and other threats and provide e-learning on

Officer of General Affairs and the Executive Officer of IT

preventive measures are being continuously upgraded to theawareness of risk management and reinforce preparedness for

information security biannually. Through these initiatives, we aim to

Planning, and comprises the leaders of relevant departments.

highest level.

unexpected situations.

foster a culture of compliance across the entire JAL Group, ensure

The Committee conducts activities specific to information

business activities are in tune with accepted social standards andmanagement, upgrades information security measures, andreduce legal risk.
In addition, an executive from each JAL Group company isstrives to reduce corporate risk.
3. ‌Group Council for Safety Enhancement General Meeting
The Corporate Safety and Security Department promotes safetycompany. These executives comprise the JAL Group Compliancerigorously under the direct control of the President. The Group

Network, which is responsible for swiftly sharing relevantCouncil for Safety Enhancement General Meeting, with theinformation and strengthening the compliance framework at each

Corporate Safety and Security Department serving as Secretariat,

Group company. This includes sending quarterly email newslettersshares information on safety in daily operations, decides

containing useful information, such as news about compliancecountermeasures, considers important measures related to safety

developments inside and outside the Group and compliance caseand checks policies.
4. ‌Group Operational Safety Promotion Committee
Organized as a committee under the Group Council for Safety

Board of Directors

Promotion of Safety and Security
Council for Safety Enhancement
General Meeting
Promotion of Aviation Safety

Safety Management
Security Management

執President
行役員

Business Outline

given overall responsibility for compliance at their respective

studies.

Risk Management System

A Business Base that Supports Value Creation

Office of General Affairs, and primarily comprises general

We have also set up a Group Hotline with contact points inManagement Strategies Designed to Create ValueJAL Group Regulations on Preventing Insider Trading, the JAL Group

About the JAL GroupTo promote compliance with all applicable laws, regulations andManagement Liaison Committee
Risk Management Committee
Administration: General Affairs Department (Overall Supervision of Risk management)

Financial Risk Committee

Information Security Committee

Corporate Risk, Operational Risk, Strategic Risk

Enhancement General Meeting, the Group Operational Safety
Financial / Data Section

Promotion Committee maintains and strengthens collaborative,
safety-related measures among departments, divisions andGroup airlines with the aim of enhancing the safety of Group airtransport operations as a whole. The Committee comprises the
Executive Officer (who serves as Chairperson) of the JAL
Operational Safety Promotion Committee, leaders of
departments responsible for JAL safety management appointed
by the Chairperson and Executive Officers responsible for safety
at Group airlines.

74

75

JAL REPORT 2018

JAL REPORT 2018

INTERNATIONAL PASSENGER OPERATIONSBusiness Environment for International
Passenger Operations
toward moderate recovery, the number of outbound passengers fromJapan has also seen a positive development. Internationally, economic

Products and services
We will further promote the introduction of JAL SKY SUITE-

range of measures to allow all customers to use our services with

Route network

configured aircraft. In addition, to ensure that we satisfy overseas

sense of security.

In addition to flexible increases in flight schedules in response tocustomers, we are introducing multilingual options in our inflightcustomer trends—for instance on the Kansai = Honolulu, Narita =entertainment systems and reviewing catering menus in our lounge

Guam and Narita = Bangkok routes— we are also successively

facilities. These and other measures in pursuit of comfort androlling out codesharing with Hawaiian Airlines and other new

convenience are designed to offer services that will be actively

partners.

chosen by customers worldwide.

Review of Fiscal 2017

development and population growth in Asia have led to surging
demand for inbound travel to Japan, and passenger numbers are

Updating of passenger service system

expected to show further growth in the future.

In November 2017, we updated our passenger service system to

The Japanese government has set a target of attracting 40

Activities in Fiscal 2018

passengers with real-time flight information. This will form part of aprovide a platform for future growth. This update, which includes
an improved website interface for overseas customers, will

are under way in preparation for this expansion in inbound travel.

contribute to increased customer convenience. Additionally, by

Meanwhile, a large number of events with an international

introducing a world standard system, we will position ourselves toaudience are due to be held in Japan, including the Rugby Worldfurther strengthen collaboration with partner airlines, such as

Cup and the Olympic and Paralympic Games Tokyo 2020.

expanding codesharing.

Additionally, an expansion of capacity at Tokyo’s metropolitan

TOPICS

JAL and Hawaiian Airlines Apply for Antitrust Law Immunity
In June 2018, Hawaiian Airlines and JAL filed applications withIn September 2017, JAL and Hawaiian Airlines reachedairports is scheduled to take place by 2020, offering an opportunity

Route network

the U.S. Department of Transportation and Japan’s Ministry ofagreement on a comprehensive business partnership and began

for major growth in international passenger operations. On the

We added a new Narita = Melbourne route and a Narita = Kona

Land, Infrastructure, Transport and Tourism seeking immunity

operation of codeshare flight in March 2018. Once antitrust

other hand, the growth in low-cost carriers serving the Japaneseroute in September 2017 and increased flights on the Haneda =from the antitrust law.

immunity has been granted, the two sides will enter a closer

market has continued, which is expected to result in intensifying

London route in October 2017 with an additional late-nightcompetition.

departure. By expanding our network in this way, we increased

Japan = Hawaii routes once the relevant antitrust immunity has

networks, product and service quality, and other areas. Going

convenience for customers worldwide by offering more options.

been granted. Currently, the two sides are preparing for theforward, we will continue to offer customers services of highToward further expansion of our network, we have reachedstart of the joint business by holding discussions on a wide

convenience and quality.

agreements with Vietjet, Vistara, Hawaiian Airlines, Aeromexico andrange of issues, including sales, airport operations, IT and(1) L‌ everaging our hub airports at Narita and Haneda
and collaboration with worldwide partners, we willbuild a network contributing to global exchange.

Aeroflot Russian Airlines, which will lead to the launch of concrete

customer service.

We aim to increase customer convenience by improving our route

Products and services

Airlines offers non-stop service to Hawaii from 11 U.S.

network, including addressing an expected increase in demand for

Toward expansion of the number of routes operated with JAL SKY

gateway cities, along with direct services to and from Japan,

connections for flights originating in North America and Southeast

SUITE-configured aircraft—whose concept is to offer all passengers

South Korea, China, Australia, New Zealand, American Samoa

Asia. By working with joint business partners, the oneworld alliancea “one-class quality upgrade”— we introduced the JAL SKY SUITE

and Tahiti.

members, and other codeshare partners to expand our global

787 configuration, featuring fully-flat business class seats and a

Hawaiian Airlines has led all U.S. carriers in on-time

network, our target is to achieve a network of 500 major city

New Spacious Economy seats with expansive legroom. Among

performance for each of the past 14 years (2004-2017) as

destinations worldwide within the next ten years.

other initiatives to enhance service were continuous improvements

reported by the U.S. Department of Transportation. Meanwhile,

to inflight meals and lounge facilities.

consumer surveys by Condé Nast Traveler and Travel + Leisure

JAL and Hawaiian Airlines will begin the joint business on

collaboration which will allow rapid enhancement of their route

A Business Base that Supports Value Creation

alliances.

Management Strategies Designed to Create Value

million overseas visitors to Japan in 2020, and a range of initiatives

Growth Strategy

Hawaiian Airlines
Now in its 89th year of continuous service, Hawaiian Airlines
is Hawaii’s biggest and longest-serving airline. Hawaiian

We aim to encourage more overseas customers to discover JAL’s

service evaluation body, ranked JAL number one in the International

high-quality services through ongoing sales promotions in overseas

Airlines category for the Reuse Intention Rate for the fifth

regions. At the same time, by reinforcing overseas marketing

consecutive year and the Repeat Intention Rate. In TripAdvisor’s

activities through a range of partnerships, we aim to increase the2018 Travelers’ Choice™ Awards for the world’s favorite airline,

overseas sales ratio of our international passenger operations tooverseas customers named JAL as Japan’s best airline, while the

50% within ten years.

2017 World Airline Awards operated by SKYTRAX presented JAL

have placed it among the top domestic airlines serving Hawaii.

Financial / Data Section

Satisfaction Index (JCSI) survey, which is conducted by an external

As a result of these initiatives, the Japan Customer

Business Outline(2) ‌We will leverage JAL’s strengths to attract more
overseas customers

the award for the Best Economy Class Airline Seat.

‌We offer customers worldwide a comfortable travel(3)
environment combined with personal and timely service.

year-over-year increase in passengers traffic, while our load factor

Among other measures, we will step up the introduction of JAL SKY

reached a record level of 81.0% and international passenger

SUITE-configured aircraft, increase multilingual services, andrevenue saw a large year over year increase to 462.9 billion yen.

In fiscal year 2017, our initiatives allowed us to post 2.3%

improve menus to meet diverse dietary needs. We will additionally76

About the JAL Group

With the Japanese economy of recent years showing a long-term trendroll out a service using the messaging app LINE to provide

77JAL REPORT 2018

JAL REPORT 2018

DOMESTIC PASSENGER OPERA TIONSBusiness Environment for Domestic Passenger
Operations

websites. In addition, we plan to partner with other sectors of the

Activities in Fiscal 2018

tourism industry to give the travelers the motivation and intention

Products and services
For the inflight Wi-Fi service on JAL SKY NEXT-configured aircraft,Route Network

we plan to enhance free video programs and will also work toWith Japan’s working-age population on the decline, major changes

accommodations will be provided in each region to increase

We plan to increase flight frequency on the Haneda = New Chitose

further raise comfort and convenience levels by launching inflight

are taking place in the macro environment. At the same time, there

nonresident populations.

route and other routes during the summer season and on certain

satellite television and other services. In addition, for “Dokokani

weekends when a high demand is anticipated. In addition, we

Mile,” our innovative mileage award service that has been highly

established a new Tokunoshima = Okinoerabu = Naha route in July

popular with customers and was honored recently at the 20172018 operated by Japan Air Commuter. We will also expand our

Nikkei Superior Products and Services Awards, we are adding

are also expectations for new growth as the economy is expected tosteadily expand ahead of the Olympic and Paralympic Games 2020

Review of Fiscal 2017

Tokyo with a continued increase in inbound tourists. The market
climate will also likely intensify due to price competition andRoute network

network in the Amami Islands to help increase the nonresident

outlying island routes from Okinawa (Naha) and Kagoshima to thecompetitors launching new routes.

Along with increasing routes operated with Embraer 190 aircraft,

population in the area.

scope of the service, which already covers Tokyo (Haneda Airport)(1) Serving Customers with New Aircraft

and Osaka (Itami and Kansai Airports) routes, in order to generate

600 turboprop on routes to outlying islands in Kagoshima

new tourist activity through an increase in the nonresident

Prefecture, operated by Japan Air Commuter, in an effort to further

population.

increase convenience and comfort on regional routes.

JAL intends to progressively introduce new aircraft with higher

Products and services

carrier business. J-AIR, which primarily operates routes out of Osaka

We now offer complimentary inflight Wi-Fi on JAL SKY NEXT-

International Airport (Itami), has been adding new Embraer 170 andconfigured aircraft, which has been very popular with customers.

190 aircraft to its fleet with complimentary inflight video

For JAL First Class service on domestic flights, which was introduced

programming and leather seats and plans to complete the process

a decade ago in 2007, we ran special commemorative programs

during fiscal year 2018. Japan Transocean Air is also upgrading itsthat included a special inflight menu and worked to further improve

fleet to Boeing 737-800 aircraft and will finish introducing JAL SKY

service quality to create an even higher value air travel experience.

A Business Base that Supports Value Creationlevels of comfort as a part of our efforts to refine our full-service

Dualski experience

NEXT-configured aircraft during fiscal year 2018. From fiscal year
2019, we plan to introduce Airbus A350-900 and Boeing 787-8

Marketing and promotions

aircraft with advanced inflight amenities and exceptional quietness

For JAL Japan Explorer Pass, which has been marketed since 2015,

and comfort to bolster our aircraft competitiveness and further

we revised prices for various destinations and set fares to make air

differentiate ourselves from other carriers.

travel highly attractive and convenient for inbound travelers. In
collaboration with TripAdvisor, we established a new promotional

TOPICS(2) Providing More Convenient, Comfortable Services

site, “Untold Stories of Japan,” to further stimulate inbound travel

Strengthening Overseas Market Initiatives to Capture New Demand

We intend to expand our fleet of JAL SKY NEXT-configured aircraft

demand. The site provides information focused on lesser known

JAL entered a capital and business alliance withpopulations. With the partnership, we are enhancing products

and further increase routes and flights with inflight Wi-Fi. From

cities and tourist attractions in regional Japan, and not just the

Hyakusenrenma, Inc., which operates on airbnb service, in orderoffered through Dynamic Package, which combines airline

Tokyo and Osaka metro areas.

to increase inbound travel demand and nonresident

tickets with private lodging experiences that draw on thefiscal year 2018, inflight satellite television will be available and in
seatback screens and personal power outlets to further enhance theExpanding Our Basethis way with other sectors of the travel industry and also

inflight experience. The new enhancements include not only

A new tour was organized with allergy-friendly meals to allow

regional governments, we are providing new travel value in an

technologies but also services to provide a more advanced customer

customers with food allergies to confidently enjoy their travel

effort to promote regional revitalization and further interchange

experience from reservations to boarding with products and services

experience. Collaborating with Club Tourism International Inc. andamong regions. In fiscal year 2018, along with creating thethat are constantly a step ahead.

ata Alliance, we also jointly conducted tour programs for people

motivation and intention to visit regional Japan, we plan tousing wheelchairs or crutches to allow them to enjoy accessible

provide high-value travel and lodging experiences in Japan’s

winter sports in Hokkaido. In addition, partnering with Aeonpet

regions in partnership with other travel sectors and work to(3) ‌Contributing to Regional Revitalization by
Promoting Tourism to Regional Japan

create further opportunities for even more inbound tourists toCo., Ltd., we developed the JAL “Wan-Wan” Jet Tour, which uses
charter flights to allow participants to bring their pet dogs onroute demand is unlikely, so new demand must be actively created.

board. Through such initiatives, we worked to further vitalize

The JAL Group will expand its market overseas and create

domestic air travel by providing new forms of travel value.

A private lodging experience in Nara Prefecture

visit regional Japan.
Financial / Data Section

With Japan’s population declining, substantial growth in domestic

Business Outline

unique tourism resources of individual regions. Coordinating infiscal year 2019, a portion of our fleet will be equipped with

opportunities for even more inbound tourists, already increasing in
number, to visit regional Japan. We have established systems for

Through these initiatives, in fiscal year 2017, the number of passengers

buying tickets for domestic flights from overseas locations such as

carried increased 4.5% year over year, the load factor was a record-

JAL Japan Explorer Pass and offer inbound travel promotions tohigh 71.8% and domestic passenger revenue increased substantiallycommunicate the appeal of regional Japan through JAL’s overseas

over the previous year to 518.2 billion yen.

78

Management Strategies Designed to Create Value

Growth Strategies

primary through Itami Airport, we introduced the advanced ATR42-

About the JAL Groupto visit Japan’s various regions. High-value tourism experiences and79

JAL REPORT 2018

JAL REPORT 2018

DOMESTIC PASSENGER OPERATIONSCARGO AND MAIL BUSINESS/OTHER BUSINESSESJAL GROUP AIRLINES

Cargo and Mail Business

Other Businesses

Fiscal 2017 Results

JALPAK Co., Ltd.

Maintaining Vital Air Links to Revitalize
Regional Economies

J-AIR Co., Ltd. (J-AIR)In fiscal year 2017, JALPAK Co., Ltd. worked to boost sales by

Our regional network provides vital transport links to residents in

J-AIR is based at Osaka International Airport (Itami) and operates

offering an enhanced range of exclusive products to JAL Mileage

regional cities and outlying islands. JAL Group airlines are

226 daily flights on 36 routes in a network connecting various

Bank members and by expanding its offer of high value-added

progressively switching to new-generation aircraft, and we willregions . Over the past few years the company has introduced the

products. Despite the success of package products, which rested

continue to contribute to regional communities and revitalization

new Embraer 190 with a Class J cabin and has been expanding its

largely on an increase in hotel rooms available, tourist demand toprojects through our highly convenient network and high-quality

regional network. In addition, the airline plans to add Japan-madedestinations in the U.S. mainland and Guam remained stagnant due

services.

MRJ jets to its fleet starting in 2021 and achieve further growth as a

Freight service using chartered cargo aircraftcompetitive regional airline. Communicating both the appeal of

Established as Southwest Air Lines in 1967 before the return ofisland and outlying islands, JTA operates 70 scheduled flights eachresulted in a 4.2% year-over-year decline to 231,000 in the number

regional Japan and the Japan brand, the airline will continue

In fiscal year 2017, air cargo demand reached high levelsof overseas travelers handled. The number of domestic travelers

moving forward together withworldwide. Among the main reasons for this was the demand forhandled remained buoyant on the other hand, increasing by 1.4%

the people of the regions it

semiconductors originating from the automotive sector and theto 2,545,000 year over year. The rise was due to the expansion ofserves.

spread of the Internet of Things. During peak busy periods, whensightseeing plan offerings, the promotion of early booking plans

capacity was insufficient, active use was made of the JAL CARGO

and other successful package product initiatives. In the inboundCharter Service. This is a service which transports cargo by

tourism market, JALPAK launched a Visit Japan Package in January

chartering freighters from other airlines, offering the combined2017 and rolled out related marketing campaigns in Thailand.

network capacity of this and JAL’s own fleet.

Operating revenue for fiscal year 2017 (prior to intercompany

Okinawa to Japan, JTA has been providing vital air links to Okinawa
residents for 51 years. In addition to connecting Okinawa’s mainto the situation in North Korea and concerns over terrorism. This

Hokkaido Air System Co., Ltd. (HAC)

day on 12 routes between Okinawa and Haneda, Chubu, Kansai,
Komatsu, Okayama and Fukuoka airports with a fleet of 12 Boeing

Established in September 1997 to provide convenient air links toWith the aim of supporting regional revitalization and

737 aircraft. JTA offers high-quality service with a hint of Okinawa

destinations across Hokkaido Prefecture, HAC celebrated its 20thincreased exports of agricultural products, we entered into

culture in the JAL Group. The airline is also doing its part to support

anniversary in 2017. The airline currently has a fleet of three SAAB 340B

partnership with three companies that have sales and distribution

the regional economy by widely

aircraft, which operate 26 daily flights linking Hakodate, Kushiro, Rishiri

networks in Japan and overseas: Nousouken Corporation, Global

added products to contribute to improving JAL brand value andpromoting Okinawa as an

Island and Misawa with Okadama Airport in Sapporo and Okushiri with

Ichiba Corporation and Agriculture Corporation Mizuho Co., Ltd.

promoting sales of package products, JALPAK will also seek toappealing destination for

Hakodate Airport. The airline will continue to focus on flight safety totourists.

maintain support from Hokkaido residents while working to attract

We also renewed the JAL

more individual and group customers, in addition to business travelers.

CARGO homepage,

HAC will also do its part toadding a wealth of new

support the development of thefunctions and accessible

regional economy andcontent to create a more

In fiscal year 2017, to attract new members, JALCARD, Inc. ran

communities in Hokkaido.

user-friendly website.

active membership campaigns, placed effective online advertising,

JAC was established to initially operate flights on four routes linking
the Amami Islands. The airline, which marks its 35th anniversary in

respond to diverse customer values in a determined effort to create
value that exceeds customer expectations.

JALCARD, Inc.

New homepage design

Ryukyu Air Commuter Co., Ltd. (RAC)in Kagoshima Prefecture. The advanced ATR42-600 turboprop was
A regional airline celebrating its 33nd anniversary in 2018, RAC provides

Hopping Route” was established in July 2018 to further support theconvenient connections to outlying islands in the Okinawa region. Basedregional network as the “wings” of the region. In addition, JAC is

at Naha Airport on the main island of Okinawa, the airline operates

expanding a cooperative project to share aviation technologies with

between 41 and 43 daily flights on 12 routes, with connections to nineother companies. Going beyond the JAL Group, since June theislands. RAC began introducing the DHC8-Q400 Cargo-Combi aircraftairline has lent ATR aircraft to Amakusa Airlines for joint operations.

(Q400CC) in April 2016 and completed the process in February 2018,

With the aim of being a trusted presence in the region, JAC willadding a total of five to its fleet. Along with a jet-equivalent cruisingcontinue to grow and develop

speed, the aircraft offers a high level of passenger comfort along withalongside it.

approximately twice the cargo space of a standard model. Making
maximum use of the Q400CC, RAC is improving convenience for
outlying island residents and tourists and using the expanded cargocapacity to transport fresh seafood and agricultural products from theislands at higher speeds and in

Growth Strategy

upgraded infrastructure to allow enrollment via smartphone andother improvements, and launched new services such as additionalfamily card enrollment and online bank transfer. As a result, thenumber of members increased by 4.7% year over year to

By reinforcing collaboration with other companies to combine

3,426,000. JALCARD also focused on one-to-one communication

capacity with our own fleet, we aim to provide a network service

via the MyJALCARD members-only online service available afterwith a higher level of convenience.

enrollment and the JALCARD app, and worked to improve customer

On the domestic cargo front, we established a dedicatedservice, for instance, through the launch of a new option allowing

portal site for reservations as a way of increasing customer

the annual membership fee to be paid in air miles. Operating

convenience. This offers a one-stop site where customers canrevenue for fiscal year 2017 (prior to intercompany transactions

complete all procedures relating to reservation, such as looking up

elimination) decreased by 10.4% from the previous fiscal year tospace availability and tracking cargo movements.

18.3 billion yen.

Financial / Data Section

introduced to routes in 2017, and the new “Amami Islands

In fiscal year 2018, as well as enhancing the range of value-

In fiscal year 2018, JALCARD will continue working to
improve customer satisfaction and realize a stress-free customer
experience by actively offering new services and enhancing theappeal of our mileage award program.

larger volumes to thereby promotelocal industries and contribute
further to the region.

80

Business Outline

2018, operates flights on 18 routes, mainly serving outlying islands

year to 175.1 billion yen.
A Business Base that Supports Value Creation

Japan Air Commuter Co., Ltd. (JAC)transactions elimination) increased by 1.5% from the previous fiscal

Management Strategies Designed to Create Value

Japan Transocean Air Co., Ltd. (JTA)

About the JAL GroupThe JAL Group’s principal member airline covering regional routes,

81

JAL REPORT 2018

JAL REPORT 2018

FINANCIAL DATA — SEVEN-YEAR SUMMARY
Billions of yen
FY2011FY2012FY2013

FY2014FY2015FY2016FY2017

Thousands of U.S. dollars*1
FY2017

1,336.6
1,127.4
209.1
209.2
174.4
312.3
△207.2
△49.6
105.1
88.5
297.7
321.1
210.6

1,288.9
1,118.6
170.3
165.0
164.1
253.1
△215.5
△53.5
37.5
95.7
266.1
286.2
233.1

1,383.2
1,208.6
174.5
163.1
135.4
281.5
△180.1
△55.8
101.3
110.8
285.4
305.4
210.8

13,020,114
11,376,986
1,643,119
1,535,956
1,274,529
2,650,056△1,695,641△526,007
954,414
1,043,486
2,686,370
2,874,623
1,984,224

As of fiscal year-end
Total assets
Net assets
Interest-bearing debt
Shareholders’ equity

1,087.6
413.8
208.4
388.5

1,216.6
583.1
160.1
565.0

1,340.1
711.0
134.2
690.2

1,473.3
800.7
100.5
776.4

1,578.9
870.5
92.6
843.0

1,728.7
1,003.3
116.0
972.0

1,854.2
1,094.1
125.7
1,060.3

17,453,190
10,298,635
1,183,170
9,980,562

Per share data (yen, U.S. dollars)*5
Profit attributable to owners of parent
Net assets
Dividends
Average number of shares during the fiscal year (thousands of shares)

514.52
1,071.19—
362,704

473.36
1,558.15
95.00
362,671458.45
1,903.53
80.00
362,639411.06
2,142.00
104.00362,584481.292,325.79
120.00362,500

456.56
2,749.71
94.00
359,594383.233,019.52
110.00353,334

3.60
28.42
1.03
—

17.0
63.6
17.9
35.7
0.5
23.8
26.4
8.3
11.3
—
30,648

15.8
36.0
16.9
46.4
0.3
22.3
24.8
8.4
11.5
20.1
30,636

12.7
26.5
13.0
51.5
0.2
19.1
21.5
8.6
12.2
17.5
31,020

13.4
20.3
12.8
52.7
0.1
19.8
21.8
8.7
12.3
25.3
30,978

15.7
21.5
13.7
53.4
0.1
22.3
24.0
9.1
11.7
24.9
31,331

13.2
18.1
10.3
56.2
0.1
20.6
22.2
9.4
11.7
20.6
32,047

12.6
13.3
9.7
57.2
0.1
20.6
22.1
10.1
12.5
28.7
33,038

—
—
—
—
—
—
—
—
—
—
—

385.2
43,03630,313
6,844
70.4
12.7
9.0

406.6
44,74534,036
7,525
76.1
11.9
9.1

437.5
46,23535,390
7,723
76.5
12.4
9.5

454.8
47,696
36,109
7,793
75.7
12.6
9.5

448.7
50,56340,305
8,460
79.7
11.1
8.9

415.2
50,621
40,633
8,394
80.3
10.2
8.2

462.9
51,83642,013
8,585
81.0
11.0
8.9

4,357,294
—
—
—
—
—
—

481.1
35,523
22,26428,965
62.7
21.6
13.5

485.2
36,44323,01230,020
63.1
21.1
13.3

487.4
37,08423,74531,218
64.0
20.5
13.1

487.5
36,30623,99331,644
66.1
20.3
13.4

501.2
35,86924,341
32,114
67.9
20.6
14.0

498.6
35,42324,55032,570
69.3
20.3
14.1

518.2
35,71425,64334,033
71.8
20.2
14.5

4,878,002
—
—
—
—
—
—

53.7
1,314

50.4
1,378

54.2
1,512

60.3
1,754

54.2
1,724

43.3
1,887

56.0
2,233

527,447
—

25.0
355

25.0
360

25.4
366

24.2
356

23.3
363

22.2
357

22.4
364

211,257—

Key Performance Indices
Operating margin (%)
ROE (%)ROA (%)
Equity ratio (%)
D/E ratio (Times)
EBITDA margin (%)*6
EBITDAR margin (%)*7
Unit cost (yen)*8
Unit cost (yen) (Including fuel cost)
Dividend payout ratio (%)
Number of employees
Business data
International passenger operations
Passenger revenues
Available seat kms (million seat kms)*10, 12
Revenue passenger kms (million passenger kms)*11, 12
Revenue passengers carried (1,000)*12
Revenue passenger load factor (%)*12
Yield (yen)*11,12
Unit revenue (yen)*12
Domestic passenger operations
Passenger revenues
Available seat kms (million seat kms)*10
Revenue passenger kms (million passenger kms)*11
Revenue passengers carried (1,000)
Revenue passenger load factor (%)
Yield (yen)Unit revenue (yen)International cargo operations
Cargo revenue
Revenue cargo ton-km (million ton kms)
Domestic cargo operations
Cargo revenue

Revenue cargo ton-km (million ton kms)

82

*1 US dollar amounts are provided forconvenience only, based on theexchange rate of ¥106.24/USD on
March 31, 2018.
*2 Excluding deposits and withdrawals
from deposit accounts*3 Free cash flow = Cash flow fromoperating activities + Cash flowfrom investing activities*4 EBITDA = Operating income +Depreciation expense*5 Japan Airlines Co., Ltd. conducted a2-for-1 stock split on October 1,
2014. Figures for profit per share,
net assets per share and dividend
per share have been calculated
assuming the stock split was
conducted at the start of fiscal
2011.
*6 EBITDA margin = EBITDA /Operating revenue*7 EBITDAR margin = EBITDAR /Operating revenue
EBITDAR = Operating income +Depreciation expense + Aircraft
lease*8 Unit cost = Consolidated airtransport cost (excluding fuel costs
and fuel costs for resale to a
related company) / ASK*9 The method used to calculate thenumber of employees was changed
as follows as of fiscal 2017. Figures
for fiscal 2011 to fiscal 2016 havealso been changed based on the
new method. Previously, thenumber of employees scheduled toretire at the end of March of the
fiscal year were excluded and thenumber of temporary employees(employees dispatched from
temporary employment agencies)
as of the end of the reporting
period were included. With the
new method, employees scheduled
to retire at the end of March of the
fiscal year are included andtemporary employees (employees
dispatched from employment
agencies) are excluded.
*10 ASK (available seat kilometers). A
unit of passenger transportcapacity: Total number of seats x
Distance flown (kms)*11 RPK (revenue passenger kilometers). Total flight distance coveredby revenue passengers: Number ofrevenue passengers x Distanceflown (kms).
*12 From fiscal 2015, revenue
passengers carried, revenue
passenger kilometers, available seatkilometers and load factor include
codeshare tickets sold by othercompanies for JAL-operated
flights.

83

Financial / Data Section

1,344.7
1,165.0
179.6
175.2
149.0
261.1
△199.2
△67.3
61.8
85.8
265.5
292.7
198.6

Business Outline

1,309.3
1,142.5
166.7
157.6
166.2
247.9
△166.7
△61.9
81.2
82.7
249.5
281.0
164.5

A Business Base that Supports Value Creation

1,238.8
1,043.5
195.2
185.8
171.6
264.8
△129.0
△60.6
135.8
81.0
276.2
307.1
121.8

Management Strategies Designed to Create Value

1,204.8
999.8
204.9
197.6
186.6
256.6
△62.4
△274.4
194.1
81.2
286.1
318.4
98.6

About the JAL GroupYears ended March 31
Operating revenue
Operating expenses
Operating income
Ordinary income
Profit attributable to owners of parent
Cash flow from operating activities
Cash flow from investing activities*2
Cash flow from financing activities
Free cash flow*3
Depreciation and amortization
EBITDA*4
EBITDAR
Capital investment (Purchase of non-current assets)

JAL REPORT 2018

JAL REPORT 2018

EVALUATION AND ANALYSIS OF FINANCIAL CONDITIONS
Analysis of Consolidated Operating Results

Economic Conditions

Number of visitors to Japan
45
35
30
25
20
15
10
5
2020

1999
2000
2001
2002
2003
2004
2005
2006
2007
2008
2009
2010
2011
2012
2013
2014
2015
2016
2017

(Year)

Source: Japan National Tourism Organization

Global passenger traffic(Millions of passengers)

4,000
3,500
1,782

Europe

2,474

4,004

2,500

3.2%

6,996

361
3.8%

2,371

Middle East

6.0%

135.4

Profit attributable toowners of parent ¥billionIn fiscal year 2017, consolidated operating revenues increased by
7.3% year on year to 1,383.2 billion yen. International passenger
revenues rose by 47.7 billion yen, reflecting the revenue
management measures that led to firm high yield demand for bothoutbound and inbound, together with an increase in fuel surcharge
revenues and forex factors. Domestic passenger revenues also
increased by 19.6 billion yen because of a rebound in demand fromthe slump after the Kumamoto earthquakes in 2016, a steep rise inpersonal travel demand, and the launch of complimentary inflight
Wi-Fi services ahead of competitors, which helped to attract morecustomers.
Operating expenses increased by 8.1% year on year to1,208.6 billion yen. Fuel costs increased by 16.4 billion yen due tohigher fuel prices, maintenance costs rose by 13.1 billion yen mainly
due to a rise in engine maintenance costs, and personnel costs roseby 17.0 billion yen due to an increase in headcount amid businessexpansion and growth in earnings-linked bonus payments. The
Group also increased amortization costs related to the newpassenger service system, which was revamped in November 2017,and various other expenses associated with passenger number
growth. However, the Group continued its cost reduction efforts
using its amoeba management system and other approaches.
As a result, consolidated operating profit rose by 2.5% year
on year to 174.5 billion yen.
Ordinary income declined by 1.1% year on year to 163.1
billion yen, reflecting a rise in non-operating expenses, mainly due
to an increase in loss on sales and disposal of flight equipment.
Profit attributable to owners of parent fell by 17.5% to 135.4 billion
yen, partly reflecting a decline in income taxes – deferred from 31.6
billion yen booked in the previous fiscal year.

2,000

5.3%

3.8%

billion

1,500

A Business Base that Supports Value Creation

Africa3,000

North America
Asia-Pacific

736
171

3,325

1,000
408

1,051

Latin America

4.8%

7,737 18,587
World

4.5%

Source: Japan Aircraft Development Corporation

500
0
1995
1996
1997
1998
1999
2000
2001
2002
2003
2004
2005
2006
2007
2008
2009
2010
2011
2012
2013
2014
2015
2016

1,910

174.5

Operatingprofit ¥(Year)

Fiscal 2017 Changes in operating profit (Billions of yen)+¥4.2 billion

ASK +1.7% YoY
PRK +3.8% YoY

Source: International Civil Aviation Organization (scheduled flights)(+2.5%)

Domestic
passenger

JAL Group
International
passenger

＋19.6

Cargo
and mail＋13.8＋17.6%＋3.9%

As a result, consolidated operating revenue increased by
7.3% year on year to 1,383.2 billion yen and the operating
expenses increased by 8.1% year on year to 1,208.6 billion yen,while the operating profit increased by 2.5% year on year to 174.5
billion yen and the ordinary profit declined by 1.1% from theprevious year to 163.1 billion yen. The profit attributable to ownersof parent was 135.4 billion yen, down 17.5% from the previous
year due to the income tax deferred in the previous fiscal year.

Fuel

＋13.1

△ 16.4＋4.4%

Maintenance△ 13.1△8.3%“other revenues”
include• ‌Travel service
sales, etc.

＋47.7

+ stands for profit increase (revenue increase, cost reduction)- stands for profit decrease (revenue decrease, cost increase)

Aircraft△ 6.7

Personnel△6.7%△ 17.0“Aircraft” includes• Aircraft Depreciation• Aircraft Leases• Aircraft Insurance Premium, etc.

△6.2%

△26.8%

Passenger
Service System(Depreciation costs)△ 7.0

Service costs＋11.5%—

Other
expenses
Business Outline

The JAL Group comprises Japan Airlines Co., Ltd. (JAL), 77
subsidiaries and 57 affiliated companies.
On April 28, 2017, the JAL Group released the JAL Group
Medium Term Management Plan for Fiscal Years 2017-2020. To
achieve the goals in the plan, the Group focused on instilling
greater focus on profits among its staff through the JAL Philosophy
and amoeba management system and worked to improve
management efficiency to provide the highest level of service tocustomers, backed by a firm commitment to operational safety.

Otherrevenues△ 29.6△4.2

Expense of travel agency △2.2

△6.0%

Landing and navigation fees △2.4

170.3

△1.9

FSC*

＋14.7

FSC*

＋3.1

FSC*

—

Total FSC*

+17.8

Sales commissions

Forex

＋4.6

Forex

＋2.0

Forex

＋0.3

Total forex+7.0

Other than those above △18.7

Total

＋19.3

Total

＋5.1

Total

＋0.3

Total

+24.8

Total

Revenues +¥94.2 billion

Costs -¥90.0 billion

174.5

△29.6

Financial / Data Section

Fiscal 2016

Fiscal 2017

*FSC = Fuel Surcharge

84

Management Strategies Designed to Create Value

億人

Compound Annual Growth Rate 2018-2037
RPK in billions
2017
2037

billion

40

0

Air Passenger Traffic Forecast

1,383.2

Operatingrevenue ¥1. Earnings Summary(Millions of visitors)

About the JAL GroupIn the fiscal year ended March 31, 2018, total air travel demandremained strong, mainly for domestic travel and inbound travel toJapan, due to continuing moderate economic recovery trends inboth Japan and overseas.
Crude oil prices, which affect the JAL Group’s fuel purchasing
costs, international passenger revenues and international cargo
revenues, increased as OPEC and other oil leaders agreed to extend
production cuts and geopolitical emerged. The exchange rate of theJapanese yen against the US dollar has been in the range of 105 to
115 yen.

85JAL REPORT 2018

JAL REPORT 2018

EVALUATION AND ANALYSIS OF FINANCIAL CONDITIONSRevenues of international routes by geographic segment

2. Segment Earnings

In the air transportation segment, operating revenue increased by
8.4% year on year to 1,257.2 billion yen and operating profit
increased by 5.3% to 161.2 billion yen.
* ‌Figures for operating revenue and operating profit are before elimination of intra-segment
transactions.

161.2

billion Operating profit ¥Air transportation segment sales by business
Fiscal 2016

International passenger
operations＋6.3

Europe

＋22.2

15

16

Asia / Oceania

17,836

18,042＋1.2

Asia / Oceania

＋9.1

34

33

China

3,506

3,292

△6.1

China

＋12.3

10

11

Hawaii / Guam

7,465

7,569

＋1.4

+11.5

Hawaii / Guam

＋2.1

15

14

Total

50,621

51,836

＋2.4

Total

＋11.5

100

100

+13.2

56,036

+29.3

8,699

9,858

+13.3

Luggage revenues

764

749

△2.0

Domestic passenger operations

525,150544,706+3.7

Passenger revenues

498,628

518,239+3.9

Cargo revenues

22,26022,444+0.8

Mail service revenues

3,959

3,718

△6.1

Luggage revenues

301

304

+1.0

Passenger operations total

993,168

1,074,269+8.2

Other revenues

166,224

182,995+10.1

1,159,392

1,257,265

+8.4

・RPK

Revenue passengers carried (1,000)

Fiscal 2017

YoY change (%)

462.9

＋11.5

8,585

8,394

＋2.3

America(Billions of yen)+¥47.7 billion(+11.5%)

＋38.0

462.9

＋9.7

415.2
·Net unit price (+)· Fuel surcharge (+), etc.

ASK (million seat kilometers)

50,621

51,836＋2.4

RPK (million passenger kilometers)

40,63342,013＋3.4

Revenue Passenger-Load factor (%)

80.3%

81.0%

＋0.8ptRevenue per passenger*1 (yen)49,461

53,919＋9.0

Yield*2 (yen)

10.2

11.0

＋7.8

Unit revenue*3 (yen)

8.2

8.9

＋8.9

Fiscal 2016

Revenue perpassenger

Number ofpassengers

Fiscal 2017

Factors of changes in Revenue per Passenger (estimate)

YoY (%)

11,735＋3.5

Europe

5,976

6,571

＋9.9

Asia / Oceania

14,371

14,936

＋3.9

China

2,577

2,610

＋1.3

Hawaii / Guam

6,372

6,158

△3.4

Total

40,63342,013＋3.4(1,000)Fiscal 2017

YoY (%)

America

1,194

1,230

＋3.0

Europe

660

733

＋11.0

Asia / Oceania

4,047

4,146

＋2.4

China

1,381

1,409

＋2.0

Hawaii / Guam

1,109

1,066

△3.9

Total

8,394

8,585

＋2.3

＋4%

· Revenue Passenger-Load factor (%)
Demand Mix＋1%Route Effect＋9%Forex, etc.

Net unit
price

（%）

Fiscal 2016

Fiscal 2017

YoY (pt)

America

79.1

78.4

△0.8

Europe

79.8

82.5

＋2.7

Asia / Oceania

80.6

82.8

＋2.2

China

73.5

79.3

＋5.8

Hawaii / Guam

85.4

81.4

△4.0

Total

80.3

81.0

＋0.8

Total

Business Outline

Fuelsurcharge

ASK (million seat kilometers) (left hand scale)

11,335

Fiscal 2016

International passengers
RPK (million passenger kilometers) (left hand scale)Fiscal 2017

· Revenue passengers carried＋4%*1 Revenue per passenger = Passenger revenues / Passengers*2 Yield = Passenger revenues / RPK*3 Unit revenue = Passenger revenues / ASK(Million passenger kilometers)

Fiscal 2016

International passenger revenues① International passenger operations

Revenue Passenger-Load factor (%) (right hand scale)

60,00051,83650,00042,01340,00090.0② Domestic passenger operations

85.0

In domestic passenger operations, although the revenue perpassenger declined from the previous year primarily due tocompetition with other airlines, passenger traffic increased 4.5%
year over year. This was attributed to the recovery in demand, which
dropped in the aftermath of the Kumamoto Earthquakes in April
2016, and the success of various demand-boosting measures. As aresult, the passenger revenue increased year over year.
In route operations, in order to improve the convenience andcomfort of the on regional network routes service, Embraer 190 was
introduced to more routes to/from Osaka (Itami) Airport, and thestate-of-the-art ATR42-600 turboprop was introduced to the islandroutes in Kagoshima Prefecture operated by Japan Air Commuter.

80.0
75.0

20,00070.0

10,000

65.0

0

60.0
2014

2015

2016

2017 (FY)② Domestic passenger operations
Fiscal 2016

Fiscal 2017

YoY (%)

Passenger revenues (billion yen)

498.6

518.2

＋3.9

Revenue passengers carried (1,000)

32,57034,033＋4.5

ASK (million seat kilometers)

35,42335,714＋0.8

RPK (million passenger kilometers)

24,55025,643＋4.5

Revenue Passenger-Load factor (%)

69.3%

71.8%

＋2.5ptRevenue per passenger*1 (yen)15,30915,227△0.5

Yield*2 (yen)

20.3

20.2

△0.5

Unit revenue*3 (yen)

14.1

14.5

＋3.1

*1 Revenue per passenger = Passenger revenues / Passengers*2 Yield = Passenger revenues / RPK*3 Unit revenue = Passenger revenues / ASK

87

Financial / Data Section

30,000

2013

86

7,962

529,563

415.2

＋4.5

7,490

43,334

Fiscal 2016

14,971

EuropeMail service revenues

Passenger revenues (billion yen)

14,322A Business Base that Supports Value Creation

In international passenger operations, passenger traffic increased
2.3% year on year and the revenue passenger load factor reached
to a record high of 81.0%, attributed to strong outbound demand
and robust inbound demand.
With regard to the route operations, JAL launched newservices between Tokyo(Narita) and Melbourne and between
Tokyo(Narita) and Kona in September 2017, and increased flightfrequency on the late-night service to Europe, the Tokyo(Haneda) =London route, in October 2017 in order to capture corporate andleisure outbound demand and a wide range of inbound demand.
JAL also made partnership agreements with Vietjet, Vistara,
Hawaiian Airlines, Aeromexico and Aeroflot, and will work jointlywith these partner airlines to further improve its network.
Regarding its products, JAL newly introduced JAL SKY SUITE
787.
On the service front, JAL won top honors for “Loyalty (Repeat
Intention Rate)” for the fifth consecutive year and “Customer
Satisfaction” in the International Airlines category of the Japanese
Customer Satisfaction Index (JCSI) Survey. This survey is conductedannually by an external service evaluation organization in Japan. For
inflight meals, JAL introduced menus created by young chefs, whowere finalists from RED U-35 including the FY2016 Grand Prix
winner, for Premium Economy and Economy Class on medium- andlong-haul routes from Japan. RED U-35 is the Japan’s largest
culinary competition for a new generation of chefs.

YoY (%)

AmericaManagement Strategies Designed to Create Value① International passenger operations

Fiscal 2017

Fiscal 2016

Fiscal 201726

Cargo revenues

Total

Fiscal 2017
YoY

(Million seat kilometers)

Fiscal 2016

26

YoY change (%)

462,919

・ASK

＋13.7

Fiscal 2017415,218（%）

Component Ratio

America(Millions of yen)

468,017

Passenger revenues· Passenger revenues

billion

About the JAL Group(1) Air transportation segment

1,257.2

Operating revenue ¥JAL REPORT 2018

JAL REPORT 2018

EVALUATION AND ANALYSIS OF FINANCIAL CONDITIONS

Domestic passenger revenues(Billions of yen)

RPK (million passenger kilometers) (left hand scale)+¥19.6 billion

ASK (million seat kilometers) (left hand scale)(+3.9%)

Revenue Passenger-Load factor (%) (right hand scale)

40,000＋22.3

35,71435,000

80.0

498.6

518.2

△ 2.7

(Billions of yen)

Fiscal2016

Fiscal
2017

Fuel

198.7

215.2

＋16.4

＋8.3

Landing and navigation fees

81.1

83.5

＋2.4

＋3.0

Maintenance

48.9

62.0

＋13.1

＋26.8
＋12.4

YoY
(Billions of yen)

YoY
(%)

Operating expenses ¥billionmanagement system and the total operating expenses increased by
8.1% year on year to 1,208.6 billion yen.

(1) Fuel costs
Fuel costs increased by 16.4 billion yen year on year due to higher prices,foreign exchange rates and other factors. The Group’s fuel consumption isrising due to capacity expansion, but it continues to take steps to limit therise of fuel usage through actively introducing fuel-efficient aircraft andefficient operational practices.

Sales commissions (Air Trasport)

15.9

17.9

＋1.9

Aircraft *1

100.4

107.1

＋6.7

＋6.7

Service *2

37.9

42.2

＋4.2

＋11.2

Personnel

273.3

290.3

＋17.0

＋6.2

Expenses of travel agency

81.5

83.8

＋2.2

＋2.8

(2) Unit cost

Other

280.4

306.1

＋25.7

＋9.2

1,118.6

1,208.6

＋90.0

＋8.1

The Group’s unit costs have been rising since fiscal 2012 due toenhanced services to customers. However, air transportation
revenue per ASK (unit revenue) is also increasing. The Group willcontinue to focus on maximizing profits per ASK (unit profit).

Total operating expenses

25,64370.0

25,000· ‌Competition withother airlines (–)· ‌Increased demandfor promotional
fares (–)

65.0

15,00060.0

10,000
55.0

5,000
0

· ‌Increase in individual
passenger (+)· ‌Recovery from aplunge in demand by
the 2016 Kumamoto
Earthquakes (+)

50.0
2013

2014

2015

2016

2017 (FY)Fiscal 2016

Revenueper passenger

Number ofpassengers

Fiscal 2017(2) Other Businesses

4. Profit Attributable to Owners of Parent
Ordinary income declined by 1.1% year on year to 163.1 billion yen
because of an increase in non-operating expenses, mainly due to anincrease in loss on sales and disposal of flight equipment. Profit

5. Cash Flows

14
12
10
8
6
4
2
0

Air transport revenue per ASK
Unit cost

14.0
10.1

2013

2014

2015

2016

135.4

Profit attributable to owners of parent ¥billionattributable to owners of parent fell by 17.5% to 135.4 billion yen,mainly due to a decline in income taxes – deferred from 31.6 billion
yen booked in the previous fiscal year.

281.5
180.1
55.8

Cash provided by operating activities ¥billionCash used in investing activities*1 -¥billionCash used in financing activities -¥The JAL Group primarily uses cash flow for investments that
increase corporate value, shareholders return and maintenance of a
firm financial structure. The Group conducts capital investment in2017 (FY)billionaccordance with strict investment criteria and aims to maximizing
free cash flow through securing an appropriate level of investment
return.

89

Financial / Data Section

Packages, which now offer a wider choice of special tourism plans
and early booking options. In inbound demand, JALPAK conducteda marketing campaign in Thailand using the JAL Visit Japan
Dynamic Package, which was launched in January 2017.
JAL CARD, Inc. stepped up efforts to attract new members,
such as using effective online advertising and running signup
campaigns, which was supported by upgrades of infrastructure toenable customers to apply for credit cards via their smartphones
and the launch of new services, including services that allow users
to apply for a family credit card and make transfers to bankaccounts online. As a result, the number of cardholders increased
by 4.7% year on year to 3.42 million. In addition, JAL CARD, Inc.
focused on providing personalized information for members via
MyJALCARD, a dedicated online service that customers can accessafter signup, and the JAL Card app. Measures were also taken to
improve services for cardholders, such as giving them the option to
pay annual card fees with miles.

Unit cost

Business Outline

In other businesses, we worked to maximize the corporate value of
the JAL Group by improving convenience for customers. Financial
results for the two main companies in other businesses were as
follows.
JALPAK Co., Ltd. worked to increase sales by strengthening its
lineup of exclusive products for members of JAL’s Mileage Bank
program, and by offering more high value-added products androlling out marketing campaigns in a timely manner. The company
also upgraded office environments and implemented otherworkstyle reforms to increase productivity. Despite strong demandfor Dynamic Packages, which use local companies in overseas
markets to secure better hotel rooms, the number of passengers
handled by JALPAK for travel to overseas destinations declined by
4.2% year on year to 231,000, reflecting the weak demand fortravel to the US and Guam amid concerns about the situation in
North Korea and terrorism. The number of passengers handled by
JALPAK for travel to domestic destinations increased by 1.4% year
on year to 2.54 million, reflecting firm demand for Dynamic

Fuel costs increased by 16.4 billion yen due to higher fuel prices in themarket. Maintenance costs rose by 13.1 billion yen due to higher
engine maintenance costs. Personnel costs increased by 17.0 billion
yen due to an increase in headcount in accordance with the capacity
growth and earnings-linked bonus payments. The depreciation costs
for the new passenger service system released in November 2017 andother costs related to business expansion also increased. However, theGroup continued its cost reduction efforts using its amoeba

A Business Base that Supports Value Creation

20,00088

Major Operating Expense Items*1 Aircraft = Depreciation + Leasing fees + Aviation Insurance Premiums, etc.
*2 Service = Expenses regarding Inflight Services, Airport Lounges, Cargo Equipment, etc.

75.0

30,0001,208.6

3. Analysis of Factors Affecting Operating Expenses

Management Strategies Designed to Create Value

Domestic passengers

and activities and a special fare for overseas visitors “JAL Japan
Explorer Pass” to boost and spread inbound tourism across Japan.
Further, JAL made a capital and business partnership with Hyakusen
Renma, an intermediary for Airbnb-style Japanese home-shareaccommodations. Not only Hyakusen Renma, we also collaborated
with other leisure business-related industries to create new travel
products combining air travel and the “minpaku,” Airbnb-style
experience of staying at a local home and enjoying local tourism
resources to promote inter-regional travel by both domestic andoverseas visitors.

About the JAL GroupRegarding products, JAL began to offer a complimentary inflight
Wi-Fi service on flights operated with JAL SKY NEXT aircraft andreceived favorable feedback from many customers. In addition,
737-800 aircraft operated by Japan Transocean Air were retrofittedwith JAL SKY NEXT cabin interiors for greater convenience andcomfort in air travel.
On the sales and marketing front, JAL and Trip Advisor, Inc.
collaborated to open a travel information website to provide travel
content on lesser-known local sights and events to incoming
travelers to Japan. “Untold Stories of Japan”, the immersive portal
on Trip Advisor’s website provides information about tourist facilities

JAL REPORT 2018

JAL REPORT 2018

EVALUATION AND ANALYSIS OF FINANCIAL CONDITIONSCash flows(1) Cash flow from operating activities(Billions of yen)

Fiscal 2017

Fiscal 2016

YoY

Cash flow from operating activities

253.1

281.5

＋28.3

Depreciation and amortization

95.7

110.8

＋15.0

Cash flow from investing activities*1△215.5△180.1＋35.4△233.4△211.9＋21.5

Investments*2

101.3

＋63.8

Cash flow from financing activities

△53.5

△55.8

△2.3

Excluding deposits and withdrawals from fixed deposit accounts,
investing activities used net cash (outflow) of 180.1 billion yen, witha decline of 35.4 billion yen year on year. The main use of cash wasfor the purchase of non-current assets.

Total cash flow*4

△15.9

45.5

＋61.4

EBITDA

266.1

285.4

＋19.3

EBITDAR

286.2

305.4

＋19.1

Free cash flow**1 Excluding‌
deposits and withdrawals from fixed deposit accounts*2 Capital‌
investments, investments in other companies, etc.
*3 Cash‌
flow from operating activities + Cash flow from investing activities*4 ‌Cash flow from operating activities + Cash flow from investing activities + Cash flowfrom financing activities(3) Cash flow from financing activities
Financing activities used net cash (outflow) of 55.8 billion yen, withan increase of 2.3 billion yen year on year, mainly reflecting cashused for cash dividends paid and for share repurchase.

1,060.3

Shareholders’ equity ¥(1) Total Assets
As of March 31, 2018, total assets stood at 1,854.2 billion yen,with an increase of 125.4 billion from the end of the previous fiscal
year, primarily due to aircraft purchases and advance payments foraircraft.

(2) Total Liabilities
As of March 31, 2018, liabilities totaled 760.0 billion yen, with anincrease of 34.7 billion yen from the end of the previous fiscal year,
mainly reflecting increases in operating accounts payable and loans
payable.

billion Equity ratio

57.2

Consolidated financial position%(Billions of yen)

End of fiscal
2016

End of fiscal
2017

YoY

1,728.7

1,854,2＋125.4

Cash and deposits*1

404.0

448.8

＋44.7

Interest-bearing debt*2

116.0

125.7

＋9.7

Future rental expenses under operating leases

76.4

67.4

△8.9

Shareholders’ equity

972.0

1,060.3＋88.2

Equity ratio (%)

56.2

57.2

＋1.0ptD/E ratio (x)*3

0.1x

0.1x

△0.0x

Total assets*1 Certificate of Deposits etc. included*2 Account Payable-installment Purchase included*3 D/E ratio = On-balance sheet interest-bearing debt / Shareholders’ equity(3) Total Net Assets

billionFiscal 2017 Fleet

Largesized

As of end of fiscal 2016
(March 31, 2017)

As of end of fiscal 2017
(March 31, 2018)

Owned

Leased

Total

Owned

LeasedTotal

Boeing 777-200

12

0

12

12

0

12

—

Boeing 777-200ER

11

0

11

11

0

11

—

Boeing 777-300

4

0

4

4

0

4

—

Boeing 777-300ER

13

0

13

13

0

13

—

40

0

40

40

0

40

—

25

0

25

25

0

25

—

8

0

8

10

1

11

＋3

Boeing 767-300

6

0

6

6

0

6

—

Boeing 767-300ER

29

2

31

28

1

29

△2

Large-sized subtotal
Medium- Boeing 787-8
sized
Boeing 787-9

Diff.

2

70

69

2

71

＋1

11

0

11

8

0

8

△3

Boeing 737-800

26

27

53

34

23

57

＋4

37

27

64

42

23

65

＋1

17

0

17

17

0

17

—

5

0

5

12

0

12

＋7

Bombardier CRJ-200

5

0

5

0

0

0

△5

Bombardier DHC8-Q400

7

2

9

5

1

6

△3

Bombardier DHC8-Q400CC

4

0

4

5

0

5

＋1

SAAB 340B

12

0

12

10

0

10

△2

Bombardier DHC8-Q300

1

0

1

1

0

1

—

Bombardier DHC8-Q100

2

0

2

0

0

0

△2

Small-sized subtotal
Regional EMBRAER 170
jet
EMBRAER 190

Regional Total
Total

1

0

1

4

0

4

＋3

54

2

56

54

1

55

△1

199

31

230

205

26

231

＋1

8. Credit Ratings
JAL’s current credit ratings are shown in the table on the right.

Rating & Investment Information, Inc. (R&I)

Issuer ratingA– (stable)

Japan Credit Rating Agency, Ltd. (JCR)

Long-term issuer rating

A (stable)

9. Retirement Benefit Obligations
The Company and its major consolidated subsidiaries haveestablished defined-benefit retirement plans such as corporate
pension plans and lump-sum retirement plans, as well as definedcontribution pension plans. When employees retire, and on otheroccasions, the Company and its consolidated subsidiaries may also
provide premium severance packages, which are not included in
calculations of the actuarial difference for retirement benefit
obligations in retirement benefit accounting.
As of March 31, 2018, the Company and 39 consolidated
subsidiaries had lump-sum retirement plans. The Group also had
three corporate pension funds, including the Japan Airlines Welfare

Pension Fund. Certain overseas subsidiaries have defined-benefit
retirement plans.
The Japan Airlines Welfare Pension Fund also introduces anoption similar to a cash-balance plan as well as other alternatives.
The JAL Group Pension Fund, which is used by some domestic
consolidated subsidiaries, uses a cash balance pension plan.
Simplified accounting methods are used to calculate
retirement benefit liabilities, assets and expenses for defined-benefit
corporate pension plans and lump-sum retirement plans at someconsolidated subsidiaries.

91

Financial / Data Section

68

Boeing 737-400

Medium-sized subtotal
Smallsized

ATR42-600

90

210.8

Business Outline

Capital investment during fiscal 2017
totaled 210.8 billion yen (including
expenditure for intangible fixed assets).
In the air transportation segment,
investment is made for aircraft to improve
operating efficiency. It also includes
intangible fixed assets such as measures toimprove the Group’s ability to respond todiversifying customer needs and systems toincrease efficiency and enhance passenger
convenience. In fiscal 2017, capital
investment totaled 209.5 billion yen. Capital
investment was mainly used to purchase 18
new aircraft (three Boeing 787-9, four
Boeing 787-800, seven Embraer 190, one
Bombardier DHC-8-Q400CC and three
ATR42-600), purchase leased aircraft andmake advance payments for aircraft. Of thethree new Boeing 787-9, one was converted
to an operating lease aircraft in fiscal 2017.

Capital investment ¥A Business Base that Supports Value Creation

6. Capital Investment and Aircraft Procurement

As of March 31, 2018, net assets totaled 1,094.1 billion yen, withan increase of 90.7 billion yen from the end of the previous fiscal
year, primarily due to profit attributable to owners of parent and anincrease in accumulated other comprehensive income, in spite of
cash dividends paid and share repurchase.
As a result, shareholders’ equity totaled 1060.3 billion yen asof March 31, 2018 and the shareholders’ equity ratio increased by
1.0 percentage point year on year to 57.2%.

Management Strategies Designed to Create Value

37.5(2) Cash flow from investing activities3

7. Financial Position

About the JAL Group

After adjusting profit before income taxes of 162.4 billion yen with
non-cash items such as depreciation and amortization, andreconciling operating accounts receivable and payable and otheritems, operating activities provided net cash (inflow) of 281.5 billion
yen, an increase of 28.3 billion yen year on year.

JAL REPORT 2018

JAL REPORT 2018

EVALUATION AND ANALYSIS OF FINANCIAL CONDITIONS

Fuel cost hedging by fiscal year (as of end-fiscal 2017)

On international routes, fuel surcharges allow the Company tooffset some of its fuel costs. As a result, the Company uses fuelhedging for fuel used on domestic routes, which is equivalent toapproximately 40% of all fuel consumed by the Group’s airtransport operations. In addition, the Company’s foreign currency
revenues are roughly the same as its foreign currency expenses,
excluding fuel costs. Consequently, the Company uses fuel andexchange rate hedging only for fuel costs.

(%)
100

80

■ Fuel■ Forex60

Approx. Approx.

40%

40

40%

20

Hedging policy· Fuel surcharge

Approx. Approx.

10%

5%

0

Fuel use

2018

Internationalroutes60%

Approx. Approx.

10%

FSC*
revenuereceived

2019

5%

2020

(FY)

(Billions of yen)Domestic
routes40%

HedgedThe Company is exposed to fuel costrisks on domestic routes, which do nothave the FSC*

Forex(yen/US$)(US$/bbl)

US$60

US$73

US$80

US$90

¥115

3.5

Forecast 0.0

1.5

-3.0

¥110

10.0

7.5

0.5

-3.0

¥105

16.5

8.0

8.0

-5.5

· Forex hedging
Foreign currency
revenues(2) Overcome Market Risks

Foreign currency
expensesNon-fuel costs

costs<Domesticroutes>hedging

The Company is exposed to forex risks
related to fuel costs, as foreign
currency expenses excluding fuel costs
are largely offset by foreign currency
revenues

Cumulative impact of price fluctuations in fiscal 2015 – 2017

Fuel prices / forex

FSC* / hedging*FSC = fuel surcharge

92

120

¥110

100
80
60
40
20
0

2013

2014

2015

2016

2017

(FY)

12. Business Outlook and Issues to Be Addressed
The Company expects the airline market – the Group’s main businessfield – to expand over the medium to long term, supported byeconomic globalization. Asia is a particularly promising growth market
for the airline sector. The pace of change in the Group’s market andbusiness climate and advances in technology are likely to accelerate. To
generate sustained and stable growth in that environment, theCompany will implement initiatives during the four years of the JAL
Group Medium Term Management Plan (fiscal 2017 – 2020). Based on
the theme, “Challenge, Leading to Growth,” the Company willcontinue to refine its full-service carrier business and steadily expand its
business domains by creating and developing new sources of earnings.
In international passenger operations, the Company anticipates
further growth in demand from overseas customers due to theupcoming 2020 Summer Olympics and Paralympics in Tokyo and an
expected increase in the number of take-off and landing slots at Tokyo
metropolitan airports. However, the competitive environment is likely to
become more challenging as domestic and international airlines,
including low-cost carriers (LCC), increase the supply of available seats.
Against that backdrop, the Company will reinforce its network,
including through joint businesses on Pacific and European routes andalliances with other airlines, and introduce new aircraft with highly
competitive cabin configurations, aiming to raise the Group’s presencein overseas markets, as well as in Japan, to become a highly regarded
global airline. In domestic passenger operations, the competitiveenvironment is likely to become tougher, including increased
competition with railway companies, amid sluggish growth in totaltransport demand due to Japan’s falling population and aging society.
Against that backdrop, the Company will introduce new aircraft suchas the Airbus 350-900, expand the number of routes withcomplimentary inflight Wi-Fi services, provide multilingual services forthe growing number of overseas visitors to Japan and take other steps
to boost competitiveness by making its services more convenient andcomfortable. The Company will also work to increase the number oftravelers by encouraging more people, including overseas visitors, toexperience Japan’s regions, helping to revitalize local economies.
The Group faces the risk of significant short-term fluctuations indemand in the airline market due to various factors, including natural
disasters, wars, terrorist incidents and outbreaks of disease. To mitigate
the impact of those risks, the Company will leverage its strengths inareas outside its full-service carrier business to create and develop new
sources of earnings that can support stable growth in the future.
Under the JAL Group Corporate Policy, “the JAL Group aims topursue the material and intellectual growth of all our employees,
deliver unparalleled service to our customers and increase corporate
value and contribute to the betterment of society.” To achieve thosegoals, all Group employees will work as one to increase corporate value
by reinforcing the Group’s businesses and financial position andaddressing society’s needs and issues.

93

Financial / Data Section

ImpactDividend per share (Yen)Business Outline<Internationalroutes>Fuel FSC* revenues

The impact of volatility in fuel prices is mitigated by hedging andfuel surcharges, however there is some time lag of their effects ineach year. However, over a medium-term timeframe, the Company
has been largely successful in mitigating the risk of fluctuations infuel prices. Based on cumulative changes in prices for the last threefiscal years, the Company has offset the impact of those changes
through hedging and fuel surcharges.

The Company’s policy is to pay dividends from capital surplus
twice a year through an interim dividend and a year-end dividend. The
Ordinary General Meeting of Shareholders approves the year-end
dividend and the Board of Directors approves the interim dividend.
The Articles of Incorporation state that the Company may pay aninterim dividend after approval by the Board of Directors, based on arecord date of September 30.
In addition, the Company continuously examines the possibility ofusing share repurchase and other methods for additional shareholder
returns and enhancing shareholder returns, based on conditions in the
1株当たり配当金額
economic environment and the Company’s financial position.

A Business Base that Supports Value Creation

Profit Impact by Fuel and FX Markets in fiscal 2018
(including hedging and fuel surcharge)

The Company regards shareholder return as one of its most importantmanagement matters. The Company’s fundamental policy is to actively
return profits to shareholders through continuous and stable dividends,
while ensuring sufficient internal reserves to invest in corporate growth,
to adapt to changes in the operating environment and to build a strong
financial structure. The Company has adopted the dividend on equity(DOE) as a reference for dividend payments, in addition to the payout
ratio.
The Company is using as a reference a payout ratio of
approximately 30% of profit attributable to owners of parent, excluding
income taxes – deferred. Also, the Company will work to achieve DOE
of 3% or higher, given the Group’s aim of maintaining ROE at 10% or
higher and the above payout ratio reference. Going forward, theCompany will improve capital efficiency further and realize stable
returns for shareholders.
Based on this policy, the Company pays a year-end dividend of
57.50 yen per share and an interim dividend of 52.50 yen per share,
resulting in an annual dividend of 110 yen per share for fiscal 2017. For
fiscal 2018, the Company forecasts an annual dividend of 110 yen per
share, including an interim dividend of 55 yen per share.

Management Strategies Designed to Create Value(1) Hedging Policy

About the JAL Group

11. Distribution of Profits to Shareholders

10. Fuel and Exchange Rate Hedging

JAL REPORT 2018

JAL REPORT 2018

EVALUATION AND ANALYSIS OF FINANCIAL CONDITIONS

Principal Business Risks① Operating environment② Competitive environment

In the air transportation business, the JAL Group places orders foraircraft with the Boeing Company, Airbus SAS, Embraer SA, ATR,
and Mitsubishi Aircraft Corporation to increase efficiency byswitching to more fuel-efficient aircraft and reducing aircraft types
in the fleet. However, the delivery of new aircraft may be delayed
due to technical, financial, and other reasons at aircraft

94② Exchange rate volatility risk
The JAL Group operates in countries other than Japan. As a result,some of its revenues and expenses are denominated in foreign
currencies. In particular, the price of aviation fuel, one of theGroup’s main costs, is largely linked to the US dollar. Fluctuations in
US dollar exchange rates therefore have a greater impact on theGroup’s expenses than on its revenues. To mitigate the impact of
exchange rate volatility on profits, the JAL Group uses foreign
currency revenues to offset foreign currency expenses and foreign
currency hedging transactions. The price of new aircraft is also
closely linked to the US dollar, which means the Group is also
exposed to the risk of exchange rate fluctuations when recording
the value of assets and depreciation costs related to aircraft. To
mitigate this risk, the Group uses hedging transactions to diversify
opportunities for foreign currency exchange.

③ Capital and financial market risk
The JAL Group needs to make significant capital investments, suchas procuring new aircraft. To meet funding needs for theseinvestments, the Group may procure funds from financial
institutions or capital markets. The Group’s ability to secure funds
and its funding costs are affected by trends in capital and financial
markets, and by changes in its credit rating, which may limit theGroup’s access to funds and lead to higher funding costs.

(4) Disaster risk
The majority of the JAL Group’s passengers use aircraft departingfrom or arriving at Haneda and Narita airports. Consequently, these
airports play a vital role in the JAL Group’s air transportation
business. In addition, the Group’s Information System Center, whichplays an important role in managing the Group’s flights, reservations
and other services, and the Operation Control Center, which istasked with controlling the operation and scheduling of the Group’s
fleet worldwide, are both located in the Tokyo area. Consequently, amajor earthquake or volcanic eruption in the Tokyo area could leadto the protracted closure of Haneda or Narita airports, while a fire,
terrorist attack or other incident at these key facilities could lead to a(5) Flight safety risk
The JAL Group implements a wide range of measures on a daily
basis to ensure the safe operation of its flights. However, a single
fatal accident has the potential to undermine customer trust in theGroup’s flight safety and lead to a loss of public support. The Group
must also provide compensation for any passenger fatalities or
injuries in the event of an accident, which could have a severe
impact on the Group’s operating performance. In addition, safetyissues related to the same aircraft type operated by the Group or
safety issues on codeshare flights could undermine customer trustin the Group’s flight safety and lead to a loss of public support,
which could affect the Group’s operating performance. To limit the
impact of legal damages related to air accidents and to ensure
those affected by any accident receive sufficient compensation, theGroup has purchased liability insurance that provides aninternationally recognized level of compensation and coverage.

(7) IT system and customer data handling risk

(6) Regulatory and litigation risk

(8) Personnel and labor relations risk

The Group’s operations are subject to various international legal
restrictions and national and local government laws and regulations.
Revisions to these laws and regulations may result in even tighter
restrictions on the Group’s operations, which could lead to asignificant increase in costs.

The JAL Group’s business is dependent on securing personnel who
have national certificates and other legally required qualifications
related to the operation of aircraft. However, due to theconsiderable amount of time required by employees to acquire
these qualifications and skills during the course of their duties, theJAL Group may not be able to secure sufficient personnel whenrequired, which could affect the Group’s business operations.
In addition, many of the Group’s employees are members oflabor unions. A collective strike by Group employees or other labor
disputes could affect the Group’s aircraft operations.

① Regulatory risk
The JAL Group conducts its operations in accordance with various
rules and regulations, such as Japan’s Civil Aeronautics Act andother regulations governing airline businesses, bilateral aviationagreements and other international arrangements, Japan’s
Antimonopoly Act and other similar antitrust laws overseas, andrules on taxes and public dues such as landing fees. Revisions tothese rules and regulations or notifications of legally enforceable
airworthiness directives could have an impact on the Group’s
operating performance. Moreover, the allocation of flight slots at
Haneda and Narita airports and the timing of the launch of newroutes could also affect the Group’s operating performance.
In addition, amid growing pressure on companies in recent
years to fulfill their corporate social responsibility to theenvironment, such as preventing global warming, the JAL Group isfacing tighter restrictions on CO2 emissions, noise pollution, harmful
substances, and other environment issues. A further tightening ofenvironmental regulations that leads to a higher cost burden
through emission charging mechanisms or other schemes, such as a
new greenhouse gas trading system to be implemented from fiscal
2020 at earliest, could have an impact on the Group’s operating
performance.

The JAL Group’s operations are dependent on a large number of IT
systems. Failures in these IT systems caused by flaws in computer
programs, computer viruses, and other cyber-attacks may lead tothe loss of critical data, as well as issues in flight operations, which
could affect the Group’s operations. Large-scale failures in powersystems, communication networks, and other infrastructure that
support IT systems could also result in significant disruption to theGroup’s operations.
In addition, inadequate handling of customers’ personal
information by the Group or unauthorized access that results in thedisclosure of such information could damage public trust in theGroup’s business, systems and corporate brand and undermine
customer and market trust in the JAL Group, which could affect theGroup’s financial position and operating performance.

Financial / Data Section(2) Aircraft risk

Fluctuations in fuel prices have a significant impact on the JAL
Group’s operating performance. The Group charges a fuelsurcharge to partly cover the impact of higher fuel prices. However,changes in fuel prices are not immediately reflected in the fuelsurcharge and it is inappropriate to ask customers to cover theentire increase in fuel prices. The Group also uses crude oil hedging
transactions to mitigate the risk of fuel price volatility. However, asudden and steep drop in oil prices may not contribute to an
improvement in the Group’s operating performance, as the benefitsof the decline would not be reflected in business results
immediately due to hedge contract positions and other factors.

The JAL Group’s business activities are exposed to the risk of various
types of litigation, which could affect the Group’s operations andoperating performance. In the event that litigation is filed against
the Group, developments in the subsequent legal case may require
additional costs and the booking of provisions, which could also
affect the Group’s operating performance.

Business Outline

The Group faces severe competition in Japan and overseas in areas
such as routes, services, and pricing. On domestic routes, the Group
competes with other major Japanese airlines, new low-cost airlines,
and bullet train services. On international routes, the Group
competes with major domestic and international airlines, andcompetition is intensifying on both domestic and internationalroutes. Alliances, codeshare agreements, and reciprocal air frequent
flyer programs between overseas and Japanese airlines arecontributing to the challenging environment on internationalroutes. Significant deterioration in this competitive climate andoperating environment could affect the Group’s operations.
The JAL Group is a member of the oneworld alliance, which
includes a number of other airlines. The Group has also formed
joint businesses with airline partners. The joint businesses extend
across international borders and have received antitrust immunity(ATI) approval. However, the JAL Group’s alliance strategy may beaffected by changes in operating conditions at other partner airlines
including oneworld members or joint business partners, and bychanges in the oneworld alliance membership or major
developments in the Group’s alliance relationships.

① Fuel price volatility risk

② Litigation risk

A Business Base that Supports Value Creation

The JAL Group’s air transportation business operates in Japan andmarkets worldwide. Demand for air travel may be affected bytrends in the global economy, natural disasters and adverse weather
conditions, terrorist attacks, regional conflicts, war, the outbreakand spread of infectious diseases, and other events.
In addition, the JAL Group’s services are partly dependent on
maintenance companies, airport personnel, sky marshals, fuelsuppliers, luggage handling companies, security companies, andother third parties, which could affect the Group’s business
operations.

(3) Market risk

prolonged outage of the Group’s information systems andoperational capabilities, which would have a severe impact on theGroup’s operations. To mitigate the risk of a shutdown at the
Operation Control Center in Tokyo, the Group transferred somefunctions to the Operation Control Center at Osaka International
Airport in April 2018 and started 24-hour operations.

Management Strategies Designed to Create Value(1) ‌Risks related to the operating environment,
including the international climate and economic
trendsmanufacturers, which could force adjustments to fleet plans that
affect the Group’s operations over the medium and long term.

About the JAL GroupThe JAL Group has identified a number of risks that could have amaterial impact on investment decisions. The list is not exhaustive
and the JAL Group may be affected by unforeseen risks notdescribed below. This report also contains forward-looking
statements based on information available to the Company as ofMarch 31, 2018. The JAL Group is exposed to the following
principal risks due to the nature of its business activities, centeredon the scheduled air transportation business and unscheduled airtransportation business.

95

JAL REPORT 2018

JAL REPORT 2018

CONSOLIDATED FINANCIAL STA TEMENTS
Consolidated Balance Sheets
Japan Airlines Co., Ltd. and Consolidated Subsidiaries

As of March 31

2018

2018

2017

ASSETS
Current assets:¥  392,075$ 3,933,000

Notes and operating accounts receivable (Note 7)

151,262

142,745

1,423,776

Securities (Notes 5, 7 and 8)

30,99912,000291,782Flight equipment spare parts and supplies

21,99621,118207,040

Deferred tax assets (Note 12)

5,576

7,436

52,484Other

58,92451,450554,631

(533)

(493)

(5,016)

686,069

626,332

6,457,727

Allowance for doubtful accounts
Total current assets

82,680854,263Flight equipment (Notes 10 and 16)

704,134

671,387

6,627,767

Ground property and equipment (Notes 10 and 16)

52,72851,708496,310

Advances on flight equipment and other purchases

123,902

101,832

1,166,246

880,765824,928

8,290,333

Tangible fixed assets, net:

Total tangible fixed assets

95,551

95,738899,388

Long-term loans receivable (Note 10)

7,715

7,303

72,618Deferred tax assets (Note 12)60,69061,457571,253

Net defined benefit asset (Note 11)

2,119

1,240

19,945

Other (Note 10)30,891

29,359290,766

(334)

(264)

(3,143)

Total non-current assets

1,168,158

1,102,444

10,995,463

Total assets¥1,854,227¥1,728,777$17,453,190

Allowance for doubtful accounts

2017

2018

¥  177,937
3,150
14,5552,389
185
14,074
107,506—
393
76,653396,846¥  159,218
5,372
13,037
5,712
181
10,82996,453
173
249
73,372364,601$ 1,674,858
29,649137,001
22,486
1,741
132,473
1,011,916—
3,699
721,5073,735,372

20,00080,696
4,319

20,00065,802
5,300

188,253
759,563
40,653

480
458
5,931
230,084
3,595
17,687363,253760,099

666
353
5,965
238,481
3,538
20,676
360,783
725,384

4,518
4,310
55,826
2,165,700
33,838
166,481
3,419,173
7,154,546

181,352
183,049
731,106

181,352
183,047
647,701

1,707,003
1,722,976
6,881,645(10,535)
1,084,972(531)
1,011,569(99,162)
10,212,462

16,4696,360(30)(47,436)(24,637)
33,792
1,094,127¥1,854,227

13,828(667)
232(52,898)(39,504)
31,3281,003,393¥1,728,777

155,016
59,864(282)(446,498)(231,899)
318,072
10,298,635$17,453,190

Contingent liabilities (Note 17)
NET ASSETS (Note 13)
Shareholders’ equity:
Common stock:
Authorized: 700,000,000 shares in 2018 and 2017
Issued: 353,715,800 shares in 2018 and 2017
Capital surplus
Retained earnings
Treasury shares, at cost:
2,555,957 shares in 2018 and 199,873 shares in 2017
Total shareholders’ equity
Accumulated other comprehensive income
Valuation difference on available-for-sale securities (Note 8)
Deferred gains (losses) on hedges (Note 9)
Foreign currency translation adjustment
Remeasurements of defined benefit plans (Note 11)
Total accumulated other comprehensive income
Non-controlling interests
Total net assets
Total liabilities and net assets
The accompanying notes are an integral part of these consolidated financial statements.

96

97

Financial / Data Section

SoftwareNon-current liabilities:
Bonds payable (Notes 7 and 10)
Long-term loans payable (Notes 7 and 10)
Lease obligations (Notes 7 and 10)
Long-term accounts payable—installment purchase(Notes 7 and 10)
Deferred tax liabilities (Note 12)
Reserve for loss on antitrust litigation
Net defined benefit liability (Note 11)
Asset retirement obligations (Note 19)
Other
Total non-current liabilities
Total liabilities

2018

Business Outline

90,757

Investment securities (Notes 6, 7, 8 and 10)

LIABILITIESCurrent liabilities:
Operating accounts payable (Note 7)
Short-term loans payable (Notes 7 and 10)
Current portion of long-term loans payable (Notes 7 and 10)
Lease obligations (Notes 7 and 10)
Accounts payable—installment purchase (Notes 7 and 10)
Income taxes payable
Advances received
Deferred tax liabilities (Note 12)
Asset retirement obligations (Note 19)
Other
Total current liabilities

A Business Base that Supports Value Creation

Non-current assets:

As of March 31

U.S. dollars (Note 4)

Management Strategies Designed to Create Value¥  417,842

Cash and deposits (Notes 5, 7 and 10)

Thousands ofMillions of yen

About the JAL Group

Thousands of
U.S. dollars (Note 4)

Millions of yen

JAL REPORT 2018

JAL REPORT 2018

CONSOLIDATED FINANCIAL STATEMENTS

Consolidated Statements of Income and Comprehensive Income

Consolidated Statements of Changes in Net Assets

Japan Airlines Co., Ltd. and Consolidated Subsidiaries

Japan Airlines Co., Ltd. and Consolidated Subsidiaries

Operating revenue:
Passenger:
Domestic
International
Incidental and other revenue
Total operating revenue¥  518,239
462,919402,099
1,383,257
290,354215,270
83,55262,08419,996
110,860
426,571
1,208,691
174,565

2017¥  498,628
415,218
375,120
1,288,967
273,316
198,794
81,14048,967
20,177
95,777400,461
1,118,634
170,3322018$ 4,878,002
4,357,294
3,784,817
13,020,114
2,733,000
2,026,261
786,445584,375
188,215
1,043,486
4,015,163
11,376,986
1,643,119
7,680
13,610(7,511)
16,575(112,612)(16,349)
23,729(23,484)
7,803
2,513
—
51,553(51,534)(11,379)(14,335)(113,742)
1,529,367

Income taxes—current (Note 12)
Income taxes—deferred (Note 12)
Total income taxes
Profit24,974(3,488)21,485140,995

23,570(31,657)(8,087)
170,865

235,071(32,831)202,230
1,327,136

Profit attributable to
Owners of parent
Non-controlling interests

135,406
5,588

164,174
6,690

1,274,529
52,597

2,590
6,969
(296)
5,481

(971)
23,923(257)
16,152

24,37865,596(2,786)
51,59070
14,814
155,809308
39,155210,021658
139,439
1,466,575

150,274¥    5,535

203,331¥    6,689

1,414,476$    52,099

Other comprehensive income (Note 14)
Valuation difference on available-for-sale securities
Deferred gains on hedges
Foreign currency translation adjustment
Remeasurements of defined benefit plans, net of tax
Share of other comprehensive income of entities accounted forusing equity method
Total other comprehensive income
Comprehensive income
Comprehensive income attributable to
Owners of parent
Non-controlling interests

Treasury shares¥181,352¥183,042¥557,905¥(538)¥921,761

4(29,944)(934)(29,944)
29,944
7(43,500)
164,174(29,944)—(922)

4¥183,047

89,795¥647,7017¥(531)

89,808¥1,011,569(43,500)
164,174—¥181,352

Accumulated other comprehensive income
Valuationdifference on
available-for-salesecurities

Balance at April 1, 2016
Changes of items during period
Dividends of surplus
Profit attributable to owners of parent
Purchase of treasury shares
Retirement of treasury shares
Changes of scope of consolidation, etc.
Net changes of items other thanshareholders’ equity
Total changes of items during period
Balance at March 31, 2017¥14,767

Deferred
gains (losses)on hedges¥(24,777)

Foreigncurrencytranslation
adjustment¥427

Remeasurements ofdefinedbenefit plans¥(69,079)

Total
accumulated
othercomprehensive
incomeNoncontrollinginterests

Total
net assets¥(78,662)¥27,457¥ 870,557(43,500)
164,174(29,944)
—
(922)

(938)
(938)
¥13,828

24,11024,110¥(667)

(195)
(195)
¥232

16,181
16,181¥(52,898)

39,15739,157¥(39,504)

3,870
3,870
¥31,328

43,027
132,835¥1,003,393

Financial / Data Section

874
979
(843)
1,875
(8,458)(1,837)
2,180
203
—
1,381
(1,285)
6,692(6,959)(505)(1,853)(7,553)
162,778

Retained earnings

Business Outline

816
1,446
(798)
1,761
(11,964)(1,737)2,521(2,495)
829
267
—
5,477
(5,475)(1,209)(1,523)(12,084)
162,480

Capital surplus

The accompanying notes are an integral part of these consolidated financial statements.

98

A Business Base that Supports Value Creation

Non-operating income (expenses):
Interest income
Dividend income
Interest expenses
Gain on sales of flight equipment
Loss on sales and disposal of flight equipment
Loss on sales and disposal of supplies
Share of profit of entities accounted for using equity method
Foreign exchange gains (losses)
Gain on sales of investments in securities
Compensation income
Compensation expenses
Subsidy income for aircraft purchase
Loss on reduction of aircraft
Impairment loss (Note 15)
Other
Total non-operating income (expenses)
Profit before income taxes

Balance at April 1, 2016
Changes of items during period
Dividends of surplus
Profit attributable to owners of parent
Purchase of treasury shares
Retirement of treasury shares
Changes of scope of consolidation, etc.
Net changes of items other thanshareholders’ equity
Total changes of items during period
Balance at March 31, 2017

Total
shareholders’ equity

Common stock

Management Strategies Designed to Create Value

Operating expenses:
Wages, salaries and benefits
Aircraft fuelLanding fees and other rent
Aircraft maintenanceAircraft rent
Depreciation and amortization
Other
Total operating expenses
Operating income

2018

Shareholders’ equity

About the JAL GroupYears ended March 31

Millions of yen

Thousands of
U.S. dollars (Note 4)

Millions of yen

99

JAL REPORT 2018

JAL REPORT 2018

CONSOLIDATED FINANCIAL STATEMENTS

Consolidated Statements of Cash Flows
Japan Airlines Co., Ltd. and Consolidated Subsidiaries

Millions of yen

Common stock

Capital surplus

Retained earnings

Treasury shares

Total shareholders’equity¥181,352¥183,047¥647,701¥(531)¥1,011,569(51,790)
135,406—¥181,3522(211)(9,999)(3)(51,790)
135,406(9,999)(213)

2¥183,049

83,405¥731,106(10,003)¥(10,535)

73,403¥1,084,972

Accumulated other comprehensive income
Valuationdifference on
available-for-salesecurities¥13,828

Foreigncurrencytranslation
adjustment¥(667)¥232

Remeasurements ofdefinedbenefit plans¥(52,898)

Total
accumulated
othercomprehensive
incomeNoncontrollinginterests

Total
net assets¥(39,504)¥31,328¥1,003,393(51,790)
135,406(9,999)
(213)

2,640
2,640
¥16,469

7,027
7,027
¥6,360

(262)
(262)
¥(30)

5,461
5,461
¥(47,436)

14,867
14,867¥(24,637)

2,463
2,463
¥33,792

17,33190,734¥1,094,127

Thousands of U.S. dollars (Note 4)
Shareholders’ equity
Capital surplus

Retained earnings

Treasury shares$1,707,003$1,722,957$6,096,583$(4,998)$9,521,545(487,481)
1,274,529—$1,707,003

18(1,986)(94,117)(28)(487,481)
1,274,529(94,117)(2,004)18$1,722,976

785,062$6,881,645(94,154)$(99,162)

690,916$10,212,462

Accumulated other comprehensive income
Valuationdifference on
available-for-salesecurities$130,158$(6,278)$2,183Remeasurements ofdefinedbenefit plans

Total
accumulated
othercomprehensive
income$(497,910)$(371,837) $294,879

Noncontrollinginterests

Total
net assets$9,444,587(487,481)
1,274,529(94,117)(2,004)

24,84924,849$155,016

66,142
66,142$59,864(2,466)(2,466)$(282)

The accompanying notes are an integral part of these consolidated financial statements.

51,40251,402$(446,498)

139,937
23,183
163,130
139,937
23,183854,047$(231,899) $318,072 $10,298,635

2017¥ 162,480¥ 162,778$ 1,529,367

110,860

95,777

1,043,486

9,882(1,422)(2,262)798(81)(2,521)(8,621)(876)
18,803
13,780300,8202,895(802)(21,370)
281,5426,459(3,589)(1,854)843(8)(2,180)(14,609)(801)
13,952
27,974
284,7422,312(862)(33,039)
253,153

93,015(13,384)(21,291)
7,511
(762)
(23,729)(81,146)(8,245)
176,986
129,706
2,831,513
27,249(7,548)(201,148)
2,650,056(408,263)
421,808(208,002)
22,701(2,941)
1,578(363,892)
411,381(233,125)
8,427
(342)
1,134

(3,842,836)
3,970,331(1,957,850)
213,676(27,682)
14,853

48

­—

451

23
(1,270)954
6,761(166,600)

—
(386)
1,485
7,239
(168,077)

216(11,954)
8,979
63,638(1,568,147)(2,221)30,306(13,468)(6,004)—(10,004)(51,749)(2,851)
111(55,883)(354)
58,704
124,261122(360)
27,895(11,169)(13,491)
19,875(29,992)(43,481)(2,807)—(53,531)(292)
31,251
92,951
58(20,905)
285,259(126,769)(56,513)—(94,164)(487,095)(26,835)
1,044(526,007)(3,332)552,560
1,169,625
1,148

(218)
¥ 182,870—¥ 124,261(2,051)$ 1,721,291

The accompanying notes are an integral part of these consolidated financial statements.

100

101

Financial / Data Section

Balance at April 1, 2017
Changes of items during period
Dividends of surplus
Profit attributable to owners of parent
Purchase of treasury shares
Changes of scope of consolidation, etc.
Net changes of items other thanshareholders’ equity
Total changes of items during period
Balance at March 31, 2018

Deferred
gains (losses)on hedges

Foreigncurrencytranslation
adjustment

Proceeds from sales of shares of subsidiaries resulting
in change in scope of consolidation
Payments of loans receivableCollection of loans receivable
Other, net
Net cash used in investing activities
Cash flows from financing activities
Net decrease in short-term loans payable
Proceeds from long-term loans payable
Repayments of long-term loans payable
Repayments for lease obligations
Proceeds from issuance of bonds
Purchase of treasury shares
Cash dividends paid
Dividends paid to non-controlling interests
Other, net
Net cash used in financing activities
Effect of exchange rate change on cash and cash equivalents
Net increase in cash and cash equivalents
Cash and cash equivalents at beginning of period
Increase in cash and cash equivalents resulting from merger
Decrease in cash and cash equivalents resulting from exclusionof subsidiaries from consolidation
Cash and cash equivalents at end of period (Note 5)

2018

Business Outline

Balance at April 1, 2017
Changes of items during period
Dividends of surplus
Profit attributable to owners of parent
Purchase of treasury shares
Changes of scope of consolidation, etc.
Net changes of items other thanshareholders’ equity
Total changes of items during period
Balance at March 31, 2018

Total
shareholders’ equity

Common stock

Cash flows from operating activities
Profit before income taxes
Adjustments to reconcile profit before income taxes to
net cash provided by operating activities:
Depreciation and amortization
Loss on sales and disposal of non-current assets andimpairment loss
Decrease in net defined benefit liability
Interest and dividend income
Interest expenses
Foreign exchange gains
Share of profit of entities accounted for using equity method
Increase in notes and operating accounts receivable
Increase in flight equipment spare parts and supplies
Increase in operating accounts payable
Other, net
SubtotalInterest and dividend income received
Interest expenses paid
Income taxes paid
Net cash provided by operating activities
Cash flows from investing activities
Payments into time deposits
Proceeds from withdrawal of time deposits
Purchase of non-current assets
Proceeds from sales of non-current assets
Purchase of investment securities
Proceeds from sales and redemption of investment securities
Proceeds from purchase of shares of subsidiaries resulting
in change in scope of consolidation

A Business Base that Supports Value Creation

Balance at April 1, 2017
Changes of items during period
Dividends of surplus
Profit attributable to owners of parent
Purchase of treasury shares
Changes of scope of consolidation, etc.
Net changes of items other thanshareholders’ equity
Total changes of items during period
Balance at March 31, 2018

Deferred
gains (losses)on hedges

Years ended March 31

Management Strategies Designed to Create Value

Balance at April 1, 2017
Changes of items during period
Dividends of surplus
Profit attributable to owners of parent
Purchase of treasury shares
Changes of scope of consolidation, etc.
Net changes of items other thanshareholders’ equity
Total changes of items during period
Balance at March 31, 2018

Thousands of
U.S. dollars (Note 4)
2018

Millions of yen

About the JAL Group

Shareholders’ equity

JAL REPORT 2018

JAL REPORT 2018

CONSOLIDATED FINANCIAL STATEMENTS

Notes to Consolidated Financial Statements
Japan Airlines Co., Ltd. and Consolidated Subsidiaries

c. Inventories
Inventories are valued at the lower of cost and net realizablevalue with cost determined principally by the moving-average method.

i. Reserve for Loss on Antitrust Litigation
Estimated future loss is accrued in order to provide forpenalties and compensation potentially arising from pricecartels.
j. Foreign Currency Translation
Revenues and expenses in foreign currencies are translated
at the rates prevailing at the time of the transaction. Except
as noted in k. Derivatives and Hedge Accounting, foreign
currency receivables and payables are translated into yen at
the applicable year-end foreign exchange rates and any gainor loss on translation is included in current earnings.
Differences arising from the translation of assets, liabili-

l. Revenue Recognition
Passenger and cargo revenues are recognized when thetransportation services are rendered.
m. Income Taxes
Deferred tax assets and liabilities are recognized for
expected future tax consequences attributable to temporary
differences between the financial statement carrying
amounts of existing assets and liabilities and their respective
tax basis, and operating loss and tax credit carryforwards.
Valuation allowance is recorded to reduce deferred tax
assets to their net realizable value if it is more likely than notthat some portion or all of the deferred tax assets will not
be realized.
The Company and certain domestic consolidated subsidiaries file tax returns under the Japanese consolidated
corporate tax system.
n. Cash Equivalents
Cash equivalents are defined as highly liquid, short-term
investments with an original maturity of 3 months or less.
3. CHANGES IN ACCOUNTING POLICY/CHANGESIN PRESENTATION
For the fiscal year ended March 31, 2017
(Changes in depreciation method)
Due to amendments to the Japanese Corporation Tax Act,
the Company and its consolidated domestic subsidiaries
adopted “Practical Solution on a change in depreciation
method due to Tax Reform 2016” (Practical Issue Task Force
No. 32, June 17, 2016) from the current fiscal year. Accord-

103

Financial / Data Section

e. Software (excluding leased assets)
Computer software intended for internal use is amortized by
the straight-line method based on its estimated useful life
which is principally 5 years.

h. Accounting Method for Retirement Benefits
In calculating the retirement benefit obligation, the methodof attributing expected benefits to the accounting period isprincipally based on the benefit formula.
Actuarial gain and loss are amortized by the straightline method over a period ranging from 5 to 17 years, whichis less than the average remaining years of service of theactive participants in the plans. Amortization is computedfrom the fiscal year subsequent to the year in which thedifference was recorded.
Past service cost is principally charged to income as
incurred. However, at certain subsidiaries, past service cost isamortized by the straight-line method over a period which isless than the average remaining years of service of the active
participants in the plans.

k. Derivatives and Hedge Accounting
Derivatives positions are stated at fair value.
Gains or losses on derivatives designated as hedging
instruments are deferred until the gains or losses on theunderlying hedged items are recognized with any unrealized
gains or losses reported as a separate component of net
assets, net of taxes. Foreign currency receivables and payables are translated at the applicable forward foreignexchange rates if certain conditions are met.

Business Outline

d. Tangible Fixed Assets (excluding leased assets)
Tangible fixed assets, excluding leased assets, are stated atcost, net of accumulated depreciation, and accumulated
impairment losses, if any, except as indicated in the following paragraph.
Accumulated depreciation of tangible fixed assets on
March 31, 2018 and 2017 amounted to ¥436,907 million($4,112,452 thousand) and ¥395,080 million, respectively.
Depreciation of tangible fixed assets is computed
as follows:‌Flight equipment: the straight-line method based on
its estimated useful life
Other: principally the straight-line method based on
the estimated useful lives of the respective assets
The estimated useful lives are principally as follows:
Flight equipment: from 12 to 20 years
Other: from 2 to 65 years

g. Allowance for Doubtful Accounts
General provision for doubtful accounts is provided byapplying a reserve percentage to receivables based on experience from past transactions. When considered necessary,
specific reserves are made based on the assessment of individual accounts.

ties, revenues, and expenses of foreign consolidated subsidiaries and entities accounted for using the equity method
into yen at the applicable exchange rates at the year-end arepresented as foreign currency translation adjustments andnon-controlling interests in a component of net assets.

A Business Base that Supports Value Creation

102

b. Securities
Securities, except for investment securities of non-consolidated subsidiaries and affiliates, are classified as trading
securities, held-to-maturity securities, or other securities.
Trading securities are carried at fair value. Held-to-maturity
securities are carried at amortized cost. Marketable securities classified as other securities are carried at fair value withany unrealized gain or loss reported as a separate component of net assets, net of taxes. Non-marketable securities
classified as other securities are carried at cost or amortizedcost. Cost of securities sold is determined principally by themoving-average method.

f. Leased Assets
Depreciation of leased assets is computed as follows:
Leased assets arising from finance lease transactions
that transfer the ownership of leased assets to the lessee aredepreciated by the same method applied to assets arisingfrom purchase transactions.
Leased assets under finance lease transactions that do
not transfer the ownership to the lessee are depreciated to aresidual value of zero by the straight-line method using thelease term as the useful life.

Management Strategies Designed to Create Value

2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIESa. Principles of Consolidation and Accounting forInvestments in Unconsolidated Subsidiaries andAffiliates
The accompanying consolidated financial statements include
the accounts of the Company and all significant subsidiaries
controlled directly or indirectly by the Company. Companies
over which the Company exercises significant influence interms of their operating and financial policies have been
included in the accompanying consolidated financial statements on the equity basis.
The balance sheet date of 4 of the consolidated subsidiaries is December 31. Any significant differences in intercompany accounts and transactions arising from intervening
intercompany transactions during the period between thebalance sheet date of each subsidiary and the consolidatedbalance sheet date have been adjusted, if necessary. The
differences between the acquisition and the fair value of the
net assets at the respective dates of acquisition of the consolidated subsidiaries and companies accounted for by theequity method are recorded as goodwill amortized by thestraight-line method over a period of 5 years.
All significant intercompany accounts and transactions
and unrealized gain or loss on intercompany accounts andtransactions are eliminated in consolidation.

About the JAL Group

1. BASIS OF PRESENTING FINANCIAL STATEMENTS
Japan Airlines Co., Ltd. (the “Company”) and its domestic
consolidated subsidiaries maintain their accounting records
and prepare their financial statements in accordance withaccounting principles generally accepted in Japan, which are
different in certain respects as to the application and disclosure requirements of International Financial Reporting Standards. The accompanying consolidated financial statements
have been compiled from the consolidated financial statements filed with the appropriate Local Finance Bureau of the
Ministry of Finance as required by the Financial Instruments
and Exchange Act of Japan and include certain additional
financial information for the convenience of readers outside
Japan. Some supplementary information included in thestatutory Japanese language consolidated financial statements, but not required for fair presentation, is not presented
in the accompanying consolidated financial statements.
As permitted by the Financial Instruments andExchange Act of Japan, amounts of less than one million
yen have been omitted. As a result, the totals shown in theaccompanying consolidated financial statements (both inyen and U.S. dollars) do not necessarily agree with the sumof the individual amounts.
Certain amounts previously reported have been reclassified to conform to the current year’s classification.

JAL REPORT 2018

JAL REPORT 2018

CONSOLIDATED FINANCIAL STATEMENTS

Millions of yen
As of March 31

Cash and deposits
Securities

Thousands of
U.S. dollars

2018

2017

2018

¥417,842¥392,075$3,933,000

30,99912,000291,782

Time deposits with a maturityof more than three months(265,971)(279,813)(2,503,492)

Cash and cash equivalents¥182,870¥124,261$1,721,291

Book value

Fair value

Difference(1) Cash and deposits¥417,842¥417,842¥—(2) Notes and operating
accounts receivable

151,262

151,262—(i) Investment securities
of non-consolidated
subsidiaries and affiliates

16,433

20,6294,196(ii) Other investment securities

69,632

69,632—

Total

655,170

659,366

4,196(1) Operating accounts payable

177,937

177,937—(2) Short-term loans payable

3,150

3,150

—

(3) Bonds payable

20,00020,06565(4) Long-term loans payable

95,252

95,252—(5) Lease obligations

6,708

6,708

—
—

Assets(3) Securities and investment
securities

Liabilities(6) Long-term accounts payable—
installment purchase

666

666

Total

303,715

303,78065

Derivatives*¥8,312¥8,307¥(4)* Derivatives assets and liabilities are stated on a net basis, and net liabilities are
enclosed in parentheses.

105

Financial / Data Section

104

5. CASH AND CASH EQUIVALENTS
The components of cash and cash equivalents in the accompanying consolidated statements of cash flows at March 31,2018 and 2017 were as follows:

Millions of yen
As of March 31, 2018

Business Outline- ‌“Accounting Standard for Revenue Recognition” (ASBJ
Statement No. 29, March 30, 2018)- ‌“Implementation Guidance on Accounting Standard for
Revenue Recognition” (ASBJ Guidance No. 30, March 30,
2018)(1) Overview
IASB and FASB co-developed a new comprehensive revenue
recognition standard and published “Revenue from Contracts with Customers” in May 2014 (IFRS No. 15 in IASB,
Topic 606 in FASB). Considering IFRS No. 15 will be applied
from the fiscal year starting January 1, 2018 and Topic 606

4. U.S. DOLLAR AMOUNTS
Amounts in U.S. dollars are included solely for the convenience of the reader. A rate of JPY 106.24 = USD 1.00, theapproximate exchange rate prevailing on March 31, 2018,has been used in translation. The convenience translations
should not be construed as representations that the Japanese yen amounts have been, could have been, or could in
the future be, converted into U.S. dollars at this or any otherrate of exchange.

7. FAIR VALUES OF FINANCIAL INSTRUMENTS
The Company and its consolidated subsidiaries (the “JALGroup”) manage its financial instruments to raise funds,
principally for the purpose of flight equipment and facilities
in accordance with management plans for air transportation, utilizing loans from financial institutions, issuance ofbonds, finance lease transactions, and derivatives. Funds
from short-term loans payable are utilized for ordinary operations. Funds from long-term loans payable and financelease transactions are utilized for flight equipment and facilities. Derivatives are utilized for the purpose of reducing therisk of fluctuations of interest rates and foreign currency
exchange rates, not for the purpose of speculation.
With respect to operating accounts receivable, the JAL
Group exercises due date management and outstandingbalance management in accordance with internal policies.
The JAL Group makes its best efforts to identify and mitigate risks of bad debt from major customers with financial
difficulties by periodically monitoring their creditworthiness.
Securities and investment securities are composed mainly ofshares of companies with which the JAL Group has business
relationships. The JAL Group reviews the fair values of suchfinancial instruments and the financial position of the issuers
periodically in order to identify and mitigate risks of impairment. Most operating accounts payable are due within one
year. As for derivatives, the JAL Group believes that thecredit risks are extremely low, as it enters into derivativetransactions only with reputable financial institutions with asound credit profile.
The Company utilizes derivatives in order to mitigate
the risks of fluctuations in interest rates and foreign currency
exchange rates on receivables and payables. The JAL Grouputilizes currency options to reduce the risk of foreign currency exchange rate fluctuations for specific foreign-currency-denominated receivables and payables, mainly for fuelpurchase payables.
The JAL Group also utilizes commodity derivatives inorder to mitigate the risk of fluctuations in commodity
prices of fuel and stabilize such fuel costs.
There are internal policies for derivative transactions
which set forth authorization levels and upper limits ontransaction volumes and the JAL Group enters into derivative transactions in accordance with such policies. Moreover,monthly meetings are held with the attendance of board
members responsible for derivatives to determine methods
and ratios for minimizing risks as well as to report and confirm results of derivative transactions.
The fair value of financial instruments is based on thequoted market price, when it is available. When there is nomarket price available, fair value is reasonably estimated.
Since various assumptions and factors are reflected in estimating the fair value, different assumptions and factors
could result in a different fair value.
The book value of financial instruments in the consolidated balance sheets, their fair value and the differences asof March 31, 2018 and 2017 were as follows:

A Business Base that Supports Value Creation

Accounting Standards Issued but not yet Effective
The following standard and guidance were issued but not
yet adopted.
- ‌“Implementation Guidance on Tax Effect Accounting”(ASBJ Guidance No. 28, February 16, 2018 (hereinafter,“Guidance No. 28”))- ‌“Implementation Guidance on Recoverability of Deferred
Tax Assets” (ASBJ Guidance No. 26 (revised 2018), February 16, 2018 (hereinafter, “Guidance No. 26”))(1) Overview
The above guidance was revised in regard to the treatments
for taxable temporary differences for investments in subsidiaries within the context of non-consolidated financial statements, and to clarify the treatments in determining
recoverability of deferred tax assets in a company which wascategorized as ”Type 1” according to the guidance.
(2) Effective date
Effective from the beginning of the fiscal year ending March
31, 2019.
(3) Effects of the application of the standards
The Company and its consolidated domestic subsidiaries are
currently in the process of determining the effects of these
new standards on the consolidated financial statements.

6. INVESTMENT SECURITIES OF NON-CONSOLIDATEDSUBSIDIARIES AND AFFILIATES
Investment securities of non-consolidated subsidiaries andaffiliates which were included in “Investment securities” inthe consolidated balance sheets on March 31, 2018 and2017 amounted to ¥37,477 million ($352,757 thousand)and ¥35,244 million, respectively. Bonds of affiliates whichwere included in “Investment securities” in the consolidatedbalance sheets on March 31, 2018 and 2017 amounted to¥3,330 million ($31,344 thousand) and ¥3,330 million,
respectively.

Management Strategies Designed to Create ValueFor the fiscal year ended March 31, 2018
Information about changes in accounting policy/changes inpresentation for the fiscal year ended March 31, 2018 is notapplicable.

from the fiscal year starting December 15, 2017, the ASBJ
developed comprehensive Accounting Standard for Revenue
Recognition and published them together with implementation guidance.
The fundamental policy for developing AccountingStandard for Revenue Recognition by the ASBJ was that theaccounting standards would incorporate the fundamental
policy of IFRS No. 15 as the starting point from the perspective of comparability of financial statements, which is one of
the benefits of achieving consistency with IFRS No. 15. If
there are matters to be taken into consideration in Japan in
actual practice, etc., alternative handling will be added
within a range that would not impair financial statementcomparability.
(2) Effective date
The Company and its consolidated domestic subsidiaries are
currently considering the effective date.
(3) Effects of the application of the standards
The Company and its consolidated domestic subsidiaries are
currently in the process of determining the effects of these
new standards on the consolidated financial statements.

About the JAL Grouping to this adoption, some consolidated domestic subsidiaries of the Company changed the depreciation method offacilities attached to buildings and structures acquired sinceApril 1, 2016 from the declining-balance method to thestraight-line method. The impact on the consolidated statements is immaterial.

JAL REPORT 2018

JAL REPORT 2018

CONSOLIDATED FINANCIAL STATEMENTS

Thousands of U.S. dollars
Book value

Fair value

Difference(1) Cash and deposits$3,933,000$3,933,000$—(2) Notes and operating
accounts receivable

1,423,776

1,423,776—

Assets(3) Securities and investment
securities

154,678

194,173

39,495(ii) Other investment securities

655,421655,421—

6,166,886

6,206,381

39,495

Total
Liabilities(1) Operating accounts payable

1,674,858

1,674,858—(2) Short-term loans payable

29,64929,649—(3) Bonds payable

188,253

188,864611(4) Long-term loans payable

896,573896,573—(5) Lease obligations

63,14063,140—(6) Long-term accounts payable—
installment purchase

6,268

—

Total

2,858,763

2,859,375

611

Derivatives*$78,237$78,190$(37)* Derivatives assets and liabilities are stated on a net basis, and net liabilities are
enclosed in parentheses.
Millions of yen
As of March 31, 2017

Book value

Fair value

Difference

Assets(1) Cash and deposits(2) Notes and operating
accounts receivable¥392,075
142,745¥392,075¥—142,745—(3) Securities and investment
securities

15,73517,0091,273(ii) Other investment securities

46,723

46,723—

Total

597,280

598,554

1,273

Liabilities(1) Operating accounts payable

159,218

159,218—

Derivatives
Derivatives are described further in “Note 9. DERIVATIVESAND HEDGING ACTIVITIES.”(ii) Financial instruments for which the fair value isextremely difficult to measure

5,372

5,372

—

(3) Bonds payable

20,00020,01313(4) Long-term loans payable

78,83978,839—As of March 31(5) Lease obligations

11,012

11,012

—

847

847

—

Investment securities of
non-consolidated subsidiaries
and affiliates

Total

275,290

275,303

13

Derivatives*¥(588)¥(550)¥  37(6) Long-term accounts payable—
installment purchase* Derivatives assets and liabilities are stated on a net basis, and net liabilities are
enclosed in parentheses.

106

Millions of yen
2018

2017

Thousands of
U.S. dollars

More thanten years

As of March 31, 2018

Withinone year

Cash and deposits¥417,842

¥—

¥—

¥—

Notes and operating
accounts receivable

151,262———

Investment securities
Short-term investments

30,999

—

—

—

—

—

—

3,330

Held-to-maturity
securities
Other securities withmaturity date

—

2,091

—

—

Withinone year

Cash and deposits$3,933,000

Notes and operating
accounts receivable

More than
one year,withinfive years

More than
five years,
withinten years

More thanten years

$—

$—

$—

1,423,776———

291,782———

Held-to-maturity
securities

—

—

—

31,344

Other securities withmaturity date—

19,681——

Investment securities
Short-term investments

As of March 31, 2018

StocksMillions of yen
More than
five years,
withinten years

More thanten years

As of March 31, 2017

Withinone year

Cash and deposits¥392,075

¥—

¥—

¥—

Notes and operating
accounts receivable

142,745———

12,000

—

—

—

—

—

—

3,330

Held-to-maturity
securities¥19,509$198,070

Held-to-maturity securities

3,330

3,330

31,344

Other securities

11,318

9,381

106,532

The above are not included in “(3) (ii) Other investment securities” in the fair value of financial instruments because there
is no market value and it is difficult to measure the fair value.

¥22,747

15,41038,15722,747(25)474
30,999—31,49931,474

(25)

Total

¥46,910¥69,632¥22,721

As of March 31, 2018

Acquisition
cost

Carrying
value

Unrealized
gain (loss)$145,048$359,158$214,109

145,048

359,158

214,109(235)

Thousands of U.S. dollars

Unrealized gain:
Stocks
Unrealized loss:
4,696

4,461

291,782291,782—

296,489

296,253

(235)

Total

$441,547$655,421$213,864

As of March 31, 2017

Acquisition
cost

Carrying
value

Unrealized
gain (loss)¥15,410¥34,229¥18,819

15,41034,22918,819(6)

Short-term investments

Millions of yen

Unrealized gain:
Stocks
Unrealized loss:
Short-term investments

2018¥21,043¥38,157

499

Stocks

The redemption schedule for short-term and long-term debt
subsequent to the consolidated balance sheet date is
described in “Note 10. SHORT-TERM LOANS PAYABLE AND
LONG-TERM DEBT.”¥15,41030,999StocksInvestment securities
Short-term investments

Unrealized
gain (loss)

Unrealized loss:

StocksMore than
one year,withinfive years

Carrying
value

Unrealized gain:

Short-term investments

Thousands of U.S. dollars

As of March 31, 2018

Millions of yen
Acquisition
cost

Total

499

493

12,00012,000—12,49912,493(6)¥27,910¥46,723¥18,813

Proceeds from sales of securities classified as other securities
for the year ended March 31, 2018 amounted to ¥1,496
million ($14,081 thousand). For the year ended March 31,
2018, the aggregate gain realized on those sales totaled¥764 million ($7,191 thousand), and the aggregate loss realized on those sales totaled ¥2 million ($18 thousand). Neitherof them was applicable for the year ended March 31, 2017.

107

Financial / Data Section(2) Short-term loans payable

More than
five years,
withinten years

Business Outline(i) Investment securities
of non-consolidated
subsidiaries and affiliates

Millions of yen
More than
one year,withinfive years

8. INVESTMENT SECURITIESNo trading securities were held on March 31, 2018 and2017. Securities classified as other securities are included in“Investment securities” in the accompanying consolidatedbalance sheets.
The components of unrealized gain or loss on marketable securities classified as other securities on March 31,2018 and 2017 were summarized as follows:

A Business Base that Supports Value Creation

6,268

Liabilities(1) Operating‌
accounts payable and (2) Short-term loans
payableThe fair value equates to the book value due to theshort-term nature of these instruments.
(3) ‌Bonds payable
The fair value of bonds payable is determined based on
the market price.
(4) Long-term‌loans payable, (5) Lease obligations, and (6)Long-term accounts payable—installment purchase
The fair value of long-term loans payable, lease obligations, and long-term accounts payable—installment
purchase with fixed interest rates is based on the present
value of future cash flows discounted using the current
borrowing rate for similar debt of a comparable maturity.

(iii) Redemption schedule for monetary claims andsecurities with maturity date subsequent to theconsolidated balance sheet date

Management Strategies Designed to Create Value(i) Investment securities
of non-consolidated
subsidiaries and affiliates(i) Methods of calculating the fair value of financial
instruments, including securities and derivatives
transactions
Assets(1) Cash‌and deposits and (2) Notes and operating accounts
receivable
The fair value equates to the book value due to theshort-term nature of these instruments.
(3) Securities‌and investment securities
The fair value of securities is determined mainly based on
the market price. These investment securities aredescribed further in “Note 8. INVESTMENT SECURITIES.”

About the JAL GroupAs of March 31, 2018

JAL REPORT 2018

JAL REPORT 2018

CONSOLIDATED FINANCIAL STATEMENTS

Type of derivative

Major hedged items

Estimated fair value

Thousands of U.S. dollars
Contract amount
Total
Maturing after 1 year
Estimated fair value¥41,055
2,673
1,594

¥ 2,47664
2¥(1,450) $386,436(27)
25,160(62)
15,003$ 23,305
602
18$(13,648)
(254)
(583)

69,65917,343449

655,675

163,243

4,226

61,946

14,691(1,299)583,076

138,281(12,227)

67,883

17,90810,702638,958

168,561

100,734

7,163
2,428
1,722

—
—
—

(160)
141
(18)
$ 78,190

All derivative transactions were conducted as over-the-counter transactions. Fair value is estimated based on prices quoted byfinancial institutions and others.

Major hedged items

Millions of yen
Contract amount
Total
Maturing after 1 year

2018

Current portion of
long-term loans
payable¥ 14,555¥13,037$137,001

0.7%

Long-term loans
payable (excluding
current portion) due
2019 to 2030

80,69665,802759,563

0.4%

Current portion oflease obligations

2,389

5,712

22,486

0.9%

Lease obligations(excluding current
portion) due 2019
to 2032

4,319

5,300

40,653

2.2%

Current portion of
long-term accounts
payable—installment
purchase

185

181

1,741

2.0%

Long-term accounts
payable—installment
purchase (excluding
current portion)due 2021

480

666

4,518

2.0%

20,000188,253

0.3%

Long-term accounts
payable—installment
purchase:

Bonds payable
Estimated fair value¥36,805
2,020
1,330

¥ 4,548——¥1,19744
84

67,232

17,318

1,918

60,885

15,129(1,268)68,35918,550(2,565)

Method of hedge accounting: Special treatment (Note 2. k) Forward foreign currency exchange contracts:
Buy:
USD
Operating accounts payable
593
—
EUR
Operating accounts payable
305—
OthersOperating accounts payable
80
—
Total

40
(7)
4
¥  (550)

All derivative transactions were conducted as over-the-counter transactions. Fair value is estimated based on prices quoted byfinancial institutions and others.

108

2017

Long-term loans:

Bonds payable due
2021 to 2026
Total

20,000¥122,626¥110,699 $1,154,235

The aggregate annual maturities of long-term debt within
5 years subsequent to March 31, 2018 are summarized asfollows:
Year ending March 31

Millions ofyen

Thousands of
U.S. dollars

2018¥ 17,130$161,238

2019

16,165

152,155

2020

11,644

109,600

2021

20,525

193,194

2022

9,482

89,2502023 and thereafter

47,677448,766¥122,626$1,154,235

Total

11. RETIREMENT BENEFIT PLANS
Outline of Current Retirement Benefit System
An employee whose employment is terminated is entitled, inmost cases, to pension annuity payments or to a lump-sum
severance payment determined by reference to the employee’s basic rate of pay, length of service, and the conditions
under which the termination occurs.
The Company and certain significant domestic consolidated subsidiaries have established contributory defined
benefit pension plans such as corporate pension funds andlump-sum severance indemnity plans. In certain cases, additional severance payments may be provided.
As of March 31, 2018, the Company and 38 consolidated subsidiaries had adopted a lump-sum severance
indemnity plan. Additionally, there were 3 corporate pension
funds, including the Japan Airlines Welfare Pension Fund.
Certain foreign subsidiaries have also established contributory defined benefit pension plans.
The Japan Airlines Welfare Pension Fund also introduced an option similar to a cash-balance plan as well asother alternatives. The JAL Group Pension Fund, which wasestablished by certain consolidated subsidiaries, introduceda cash-balance plan option.
Some of the consolidated subsidiaries adopt the simplified method for the calculation of retirement benefit obligations.

109

Financial / Data Section

Forward foreign currency exchange contracts:
Buy:
USD
Operating accounts payable
EUR
Operating accounts payable
OthersOperating accounts payable
Currencies options:
Buy:
Call option
Operating accounts payableSell:
Put option
Operating accounts payable
Commodity swap:
Received variable/pay fixed
Aircraft fuel

2018

2018

As of March 31

Business Outline

Type of derivative

Weightedaverageinterest rate

Lease obligations:

Method of hedge accounting: Special treatment (Note 2. k) Forward foreign currency exchange contracts:
Buy:
USD
Operating accounts payable
761
—
(17)
EUR
Operating accounts payable
258—
15
OthersOperating accounts payable
183
—
(2)
Total
¥  8,307

As of March 31, 2017

Millions of yen

Thousands of
U.S. dollars

Assets pledged as collateral as of March 31, 2018 for longterm and short-term debt of ¥94,023 million ($885,005
thousand) are flight equipment and others totaling¥170,397 million ($1,603,887 thousand). Assets pledged ascollateral as of March 31, 2017 for long-term and shortterm debt of ¥76,012 million are flight equipment andothers totaling ¥155,401 million.
Also included as part of pledged assets are certain
assets set aside for revolving pledges on obligations accompanying syndicated loans taken out by an affiliate, Tokyo
International Airport Terminal Corporation, for core businesspurposes. As of March 31, 2017, the amounts include security deposits paid to the banks regarding derivative transactions.
The Company entered into loan commitment agreements amounting to ¥50,000 million ($470,632 thousand)with three banks. There were no loan payables outstanding
under these loan commitment agreements.

A Business Base that Supports Value Creation

Forward foreign currency exchange contracts:
Buy:
USD
Operating accounts payable
EUR
Operating accounts payable
OthersOperating accounts payable
Currencies options:
Buy:
Call option
Operating accounts payableSell:
Put option
Operating accounts payable
Commodity swap:
Received variable/pay fixed Aircraft fuelMillions of yen
Contract amount
Total
Maturing after 1 year

10. SHORT-TERM LOANS PAYABLE AND LONG-TERM DEBT
The weighted-average interest rate for short-term loans
payable outstanding on March 31, 2018 was 1.0%. Longterm debt on March 31, 2018 and 2017 consisted of thefollowing:

Management Strategies Designed to Create Value

As of March 31, 2018transactions are examined by other departments. Gains and losses
on hedging instruments and the assessment of hedge effectiveness,
which are performed both at inception and on an ongoing basis,are reported at meetings of the related department managers on atimely basis. Other consolidated subsidiaries have adopted procedures for hedging transactions which are more simplified thanthose adopted by the Company.
The contract amount and the estimated fair value of theopen derivatives positions on March 31, 2018 and 2017, which
met the criteria required for the application of hedge accounting,are summarized as follows:

About the JAL Group

9. DERIVATIVES AND HEDGING ACTIVITIES
Certain consolidated subsidiaries utilize forward foreign exchange
contracts and currency options on a consistent basis to hedge
certain foreign currency transactions related to foreign purchasecommitments, principally for flight equipment and foreign
accounts payable, and other items. The Company also enters into avariety of options in its management of risk exposure related to thecommodity prices of fuel.
The Company and certain consolidated subsidiaries enter into
these hedging transactions in accordance with the internal guidelines and strategies established by management. The routine operations of the department which is responsible for hedging

JAL REPORT 2018

JAL REPORT 2018

CONSOLIDATED FINANCIAL STATEMENTS(4) Reconciliation‌from retirement benefit obligations andplan assets to net defined benefit liability (asset)

2018Year ended March 31
Millions of yen
2017

2018

¥473,346$4,495,331

Service cost

12,946

12,736

121,856

Interest cost

3,527

3,497

33,198Actuarial loss

1,363

12,84012,829Benefit paid

(24,169)(26,125)(227,494)

Balance at beginning of period

Reclassification of retirement
benefit obligations due to thechange from simplified method

—

1,512

—

Other

(3)

(223)

(28)

¥471,248¥477,584$4,435,692

Balance at end of period

2018

2017

¥380,893¥389,708$3,585,212

Plan assets(248,801)(245,737)(2,341,876)

132,092

143,971

1,243,335

Unfunded retirement benefit
obligations

95,871

Total net defined benefit
liability (asset)

227,964

237,240

2,145,745

Net defined benefit liability

230,084

238,481

2,165,700

Net defined benefit asset(2,119)(1,240)(19,945)

Total net defined benefit
liability (asset)¥227,964$2,145,745¥237,240

2018

2017

2018

Balance at beginning of period¥242,402¥240,874$2,281,645

Expected return on plan assets

3,698

3,669

34,807

Year ended March 31

Actuarial gain

1,091

1,126

10,269Contributions paid by the employer

17,817

16,338167,705

Benefit paid

(19,579)(19,666)(184,290)

Reclassification of retirement
benefit obligations due to thechange from simplified method

—

280

—

Other

—

(221)

—

¥245,430¥242,402$2,310,146

Balance at end of period

2018

2017

2018

Service cost

¥12,946¥12,736$121,856Interest cost

3,527

3,497

33,198

Expected return on plan assets(3,698)(3,669)(34,807)

Past service costs amortization

(49)

(28)

(461)

Net actuarial loss amortization

7,771

6,442

73,145

Year ended March 31

Retirement benefit cost basedon the simplified method

343

781

3,228

Other

(670)

(676)

(6,306)

Subtotal

20,16919,083

189,843

Total(3) ‌Reconciliation from retirement benefit obligations andplan assets to net defined benefit liability (asset), applying
the simplified method

Year ended March 31

Balance at beginning of period

—

70

—

¥20,169¥19,153$189,843(6) Remeasurements‌of defined benefit plans in othercomprehensive income

Thousands of
U.S. dollars

Millions of yen

2017

2018

¥(320)¥(370)$(3,012)

Actuarial losses that are yet
to be recognized

68,15775,656

641,538

Total¥67,837¥75,286$638,525

Millions of yen

Thousands of
U.S. dollars

2018

2017

2018

Year ended March 31

2018

2017

2018

¥2,059¥2,748$19,380

Past service costs¥   (49)¥    (28)$   (461)(8) Plan assets
Year ended March 31

2018

2017

%

%

Thousands of
U.S. dollars

Millions of yen
2018

2017

2018

Net defined benefit liability¥69,633¥69,467$655,431

Operating accounts payable

11,79010,535110,975

Non-recurring depreciation

4,826

3,918

45,425Reserve for loss on antitrust
litigation

1,777

1,788

16,726

Deferred liability on flightequipment

1,625

2,080

15,295

As of March 31

Deferred tax assets:

General insurance fund91

90

Asset retirement obligations

1,194

1,133

11,238Bond

4

4

Deferred losses on hedges

675

1,919

6,353

Other

5

6

Lease obligations

269

1,343

2,532

Total

100

100

152,047

176,161

1,431,165

Current and target asset allocations, historical and expected
returns on various categories of plan assets have been considered in determining the long-term expected rate of return.

9,612

8,786

90,474

253,453

277,134

2,385,664(174,066)(197,685)(1,638,422)

79,38679,449747,232

Valuation difference on
available-for-sale securities

6,854

5,722

64,514

Deferred gains on hedges

3,521

1,719

33,141

Asset retirement obligations

336

415

3,162

Leased assets

202

1,000

1,901

Other
Valuation allowance
Deferred tax liabilities:(9) Actuarial assumptions
Year ended March 31

Tax loss carryforwards

2018

2017

%

%

Discount rate

0.4–1.2

0.4–1.2

Long-term expected rate of return

1.0–2.0

1.0–2.5

b. Defined contribution plans
The Company and its consolidated subsidiaries contributed
a total of ¥1,614 million ($15,192 thousand) and ¥1,581
million for the fiscal years ended March 31, 2018 and 2017,
respectively.

Other
Net deferred tax assets

2,662

2,223

25,056

13,577

11,081

127,795¥65,808¥68,367$619,427

A reconciliation between the Japanese statutory income tax
rate and the Company’s and the consolidated subsidiaries’
effective tax rates for the years ended March 31, 2018 and2017 were as follows:Year ended March 31

2018

2017

%
Statutory rate

30.2

%
30.2

343

781

3,228

Actuarial gains

7,499(5,271)

70,585

(0.5)

(0.4)

Contributions paid by the employer

(106)

(148)

(997)

Total

¥7,449¥(5,300)$70,114

Changes in valuation allowance(14.3)(36.6)

Benefit paid

(149)

(172)

(1,402)

Other

(2.2)

1.8

Effective tax rate

13.2

(5.0)

—

(1,161)

—

Other

(0)

11

(0)

¥2,146¥2,059$20,199

Balance at end of period

110

Income taxes in Japan applicable to the Company and its
domestic consolidated subsidiaries consist of corporation
tax, inhabitants’ taxes, and enterprise tax. Income taxes of111

Financial / Data Section

Retirement benefit cost

Share of loss of entities accounted for using
equity method

Reclassification of retirement benefit
obligations due to the change from
simplified method

Business Outline

Reclassification of retirement benefit
obligations due to the change from
simplified method

2018

A Business Base that Supports Value Creation

Thousands of
U.S. dollars

Millions of yen
Thousands of
U.S. dollars

Past service costs that are yet
to be recognized

902,400

93,269(5) Retirement benefit costs(2) ‌Balances of plan assets, excluding plans adopting
the simplified method
Millions of yen

As of March 31

Funded retirement benefit
obligations

Thousands of
U.S. dollars

Millions of yen

12. INCOME TAX
The significant components of deferred tax assets andliabilities and the related valuation allowances on March 31,2018 and 2017 were as follows:

Management Strategies Designed to Create Value

2018¥477,584

Year ended March 31

Thousands of
U.S. dollars

Millions of yen

Thousands of
U.S. dollars(7) ‌Remeasurements of defined benefit plans in accumulated
other comprehensive income

About the JAL GroupFor the years ended March 31, 2018 and 2017a. Defined benefit plans(1) ‌Balances of retirement benefit obligations, excluding
plans adopting the simplified method

JAL REPORT 2018

JAL REPORT 2018

CONSOLIDATED FINANCIAL STATEMENTS

On April
1, 2017

Increase

Decrease

On March
31, 2018

Number of shares ofstock authorized:

Increase

Decrease

On March
31, 2017

Number of shares ofstock authorized:
Common stock
Preferred stock
Total

700,000——

700,000

50,000——50,000750,000——

750,000

Number of shares of stockin issue:Common stockTotal

362,704—

8,988

353,715362,704—

8,988

353,715

Number of shares of common
stock in treasury:
Common stock
Total

203

8,988

8,991

199

203

8,988

8,991

199

Year ended March 31

2018

2017

2018

¥ 3,722¥(1,414)$ 35,033

Valuation difference on availablefor-sale securities, net of taxes:
Unrealized holding gains arisingduring the period
Less: Reclassification adjustment
included in profit

—

—

—

Pre-tax amount

3,722(1,414)35,033Tax expense (benefit)(1,131)

443(10,645)

Valuation difference on availablefor-sale securities, net

2,590

(971)

24,378Deferred gains (losses) arisingduring the period

12,59518,053

118,552

Less: Reclassification adjustment
included in profit(2,702)

13,596(25,432)

Deferred gains (losses) on hedges,
net of taxes:

Pre-tax amount

9,892

31,65093,109Tax expense (benefit)(2,923)(7,726)(27,513)

Deferred gains (losses) onhedges, net of taxes

6,969

23,92365,596

Translation adjustment arisingduring the period

(308)

(257)

(2,899)Less: Reclassification adjustment
included in profit

11

—

103

Foreign currency translation
adjustment

(296)

(257)

(2,786)

Foreign currency translation
adjustment:

Remeasurements of defined
benefit plans:Remeasurements of defined benefit
plans arising during the period(271)

Less: Reclassification adjustment
included in profit(11,713)(2,550)

7,721

6,413

72,675Pre-tax amount

7,449(5,300)70,114700,000——

700,000

Tax expense (benefit)(1,968)21,453(18,524)

Preferred stock

50,000——50,000750,000——

750,000

Remeasurements of defined
benefit plans

5,481

16,152

51,590Common stockTotal

353,715——353,715353,715——353,715

199

2,356

—

2,555

199

2,356

—

2,555

Number of shares of common
stock in treasury:
Common stock
Total

112

Share of other comprehensive
income of entities accounted forby the equity method:
Share of other comprehensive
income of entities accounted
for by the equity method
arising during the period

70

308

658

Total other comprehensive income¥14,814¥39,155$139,439

Groups of assets

Locations

Flight equipment—

An impairment loss of ¥1,209 million ($11,379 thousand)was recognized mainly on flight equipment as non-operating expenses in the accompanying consolidated statements
of income and comprehensive income for the year ended
March 31, 2018.
The Company has recognized impairment loss on thefollowing groups of assets in the accompanying consolidated statements of income and comprehensive income forthe year ended March 31, 2017:

Assets to be soldGroups of assets

Locations

Flight equipment—

An impairment loss of ¥505 million was recognized as
non-operating expenses in the accompanying consolidated
statements of income and comprehensive income for theyear ended March 31, 2017.
16. LEASESAs Lessee
Depreciation equivalent is calculated by the straight-line
method on the assumption that the useful lives of therelated assets are the same as the lease term and the residual value is zero.
Interest expenses equivalent is calculated on the

113

Financial / Data Section

Number of shares of stockin issue:

Assets to be sold

Assets utilized in the Company’s andconsolidated subsidiaries’ operations

Common stock
Total

Assets utilized in the Company’s andconsolidated subsidiaries’ operations

Business Outline

Year ended March 31, 2018Year ended March 31, 2017

Thousands of
U.S. dollars

Millions of yen

15. IMPAIRMENT LOSS ON NON-CURRENT ASSETS
Assets are attributed or allocated to cash-generating units
which generated largely independent cash flows for calculating impairment loss. Assets to be sold and idle assets are
written down to their respective recoverable amounts.
The Company and its consolidated subsidiaries estimated recoverable amounts at the higher of fair value lesscosts to sell and value in use. Fair value is based on reasonable estimates made by the Company and its consolidated
subsidiaries in accordance with the contract amounts ofsales for the periods ended March 31, 2018 and 2017,
respectively.
The Company and certain consolidated subsidiaries
have recognized impairment loss on the following groups ofassets in the accompanying consolidated statements ofincome and comprehensive income for the year ended
March 31, 2018:

A Business Base that Supports Value Creation

Thousands of shares

Thousands of shares
On April
1, 2016

14. OTHER COMPREHENSIVE INCOME
Reclassification adjustments for each component of othercomprehensive income including tax effect for the years
ended March 31, 2018 and 2017 were as follows:

Management Strategies Designed to Create Value

13. NET ASSETSThe Companies Act of Japan (the “Act”) provides that an
amount equal to at least 10% of the amount to be disbursed as distributions of capital surplus (except for distributions from additional paid-in capital) and retained earnings(except for distributions from the legal reserve) be appropriated to additional paid-in capital and the legal reserve,
respectively, until the sum of additional paid-in capital andthe legal reserve equals 25% of the capital stock account.
Such distributions can be made at any time by a resolutionof the shareholders, or by the Board of Directors if certain
conditions are met, but neither additional paid-in capital nor
the legal reserve is available for distribution by resolution of
the Board of Directors.
A company may, by a resolution of its board of directors, designate an amount not exceeding half of the price of
new shares as additional paid-in capital, which is included incapital surplus. The maximum amount that a company can
distribute as dividends is calculated based on its unconsolidated financial statements in accordance with the Act.
At the annual shareholders’ meeting held on June 19,
2018, the shareholders approved dividends of surplus
amounting to ¥20,195 million ($190,088 thousand). Suchappropriations have not been accrued in the Consolidated
Financial Statement as of March 31, 2018.
The total number and changes in the total number ofshares of stock authorized and in issue and common stock
in treasury for the year ended March 31, 2018 were as follows:

The number of shares of common stock in treasury
increased by 2,356 thousand shares. Because the Company
purchased 2,354 thousand shares and 2 thousand shares
increased with the influence that the entity accounted forusing the equity method which holds the shares of theparent company purchased its own treasury shares.
The total number and changes in the total number ofshares of stock authorized and in issue and common stock
in treasury for the year ended March 31, 2017 were as follows:

About the JAL Group

foreign consolidated subsidiaries are based generally on the
tax rates applicable in their countries of incorporation.

JAL REPORT 2018

JAL REPORT 2018

CONSOLIDATED FINANCIAL STATEMENTS

As of March 31

2018

2017

2018

Within 1 year

¥12,278¥15,468$115,568

Over 1 year

55,18860,983

519,465

Total¥67,466¥76,451$635,033

Yen
Year ended March 31

Basic¥456.56$3.60

The following table sets forth the computation of basic
earnings per share of common stock for the years ended
March 31, 2018 and 2017:
Thousands of
U.S. dollars

Millions of yen
Year ended March 31

2018

2017

2018

¥135,406¥164,174$ 1,274,529

Earnings (allocable to) available forshareholders of common stock:
Profit attributable to ownersof parent———¥135,406¥164,174$ 1,274,529
Thousands of
U.S. dollars

Millions of yen
Year ended March 31

Weighted-average number of shares ofcommon stock outstanding

Thousands of sharesYear ended March 31

2018

2017

Balance at beginning of period

353,334

359,594

Net assets per share are computed based on the net assets
available for distribution to the shareholders of common
stock and the number of shares of common stock outstanding on each balance sheet date.
Yen
As of March 31

Net assets per share of common stock

U.S. dollars

2018

2017

2018

¥3,019.52¥2,749.71$28.42

2018

2017

2018

¥ 3,788¥ 3,957$ 35,655

Increase due to purchases of tangible
fixed assets

0

10

0

Increase due to changes in estimatedobligations

143

—

1,346

Accretion due to the passage of time

56

55

527

Decrease due to settlement

(0)

(235)

(0)

¥3,988¥3,788$37,537

Balance at end of periodb. Asset retirement obligations not recognized in the
consolidated balance sheets as of March 31, 2018and 2017
The Company and its consolidated subsidiaries have rented
lots and buildings from domestic service airports based on
permission for national property use and a real estate rental
contract for national property, and have an obligation toremove the facilities from leased real estate. The Company
and its consolidated subsidiaries have an important role inpublic traffic, and depend on the trends of the aviation
administration of each country. For this reason, the time ofbuilding removal and withdrawal cannot be determined at
the discretion of the Company and its consolidated subsidiaries alone in regard to rented airport-related facilities.
Moreover, since there is also no schedule for building
removal and withdrawal at present, asset retirement obligations cannot be reasonably estimated. Therefore, the asset
retirement obligations corresponding to the debt concerned
have not been calculated.

Business Outline
Financial / Data Section

114¥383.23

2018

20. SEGMENT INFORMATIONThe reportable segments of the Company and its consolidated subsidiaries are components for which discrete financial information is available and whose operating results are
regularly reviewed by the Board of Directors to make decisions about resource allocation and to assess performance.
Air transportation includes international and domestic passenger operations, cargo operations and other transportation services.
The accounting policies of the segments are substantially the same as those described in the significant accounting policies in Note 2. Inter-group sales are recorded under
the same conditions used in transactions with third parties.

A Business Base that Supports Value Creation

18. AMOUNTS PER SHARE
Basic earnings per share is computed based on the earnings
available for distribution to or allocable to the shareholdersof common stock and the weighted-average number ofshares of common stock outstanding during each year.
Diluted earnings per share are computed based on earnings
available for distribution to the shareholders and theweighted-average number of shares of common stock outstanding during each year after giving effect to the potentially dilutive securities to be issued upon the conversion of
convertible bonds. However, diluted earnings per share havenot been presented for the years ended March 31, 2018and 2017 since the Company had no equity instruments

2017

Earnings per share of common stock:

Appropriations for payment ofpreferred dividend

17. CONTINGENT LIABILITIESOn March 31, 2018 and 2017, contingent liabilities forguarantees for bank loans of employees amounted to ¥107
million ($1,007 thousand) and ¥150 million, respectively.
On March 31, 2018 and 2017, contingent liabilities forguarantees for lease obligations of Jetstar Japan Co., Ltd.
amounted to ¥4,042 million ($38,045 thousand) and¥4,400 million, respectively.
The Company guarantees for damage resulting from a
breach of the obligation, assertion or guarantee on thecontract regarding stock transfer reservation concluded
between Fukuoka Airport Holdings Co., Ltd. (transferor), in
which the Company holds an investment, and the Ministryof Land, Infrastructure, Transport and Tourism Civil Aviation
Bureau (transferee), capped at ¥7,867 million ($74,049
thousand) on March 31, 2018 and 2017.

U.S. dollars

2018

19. ASSET RETIREMENT OBLIGATIONS
a. Asset retirement obligations recognized in the consolidated balance sheets on March 31, 2018 and 2017
The Company and its consolidated subsidiaries, in connection with some buildings and land, have entered into realestate lease contracts with terms ranging from 1 to 46 years
for the years ended March 31, 2018 and 2017. Asset retirement obligations have been recognized in light of the obligation of the Company and its consolidated subsidiaries tothe owners of the buildings and land to remove the facilities
from leased real estate at the end of those contracts. The
liabilities on March 31, 2018 and 2017 have been calculatedwith expected useful lives ranging from 1 to 46 years anddiscount rates ranging from 0.1% to 2.5%.
The following table summarizes the changes in theaggregate carrying amount of asset retirement obligations
for the years ended March 31, 2018 and 2017:Management Strategies Designed to Create Value

Millions of yen

Thousands of
U.S. dollars

issued that had a dilutive effect on earnings per share.

About the JAL Groupassumption that the difference between aggregate leaserentals and the acquisition cost of leased assets is deemed
to be the interest portion and is apportioned over the termof the lease by the interest method.
No impairment loss has been recognized on leased
property under finance leases accounted as operating leases
for the years ended March 31, 2018 and 2017.
Future rental expenses under noncancelable operatingleases outstanding on March 31, 2018 and 2017 were as
follows:

115

JAL REPORT 2018

JAL REPORT 2018

CONSOLIDATED FINANCIAL STATEMENTS

Millions of yen
Air transportation

Other

Total

Eliminations

Consolidated¥1,140,333¥242,923¥1,383,257¥—¥1,383,257

116,931

32,386

149,318(149,318)—

1,257,265

275,310

1,532,575(149,318)

1,383,257

Operating revenue
External
Intersegment
Total
Segment profit
AssetsDepreciation and amortization

161,261

13,401

174,662(96)

174,565

1,800,326

173,029

1,973,356(119,128)

1,854,227

108,236

2,635

110,872(11)

110,860

1,184

25

1,209

—

1,209

Investments in entities accounted for using equity method

8,475

22,192

30,668—30,668¥  209,541¥  1,263¥  210,804¥—¥  210,804

Increase in tangible fixed assets and intangible assets

Thousands of U.S. dollars
Year ended March 31, 2018

Air transportation

Other

Total

Eliminations

Consolidated

Operating revenue
External
Intersegment
Total$10,733,556$2,286,549$13,020,114$—$13,020,114

1,100,630

304,838

1,405,478(1,405,478)—

11,834,196

2,591,396

14,425,592(1,405,478)

13,020,114

1,517,893

126,138

1,644,032(903)

1,643,119

Assets

16,945,839

1,628,661

18,574,510(1,121,310)

17,453,190

Depreciation and amortization

1,018,787

24,802

1,043,599(103)

1,043,486

11,144235

11,379—11,379Impairment loss
Investments in entities accounted for using equity method
Increase in tangible fixed assets and intangible assets

79,772

208,885

288,667—

288,667$1,972,336$  11,888$  1,984,224$—$  1,984,224

Millions of yen
Year ended March 31, 2017

Other

Total

Eliminations

Consolidated¥1,044,915¥244,051¥1,288,967

114,476

29,440143,917¥

—¥1,288,967(143,917)—

1,159,392

273,491

1,432,884(143,917)

1,288,967

153,191

17,400170,591(259)

170,332

1,673,011

167,188

1,840,199(111,422)

1,728,777

93,397

2,386

95,784(7)

95,777

2018

2017

2018

Asia and Oceania¥237,359¥214,298$2,234,177

North America

209,263

186,398

1,969,719

Europe89,247

72,586

840,050

Total¥535,871¥473,283$5,043,966

Information about amortization and unamortized balancesof goodwill by segment for the year ended March 31, 2017
were as follows:
Millions of yen
Air
Year ended March 31, 2017 transportation

Other

Total

Amortization
during the year

¥—

¥455

¥455

¥—

¥455

Unamortizedbalance

—

—

—

—

—

Eliminations Consolidated

Operating revenue
External
Intersegment
Total
Segment profit
AssetsDepreciation and amortization
Impairment loss
Investments in entities accounted for using equity method
Increase in tangible fixed assets and intangible assets

505

—

505

—

505

7,820

20,51028,331—

28,331¥  231,562¥  1,633¥  233,196—¥  233,196¥Information about amortization and unamortized balancesof goodwill by segment for the year ended March 31, 2018
was not applicable.
21. RELATED PARTY INFORMATION
There are no material transactions that need to be presented
for the years ended March 31, 2018 and 2017.

b. Retirement of treasury shares
The Company resolved to retire treasury shares at the meeting of the Board of Directors held on April 27, 2018, in
accordance with the Companies Article 178 of the Companies Act.
As a result, the following was implemented.
1. Details of the retirement(1) Type of shares to be retired Common shares of the Company(2) Total number of shares to be retired
4,687,100 shares(The percentage compared to the total number of sharesissued before the retirement : 1.33%)(3) Scheduled date of retirement
May 23, 20182. ‌The total number of shares after the above retirement oftreasury shares
349,028,700 shares.

Financial / Data Section

22. SUBSEQUENT EVENTS
a. Share repurchase
The Company resolved to purchase treasury shares at themeeting of the Board of Directors held on February 28,
2018, in accordance with the Companies Act Article 156,
Paragraph1, applied by replacement under Article 165,
paragraph 3 of the same Act.
As a result, the following was implemented.

Content of shares repurchased after April 1, 2018
(1) Type of shares to be purchased Common shares of the Company(2) Total number of shares to be purchased
2,333,100 shares(3) Total purchase price of shares
9,999,983,483 yen(4) Purchase period
April 1, 2018 to April 13, 2018(5) Purchase method
Purchase on the Tokyo Stock Exchange

1. Reasons for share repurchase
To improve capital efficiency and expand shareholders return

116

Business Outline

Air transportation

Year ended March 31

3. Result of repurchaseContent of shares repurchased before March 31, 2018
(1) Type of shares to be purchased Common shares of the Company(2) Total number of shares to be purchased
2,354,000 shares(3) Total purchase price of shares
9,999,955,400 yen(4) Purchase period
March 1, 2018 to March 31, 2018(5) Purchase method
Purchase on the Tokyo Stock Exchange

A Business Base that Supports Value Creation

Segment profit

Thousands of
U.S. dollars

Millions of yen

2. Details of repurchase(1) Type of shares to be purchased Common shares of the Company(2) Total number of shares to be purchased 7million shares (maximum)(3) Total purchase price of shares
20 billion yen (maximum)(4) Purchase period
March 1, 2018 to April 27, 2018

Management Strategies Designed to Create Value

Impairment loss

Information by Geographical Area
Operating revenue from overseas operations, which include
international passenger and cargo services of domestic consolidated airline subsidiaries rendered during the years
ended March 31, 2018 and 2017, export sales of domestic
consolidated subsidiaries, and sales of consolidated subsidiaries outside Japan, for the years ended March 31, 2018and 2017 were as follows:

About the JAL GroupYear ended March 31, 2018117

JAL REPORT 2018

CONSOLIDATED FINANCIAL STATEMENTS

JAL REPORT 2018

CONSOLIDATED SUBSIDIARIES(As of March 31, 2018)

Independent Auditor’s Report

Paid-in Capital(Millions of yen)

Ratio of Voting Rights
Direct(%)

Indirect(%)

Corporate Name

Total
(%)

Air Transport Business Segment

Other Segments

Air Transport Business

Maintenance
4,537

72.8

—

72.8

JAPAN AIR COMMUTER CO., LTD.

300

60.0

—

60.0

J-AIR CO., LTD.

200

100.0

—

100.0

HOKKAIDO AIR SYSTEM CO., LTD.

490

57.3

—

57.3

RYUKYU AIR COMMUTER CO., LTD.

396

—

74.5

74.5

Airport Passenger Handling

JAL AIRTECH CO., LTD.

Ratio of Voting Rights(Millions of yen)

Direct(%)

Indirect
(%)

Total
(%)

315

66.6

3.4

70.0

HKD 1,000
1,960

46.4

4.6

51.0

Cargo
JUPITER GLOBAL, LTD.

Passenger Sales
80

96.4

1.2

97.7

JAL SALES CO., LTD.

460

100.0

—

100.0

JAL JTA SALES CO., LTD.

30

16.7

83.3

100.0

JALPAK INTERNATIONAL HAWAII, INC.

USD 1,000
1,000

—

100.0

100.0

JALPAK INTERNATIONAL (CHINA) CO.,LTD.

USD 1,000
600

—

100.0

100.0

JALPAK INTERNATIONAL (EUROPE)
B.V.

EUR 1,000
1,600

—

100.0

100.0

JALPAK INTERNATIONAL (FRANCE)S.A.S.

EUR 1,000
160

—

100.0

100.0

EURO-CREATIVE TOURS (U.K.) LTD.

JAL SKY CO., LTD.

100

100.0

—

100.0

JAL SKY AIRPORT OKINAWACOMPANY., LTD.

33

66.7

33.3

100.0

JALSKY OSAKA CO., LTD.

30

100.0

—

100.0

JALSKY KYUSHU CO., LTD.

30

100.0

—

100.0

JALSKY SAPPORO CO., LTD.

30

100.0

—

100.0

JALSKY KANAZAWA CO., LTD.

10

100.0

—

100.0

JALSKY SENDAI CO., LTD.

10

100.0

—

100.0

GBP 1,000 100

—

100.0

100.0

JAL GROUND SERVICE CO., LTD.

100

99.8

0.2

100.0

JALPAK INTERNATIONAL ASIA PTE. LTD. SGD 1,000 146

—

100.0

100.0

JAL GROUND SERVICE OSAKA CO.,
LTD.

10

—

100.0

100.0

JAL SATELLITE TRAVEL CO., LTD.

HKD 1,000 750

—

100.0

100.0

JAL GROUND SERVICE KYUSHU CO.,
LTD.

10

—

100.0

100.0

IDR 1,000
500,000

—

49.0

49.0

JAL GROUND SERVICE SAPPORO
CO., LTD.

10

—

97.7

97.7

100

51.0

—

51.0

JAL INFORMATION TECHNOLOGYCO., LTD.

702

100.0

—

100.0

AXESS INTERNATIONAL NETWORK,
INC.

700

100.0

—

100.0

JAL CARD, INC.

360

50.6

—

50.6

JAL FACILITIES CO., LTD.

180

85.0

—

85.0

JAL PAYMENT PORT CO., LTD.

154

16.5

68.5

84.9

JAL BRAND COMMUNICATIONS CO.,
LTD.

100

100.0

—

100.0

JTA INFORMATION & COMMUNICATION CO., LTD.

50

—

100.0

100.0

JAL SBI FINTECH CO., LTD.

45

51.0

—

51.0

JAL SUNLIGHT CO., LTD.

20

100.0

—

100.0

OFFICIAL FILING CO., LTD.

10

50.0

4.0

54.0

JPRO CO., LTD.

10

—

100.0

100.0

USD 1,000
2,000

100.0

—

100.0

Ground Handling

Airport-Related Business

Maintenance
80

100.0

—

100.0

JAL MAINTENANCE SERVICE CO., LTD.

10

100.0

—

100.0

100

69.2

—

69.2

JAL CARGO SERVICE CO., LTD.

50

100.0

—

100.0

JAL CARGO HANDLING CO., LTD.

50

—

100.0

100.0

JAL CARGO SERVICE KYUSHU CO.,
LTD.

20

40.0

40.0

80.0

Passenger Sales
50

100.0

—

100.0

JAL MILEAGE BANK CO., LTD.

40

100.0

—

100.0

Airport-Related Business
2,700

51.0

—

51.0

JLC INSURANCE COMPANY LIMITED*1 Operating revenue (excluding operating revenue between consolidated subsidiaries)
of JALPAK CO., LTD. accounts for over 10% of consolidated operating revenue.
*2 Although JAL’s ownership is 50% or less, the company is a considered subsidiarybecause JAL has substantial control.

118

119

Financial / Data Section

JAL NAVIA CO., LTD.

Business Outline

Cargo

JAL ROYAL CATERING CO., LTD.

JAL ABC, INC.

OthersJAL ENGINEERING CO., LTD.

JAL KANSAI AIRCARGO SYSTEM
CO., LTD.

PT. TAURINA TRAVEL DJAYA*2

A Business Base that Supports Value Creation

JALPAK CO., LTD.*1

Management Strategies Designed to Create Value

JAPAN TRANSOCEAN AIR CO., LTD.

Paid-in Capital

About the JAL Group

Corporate NameJAL REPORT 2018

JAL REPORT 2018

ESG DATA
Environmental Data (E)Governance Data (Japan Airlines Co., Ltd.) (G)Environment
CO2 Emissions
Scope 1
Scope 2CO2 Emissions/RTK(Comparison with FY 2005)
NOx (LTO cycle)
CO (LTO cycle)
HC (LTO cycle)

General Waste (Aircraft)
General Waste (Ground)Industrial Waste
Ratio of Final Disposal

FY2017FY2016

Unit

840
7.88

854
7.60

875
7.15

907
6.70

10,000 tons
10,000 tons

86.6

85.1

84.6

82.2

%

6.12
4.38
0.7

5.78
4.43
0.72

5.30
4.24
0.71

5.02
3.87
0.63

1,000 tons
1,000 tons
1,000 tons

125
48,494445

120
46,770430

11344,936426

110
43,512435

Million kWh
1,000 liters
1,000 m3

3,436
1.1

5,874
2,192
3,266
1.0

Tons
Tons
Tons
%

3,415
1.2

3,475
1.2

*1 Airports, Offices, Maintenance Centers (Japan)

Social Data (Japan Airlines Co., Ltd. and 51 Consolidated Subsidiaries) (S)Human Resources
Consolidated Staff Headcount*2
Ground Staff
Cockpit Crew
Cabin Attendants

FY2015FY2017FY2016

Unit

32,75324,0552,570
6,128

33,03823,8282,629
6,581

Persons
Persons
Persons
Persons

Average age
Ground Staff
Cockpit Crew
Cabin Attendants

38.3
38.7
42.7
35.1

37.4
37.7
41.1
35.0

38.2
38.6
43.8
34.9

38.6
38.9
44.1
35.6

Years old
Years old
Years old
Years old

Ratio of Men
Ratio of Women

53.2
46.8

52.3
47.7

52.5
47.5

51.6
48.4

%
%

Managerial Staff
General Staff
Ratio of Disabled Staff*3
Ratio of Female Managers

15.9
84.1
2.04
15.1

16.0
84.0
2.28
15.6

15.9
84.1
2.56
16.3

15.8
84.2
2.69
16.3

%
%
%
%

60.2
318,24962.8
380,997

66.4
403,51964.7
422,187

Childcare Leave Applicants*5
Nursing Care Leave Applicants*5

779
51

782
42

781
65

843
89

Persons
Persons

Ratio of Local Hires at Overseas Offices
Ratio of Locally Hired Managerial Staff at
Overseas Offices

90.8

90.4

89.9

88.4

%

62.8

60.8

61.9

58.4

%

Average Years of Continuous Service

14.4

13.9

14.2

14.5

Years

1,044
4,436

909
3,182

1,506
5,271

2,701
6,224

Persons
Hours

Number of Audit & Supervisory Board meetings
External Audit & Supervisory Board Member attendanceat Audit & Supervisory Board meetings

Yes
Company with companies with Audit & Supervisory Board
1 yearChairman
10 (of which, three External Directors)
21 (Fiscal year 2017)93% (Fiscal year 2017)
Five (of which, three External Members)
98%(Fiscal year 2017)Management Committee, Group Earnings Announcement Session,
Group Council for Safety Enhancement General Meeting,Management Liaison Committee, Risk Management Committee
13 (Fiscal year 2017)100% (Fiscal year 2017)

Appointment of independent External Directors andExternal Audit & Supervisory Board Members

Six (three External Directors, three External Audit & Supervisory
Board Members)

Accounting Auditor
Internal Auditing

KPMG AZSA LLC
Audit(FY 2017)

Establishment of Committee

Corporate Governance Committee
Nominating Committee
Compensation Committee
Personnel Committee
Officers Disciplinary Committee

The Chairperson

Composition(number of members)

Numberof meetings

4
5
5
5
5

2
13
7
6
1

Kimie Iwata (Lead Independent External Director)
Masatoshi Ito (External Director)
Eizo Kobayashi (External Director)
Yoshiharu Ueki (Representative Director, President)
Kimie Iwata (External Director)(FY 2017)

Training Period per Person*4
Training Cost per Person*4

Community Contribution
Participation in Voluntary Activities
Total Hours of Voluntary Activities

Hours/Person
Yen/Person

Management
Committee

Group Earnings
Announcement Session

JAL Philosophy Council*2 ‌The number of employees until fiscal year 2016 excluded employees planning to retire as of the end of March that fiscal year, but since fiscal year 2017, thenumber of employees has included these employees and excluded temporary employees (from temporary staffing companies).
*3 As of June 1 of the year following each fiscal year. Combined data for Japan Airlines Co., Ltd. and its special subsidiary JAL Sunlight Co., Ltd.
*4 Past data have been revised in accordance with improvements made in the accuracy of data collection.
*5 Japan Airlines Co., Ltd. only120

Bodies directly controlled
by the PresidentGroup Council for
Safety Enhancement
General Meeting

Corporate Brand
Promotion Council

Management Liaison
Committee

Topics discussed
The Management Committee is a body established by the Company
for the purpose of contributing to appropriate and flexible decisionmaking by the Board of Directors and the President. The Committee
deliberates important issues requiring a resolution of the Board of
Directors and matters requiring approval by the President that must be
confirmed by the Management Committee before they are presented
to the Board or to the President.
The Group Earnings Announcement Session is attended by the
management teams of Japan Airlines and all its major subsidiaries toshare the status of the JAL Group earnings and consider ways toimprove business performance.
This body is tasked with promoting the JAL Philosophy. It is responsiblefor developing basic policies for initiatives, planning and implementing
related measures and evaluating the impact of those measures.

This body is tasked with ensuring safe flight operations across theGroup and promoting safety management, in line with the Group’s
principles and policies.
• Determines key policies related to safety management• Clarifies the status of management systems and regularly overhauls
those systems• Addresses day-to-day flight safety issues, etc.
The Corporate Brand Promotion Council establishes important policies
on the corporate brand (corporate value) based on the JAL Group
Corporate Policy and strategies, clarifies the status of corporate
activities, and where necessary, overhauls related organizations,systems and policies to strengthen the corporate brand.
The Management Liaison Committee monitors the progress ofmanagement projects and shares information.

Composition

Numberof meetings

A forum for discussion attended by the President, Vice President,
Senior Managing Executive Officers, Managing Executive Officers,
Full-time Directors, other Directors, and Audit & Supervisory
Board Members.

39

Chairman, President, Directors, Executive Officers, Area Managers,
Presidents of major subsidiaries, Audit & Supervisory Board Members

12

Chairman, President, Vice President, General Manager of Managing
Division Route Marketing, General Manager of Managing Division
Passenger Sales, General Manager of Cargo & Mail, General Manager
of Flight Operations, General Manager of Engineering & Maintenance,
General Manager of Cabin Attendants, General Manager of Airport
Operations, General Manager of General Affairs, General Manager of
Human Resources, General Manager of Corporate Control, General
Manager of Communication Division
President of Japan Airlines, Safety General Manager for Japan
Airlines, Executives nominated by the chairperson, Presidents ofGroup airlines

4

12

President, Vice President, Senior Managing Executive Officers,
Managing Executive Officers, Executive Officers nominated by thechairperson, Presidents of Group airlines

12

President, Vice President, Senior Managing Executive Officers,
Managing Executive Officers, Directors, Executive Officers,
Audit & Supervisory Board Members

20

121

Financial / Data Section

31,98623,3672,519
6,100

Formulation of Fundamental Policies of Corporate Governance
Organization Form
Directors
Term of Office Stipulated
Chairperson of the Board
Number of Directors (of which, External Directors)
Number of Board of Directors meetings
External Director attendance at Board of Directors meetings
Audit & Supervisory Board Members
Number of Audit & Supervisory Board Members (of which, External Members)
External Audit & Supervisory Board Member attendance at Board of Directors meetings
Key meetings attended by Audit & Supervisory Board Members

Business Outline

31,53423,093
2,446
5,995

Topics discussed

A Business Base that Supports Value Creation

FY2014(As of July 1, 2018)

Corporate governance-related items

Management Strategies Designed to Create Value

Electricity Use*1
Heat Use (crude oil equivalent)*1
Water Use

FY2015

About the JAL GroupFY2014

JAL REPORT 2018

JAL REPORT 2018

INTERNATIONAL ROUTE MAP(As of July 20, 2018)

Flight destinations overseas: 290 cities(Including code-share flights)

About the JAL Group

Stockholm
Hamburg
Reykjavik
Newcastle
Copenhagen Kaliningrad Kittila
BillundDublinGothenburg
Ivalo
Manchester
Dusseldorf
BelfastOslo
Amsterdam
Rovaniemi
Glasgow

Oulu
Moscow
Helsinki
Riga
Vilnius

Brussels

Edinburgh
Aberdeen

Tallinn
St. Petersburg

Yellowknife
ToledoKhabarovsk
Nizhny Novgorod

Yekaterinburg

BerlinHannoverPragueBudapest

London
Paris
Basel
Lyon
A Coruna
Santiago deCompostela
Vigo

ViennaFrankfurt
MunichRostov
Sochi

Krasnodar

Tenerife
Gran Canaria
SevillaSao Paulo
MalagaNizhnekamsk
Kazan

Shenyang
DalianYantaiChongqing
Mandalay

Kunming

Nay Pyi Taw
Dubai

Delhi
YangonMumbaiHyderabadBangalore
Koh Samui

BilbaoAddis Ababa

NanjingChengdu

Wuhan

TaipeiMontereyFresnoDenver
Wichita
Tulsa
Las Vegas
AlbuquerqueLos Angeles

Kaohsiung

El PasoLong Beach

Hong Kong

Guam
ManilaLuang Prabang
Siem Reap
Vientiane
Phnom Penh
Ho Chi Minh City

Santa Ana
San Diego
Lihue

Kota Kinabalu

Honolulu
Phoenix
KahuluiTucson
Hilo
Chihuahua
Kona
Little RockDurbanPapeeteGold Coast

Perth

SydneyAucklandKnoxville

Norfolk
Indianapolis

Huntsville

Cincinnati
Raleigh Durham

Nashville

EvansvilleJacksonville
Dallas
HoustonAustinSan Antonio
Monterrey

OrlandoWest Palm Beach
Fort Lauderdale
Miami

Tampa

Greensboro
Charlotte
Greenville
Columbia
AtlantaParis

CancunFort Myers

Frankfurt
San Juan

Mexico City

Brisbane

Cape Town

MemphisWashington
Richmond

LouisvillePuertoVallarta

Queretaro
CairnsOklahoma City

St. Louis

Fortaleza

LondonNew Orleans
Pensacola
Salvador

Birmingham

Brasilia

ManausBusiness Outline

Denpasar
KuchingBloomington

North
West
Arkansas

Aguascalientes
Guadalajara
Leon
San Luis Potosi

Jakarta

PeoriaDes Moines
Kansas CitySan Francisco
San Jose

Surabaya

Johannesburg

Chicago

Reno

TainanKuantan
Kuala Lumpur
Dar es Salaam
Singapore

Shanghai

Sacramento

NewarkHartford
New York
Philadelphia
Harrisburg
Baltimore
DaytonLexington

Omaha

Salt Lake City

EugeneHanoi

BangkokColumbus
PortlandPittsburgh
Boston

Boise

Busan
Jeju

Guangzhou
Shenzhen

Chennai

Syracuse

Jackson Hole

Santa Rosa

ColomboMale
Langkawi
PenangNairobiSeattleJapan

Tianjin
Qingdao

Xi'an

Chiang Rai

Doha

Seoul

Burlington

Winnipeg

Calgary
Kelowna
Vancouver

Vladivostok
PortlandGrand Rapids
Milwaukee
Kalamazoo

Edmonton
MadisonVictoria

Beijing

Istanbul
AnkaraRome
ZurichIrkutsk

Bucharest

Athens
Venice Amman

Milan
Nice
GenevaMarseille
Barcelona
Toulouse

Terrace

PrinceGeorgeA Business Base that Supports Value Creation

MadridNovosibirsk
Omsk

Perm

Volgograd

Stuttgart
Dubrovnik
Malta

Ufa Chelyabinsk

SamaraBaku

OviedoLisbonMinneapolis

TyumenWarsaw

Management Strategies Designed to Create Value

Cleveland
Detroit
Buffalo
TorontoOttawaRochesterMontreal

Whitehorse

Anchorage

RecifeBelo Horizonte
Lima
Campo Grande
IguazuSantiago

Melbourne

Financial / Data Section

Port Alegre
Curitiba
Sao Paulo
Rio De Janeiro● The routes above include code-share flights.
● The map has been altered to highlight the cities on JAL’s route network.

122

123

JAL REPORT 2018

JAL REPORT 2018

DOMESTIC ROUTE MAP

GLOSSARY(As of July 20, 2018)

Flight destinations in Japan: 59 cities(Including code-share flights)

Rishiri

Asahikawa
Sapporo (Okadama)
Sapporo (New Chitose)

Memanbetsu

Obihiro(Tokachi Obihiro)

ASK

Abbreviation for Available Seat Kilometer. A unit
for passenger transport capacity. Total number ofseats × distance travelled (in kilometers)

LCC

Abbreviation for Low Cost Carrier. An airline
operating at reduced fares by cutting costs
through simplified services and limited baggage
allowance. LCCs have emerged in many
countries since airline deregulation.

Kushiro (Tancho Kushiro)

ROA

MisawaAkita

ROE
Hanamaki (Iwate Hanamaki)

Yamagata(Oishii Yamagata)
Sendai

RPK

NiigataTajimaOsaka (Itami)
Okayama
Hiroshima
Yamaguchi Ube
Kitakyushu

Fukuoka

Nagasaki

Oita

Matsumoto(Shinshu
Matsumoto)
Nagoya(Komaki)Nagoya(Chubu)Tokyo(Haneda)Tokyo(Narita)

SMS (Safety
Management
System)Shizuoka(Mt. Fuji Shizuoka)

Osaka (Kansai)

Takamatsu
Tokushima(Tokushima Awaodori)Matsuyama
Kochi(Kochi Ryoma) Nanki Shirahama

Alliance

Kumamoto(Aso Kumamoto)AmakusaMiyazaki(Miyazaki Bougainvillea)

KagoshimaTanegashima

Abbreviation for Return on Assets. Calculated by
dividing operating income by total assets (netassets + liabilities). Indicates how much profit isearned from assets invested in the business.

A proactive preventive program to identify latentrisks in daily operations and normal operations,and implement preventive measures.

Abbreviation for Return on Equity. Calculated by
dividing current net income by shareholders’equity. Indicates the rate of return on
shareholders’ investment.

Fleetmanagement

A management approach to manage aircraft
flexibly according to demand trends in order tomaximize revenues and minimize expenses.

Abbreviation for Revenue Passenger Kilometers.
The total distance flown by each revenue
passenger. Number of revenue passengers ×
distance flown (in kilometers).

Full-service carrier

An airline which has an extensive route networkand provides conventional services. It offers
several classes of seats (First, Business, Economy,etc.), and includes services such as meals, drinks,
and entertainment in the fare. It is also called a
network carrier or legacy carrier.

A system to proactively prevent accidents byidentifying and managing accident risk factors inevery sector of the airline. Activities should be
conducted organizationally based on mutual
trust, in which safety policies and safety
information are shared by everyone from top
management to frontline staff.

Marshaller

A specialist who uses hand signals to guideaircraft on the ground to a specified position.

Unit cost

Consolidated air transport costs (excluding fuelcosts and transactions with affiliated companies
in which revenues and expenses are settledinternally) / ASK.

Member airlines of an alliance promote business
partnership by such means as operating codeshare flights to their respective airports,
simplifying procedures at connecting airports,
participating in frequent-flyer programs of all
members, and sharing airport lounge services for
top-tier members. The three major airline
alliances are the oneworld alliance, Star Alliance,
and Sky Team.

Unit revenue

Revenue from passenger flights / ASK.

Revenuemanagement
system

A method of forecasting changes in demand andcontrolling inventory to maximize revenues, forexample, setting advance discount fares inphases to secure the optimum number ofrevenue passengers.

Load control

To control aircraft weight. Cargo and passengers
are loaded taking into account the center ofgravity, loading weight limitations, and loading/unloading sequences.

Load factor

The usage rate of revenue passenger seats.
It represents how many revenue passengers
boarded against the total number of seatsavailable. An indicator for measuring sales ofseats. Calculated by RPK (Revenue Passenger
Kilometers) / ASK (Available Seat Kilometers).
Different from seat occupancy rate, because
nonrevenue passengers are excluded.

Yakushima

Irregular
operation

An occurrence in which the aircraft diverts due
to aircraft system malfunction, etc., but with noimmediate effect on flight safety.

Incident

An occurrence with risks of an aircraft accident
according to the Civil Aeronautics Act, Article
76-2. Sixteen items and equivalent situations
such as engine damage and fire inside an aircraft
are defined in the Ordinance for Enforcement of
the Civil Aeronautics Act.

Amami-Oshima
Kikaijima
Tokunoshima (Tokunoshima Kodakara)

Okinoerabu (Erabuyurinoshima)
Yoron

Kita-Daito

Kumejima
Okinawa(Naha)

Minami-Daito

Open Skies
Agreement

An agreement signed by countries or regions
allowing the free movement of people andgoods. Airlines are given more freedom in
selecting the number of flights, destinations andother conditions.

Code-share

To place the flight number of an airline on aflight operated by another airline, indicating thatthe flight number on reservations systems andtimetables, and operating the flight as if it wereits own flight. A flight undertaken jointly.

TaramaYonaguni

MiyakoIshigaki(Painushima Ishigaki)

124

125

Financial / Data Section

Normal line
operation
monitoring

Business Outline

A management approach which provides equal
opportunity in employment regardless of gender,
age, race, nationality, belief, values or disability
to enable everyone to reach his or her potential.

A Business Base that Supports Value Creation

Izumo(IzumoEnmusubi)

Komatsu

Diversity

Management Strategies Designed to Create Value

AomoriOki(Oki Island Global Geopark)An occurrence which did not result in an aircraft
accident, but had the risk of causing an accident,
as rated by the Ministry of Land, Infrastructure,
Transport and Tourism, such as deviation from a
runway, emergency evacuation, fire, smoke andabnormal cabin decompression, andencountering abnormal weather conditions.

Hakodate

Okushiri* Some flights on the Osaka (Itami) = Kumamotoroute are also code-share flights with AMX.
* Some routes are not operated in certain seasons.

Serious incident

About the JAL Group● The routes below are operated as code-share flights
with Fuji Dream Airlines Co., Ltd. (FDA) using FDA
aircraft and crew: Sapporo (New Chitose) = Yamagata,
Sapporo (New Chitose) = Matsumoto, Sapporo(Okadama) = Shizuoka, Yamagata = Nagoya (Komaki),Sendai = Izumo, Niigata = Nagoya (Komaki), Niigata =Fukuoka, Matsumoto = Fukuoka, Shizuoka = Izumo,
Shizuoka = Fukuoka, Shizuoka = Kagoshima, Nagoya(Komaki) = Izumo, Nagoya (Komaki) = Kochi, Nagoya(Komaki) = Fukuoka, Nagoya (Komaki) = Kitakyushu,
and Nagoya (Komaki) = Kumamoto.

JAL REPORT 2018

JAL REPORT 2018

DATA ON INCIDENTS(As of March 31, 2018)

Fiscal year 2017 management indicators and results
Indicator

ResultSummary

Aircraft accidents0—

Serious incidents

1

September 5, 2017
JAL flight 006
Returning after takeoff due totrouble in left engine

JAL flight 006 returning due to trouble in left engine(September 5, 2017)

9201● Number of Shares Per Unit

100 shares● Account closing date

March 31

● Ordinary General Meeting of Shareholders

June each year

● Date of Finalizing Shareholders Eligible to
Exercise Voting Rights at the Ordinary
General Meeting of Shareholders

March 31

● Date of record for dividend

September 30 andMarch 31

● Shareholder Registry Administrator

Mitsubishi UFJ Trust andBanking Corporation* ‌The total number of shares issued as of May 23, 2018 was 349,028,700 shares, adecline of 4,687,100 shares due to retirement of treasury stock as resolved at themeeting of the Board of Directors held on April 27, 2018.

● Major Shareholders

Number ofsharesPercentage ofShares Against
Total Numberof Issued
Shares (%)

The Master Trust Bank of Japan, Ltd.
(Trust account)

18,870,400

5.33● Method of official announcement
Electronic public notice at:
URL www.jal.com/ja/corporate/publicnotices/
Provided, however, that if the electronic notice cannot be made due toan accident or any unavoidable reason, the public notice shall be
published in the Nihon Keizai Shimbun.

Japan Trustee Services Bank, Ltd.
(Trust account)

15,465,100

4.37

Kyocera Corporation

7,638,400

2.15Japan Trustee Services Bank, Ltd.
(Trust account 9)7,476,300

2.11● Limitation on listing or recording of Citizens of Foreign Countries andOther Persons in Register of Shareholders and Register of Beneficial
Shareholders
The Articles of Incorporation lay down the following provision concerning
the Civil Aeronautics Act, Article 120-2.

Japan Trustee Services Bank, Ltd.
(Trust account 5)

6,714,700

1.89

Daiwa Securities Group Inc.

5,000,000

1.41Japan Trustee Services Bank, Ltd.
(Trust account 1)

4,988,300

1.41Japan Trustee Services Bank, Ltd.
(Trust account 2)

4,890,100

1.38Japan Trustee Services Bank, Ltd.
(Trust account 7)

3,969,900

1.12

STATE STREET BANK AND
TRUST COMPANY (505001)

3,786,100

1.07

Shareholders Name

Article 12.	 Limitation on listing or recording of Citizens of Foreign Countries and Other Persons in Register of
Shareholders and Register of Beneficial Shareholders 12.1 If the Company receives from a person,
who falls into one of the categories listed in the items below,
a request for listing or recording his or her name and address in the register of shareholders(including the register of beneficial shareholders; hereinafter the same), and if the acceptance ofsuch request causes the total voting rights owned by persons, who fall into one of the categories
listed in the items below, to represent one-third or more of the Company’s total voting rights, theCompany shall refuse such listing or recording.
		(1) A person who does not have Japanese citizenship		(2) A foreign country, foreign public body or similar entity		(3) A corporation or other organization established under foreign laws and regulations
2.	 When the Company intends to list or record all shares held by any of the shareholders listed in
the items of the following paragraph, upon notification from a book-entry institution inaccordance with Article 151. Paragraph (1) or (8) of the Act on Book-Entry Transfer of Company
Bonds, Shares, etc., and thereby the total number of voting rights held by such persons listed in
the items of the preceding paragraph will account for more than a third of the Company’s voting
rights, the Company shall list or record such shareholders in the register of shareholders inaccordance with measures provided for in the Ordinance of the Ministry of Land, Infrastructure,
Transport and Tourism to list or record only a part of the shares so that the total number of voting
rights held by such shareholders in the items of the preceding paragraph accounts for less than athird of the Company’s voting rights.

Share price (Left axis)

Corporate NameJapan Airlines Co., Ltd.

Headquarters

Nomura Real Estate Bldg., 2-4-11
Higashi-Shinagawa, Shinagawa-ku, Tokyo
140-8637, Japan
Phone: +81 (0)3-5460-3121
Website: www.jal.com/en

Established

August 1, 1951

(Million shares)
Trading volume (Right axis)
100

80

Representative
Yuji Akasaka
Director, President

3,000

60

Capital181,352 million yen

Employees

Consolidated Employees 33,038 people
Employees 12,127 people

Capital andPaid-in Capital

355,845 million yen(Amount is rounded down to the nearest million yen)

Businesses

1. Scheduled and non-scheduled air transport services
2. Aerial work services
3. Other related business

2,000

40

1,000

20

0

0

April
2014

April
2015

April
2016

April
2017

April
2018

127

Financial / Data Section

4,000Group in a readily accessible form.

126

Company Profile● Transition of share price and trading volume

5,000

The JAL Group Safety Report is published yearly in accordance with the Civil Aeronautics Act (Article 111-6: Publication of Safety
Reports by Domestic Air Carriers). The report presents safety initiatives and other relevant data from the six companies of the JAL● Outstanding Issued Shares
Common stock 353,715,800 (Number of shares per unit: 100)
Number of Shareholders 123,474● Contact
Stock Transfer Agency Department
Mitsubishi UFJ Trust and Banking Corporation
1-1, Nikko-cho, Fuchu-shi, Tokyo, Japan
Mailing address: ShinTokyo Post Office Post-office box no.29
Phone: 0120-232-711(toll free (Only within Japan))
Open: 9:00 am to 5:00 pm except Sat, Sun and public holidays(Japan time)
Website: www.tr.mufg.jp/daikou/(Yen)

JAL Group Safety Report (only in Japanese)● Total number of shares to be issued 750 million(Common stock) (700 million)(Class 1 Preferred stock) (12.5 million)(Class 2 Preferred stock) (12.5 million)(Class 3 Preferred stock) (12.5 million)(Class 4 Preferred stock) (12.5 million)

Business Outline*1 ‌Aircraft accident: A situation arising from the operation of an aircraft and resulting in
fatal or serious injury, an aircraft crash, collision, or fire, damage to the aircraft during
flight requiring major repair, or other situation classified as an aircraft accident by the
Ministry of Land, Infrastructure, Transport and Tourism.
*2 ‌Serious incident: An incident not amounting to an aircraft accident, but where arecognized danger of an accident occurring was present, such as runway excursion, an
emergency evacuation, fire or smoke on board, abnormal depressurization, encounter
with abnormal weather conditions, or other situation classified as a serious incident by
the Ministry of Land, Infrastructure, Transport and Tourism.

● Stock Code

A Business Base that Supports Value Creation

On September 5, 2017, JAL flight 006 (Tokyo International
Airport to JFK International Airport) experienced engine
trouble in its left engine during takeoff, so the engine wasshut down, the fuel jettisoned and the flight returned toTokyo International Airport. In the inspection of the engine
after landing, damage to the low-pressure turbine in therear of the engine and other components was found, so theincident was classified as a serious incident by the Civil Aviation Bureau of the Ministry of Land, Infrastructure, Transport
and Tourism (MLIT).
The incident is being investigated by MLIT’s Japan
Transport Safety Board to clarify the causes. JAL is fully
cooperating with the board’s investigation and will implement necessary measures.

● Stock Exchange The First Section of the Tokyo Stock ExchangeManagement Strategies Designed to Create Value

Serious incidents (1)Stock Information

About the JAL Group

Safety issues occurring in fiscal year 2017 andcountermeasures
The JAL Group undertakes active disclosure of safety data sothat customers can put their confidence in our services.
In fiscal year 2017, there were no aircraft accidents,*1
but one serious incident*2 occurred.
We apologize once again for the inconvenience andconcern caused.
In response to the serious incident reported below, theJAL Group is committed to cooperating fully with the investigative body and implementing the necessary countermeasures.

STOCK INFORMATION / CORPORATE INFORMATION

Japan Airlines Co., Ltd.
Finance Department, Corporate Brand Promotion Department
Nomura Real Estate Building, 2-4-11 Higashi-Shinagawa, Shinagawa-ku, Tokyo 140-8637, Japan
Tel.: +81 (0)3-5460-3068 (Finance) +81 (0)3-5460-6837 (Corporate Brand Promotion Division)
Corporate website
Corporate information
CSR information
Investor Relations

www.jal.com/en/
www.jal.com/en/outline/corporate/www.jal.com/en/csr/
www.jal.com/en/investor/