Japan Airlines Co., Ltd.
Finance Department and CSR Group, General Affairs Department
Nomura Real Estate Bldg., 2-4-11 Higashi-Shinagawa,Shinagawa-ku, Tokyo 140-8637, Japan
TEL: +81-3-5460-3068 (Finance Department) +81-3-5460-6837 (General Affairs Department)
Corporate Website:www.jal.com
Corporate Information: http://www.jal.com/en/outline/corporate/
CSR Information:
http://www.jal.com/en/csr/
Investor Relations:
http://www.jal.com/ja/investor/

English Version

Fly into Tomorrow

JAL Group Corporate Policy
The JAL Group will:

Pursue the material and intellectual growth of all our employees;
Deliver unparalleled service to our customers; andIncrease corporate value and contribute to the betterment of society.

1

JAL REPORT 2013

Contents
02

Highlights

04

Upon Publication of the JAL Report

		
		

06
		

16
		
21
22
25
		
28
29

Kazuo Inamori, Chairman EmeritusM asaru Onishi, Representative Director,
ChairmanPresident’s Message

 oshiharu Ueki, Representative Director,
Y
President

Review of Operations

Air Transport Segment / Others

Each of Us Making JAL What It IsP utting Ourselves in the Customer’s
Position
Employee Dialog— United under the JAL Philosophy

JAL Group’s Corporate Social ResponsibilityF our Key Areas of the JAL Group’s CSR Activities
Safety and Security

30

Nurturing the Next Generation

36

The Environment

38

Bridging Japan and the World

41
42
43
45
46

Partnership with Business Associates

Corporate Governance

ESG Data

Third-Party Opinion

47

Financial Section

73

Consolidated Subsidiaries

74
77
78

JAL Group Route Network
Shareholder Information

Executive Officers

Editorial Policy

 AL Report 2013 was compiled using various referential guidelines as anJintegrated report on financial information and CSR activities, and isintended to promote understanding of the corporate value and growthprospects of the JAL Group.

Period Covered by
the ReportIn principle, the report covers activities for the period from April 2012 toMarch 2013 (FY2012).

Scope of the Report

JAL Group companies

Date of Publication

August 2013

This report includes photographs taken before design changes were made to the logo, uniform, etc.

JAL REPORT 201301

Highlights
Major Financial Items

Japan Airlines Co., Ltd. Consolidated performance
FY2012 (Accounting date: March 31, 2013), FY2011(Millions of yen)

FY2011FY2012

Operating Revenue

1,204,813

1,238,839

Operating Expense

999,890

1,043,596

Operating Profit

204,922

195,242

Ordinary Income

197,688

185,863

Net Income

186,616

171,672

Net Income Per Share (Yen)

1,029.03

946.71

Interest-bearing Debt

208,460

160,145

Shareholders’ Equity

388,523

565,048

Net Assets

413,861

583,189

Total Assets

1,087,627

1,216,612

181,352

181,352

Shares Issued (Thousand shares)

Traffic Results

Japan Airlines Co., Ltd. Consolidated performance
FY2012 (Accounting date: March 31, 2013), FY2011
Revenue passengers carried(number of passengers)

Revenue passenger km(1,000 passenger-km)

Revenue passenger-loadfactor (%)

Available seat-km(1,000 seat-km)

Revenue cargo ton-km(1,000 ton-km)

FY2011FY2012

Domestic

28,965,514

30,020,440

International

6,844,772

7,525,038

Total

35,810,286

37,545,478

Domestic

22,264,394

23,012,898

International

30,313,789

34,036,119

Total

52,578,184

57,049,018

Domestic

62.7

63.1

International

70.4

76.1

Total

66.9

70.3

Domestic

35,523,214

36,443,994

International

43,036,984

44,745,317

Total

78,560,199

81,189,311

Domestic

355,909360,176

International

1,314,295

1,378,282

Total

1,670,205

1,738,458

Percentages are rounded off to the first decimal place.
Except for revenue passengers carried, figures are truncated under 1,000.

02

JAL REPORT 2013

Highlights

Messages from Management

Review of Operations

Operating Revenue

Each of Us Making JAL What It Is(JPY Bn)

1,500

250

1,204.8 1,238.8

200

(%)
25

204.9

195.2

17.0

15.8

20

900

150

600

100

10

300

50

5

0

2011

0

2012 (FY)Net Income(JPY Bn)

186.6

2011

2012 (FY)150

EBITDA* / EBITDA Margin*(JPY Bn)
200

300

171.6

(%)

286.1

276.2

23.8

30

160

240

120

180

18

80

120

12

40

60

6

0

2011

0

2012 (FY)Net Income Per Share
(Yen)

(%)
60

1,029.03

900

40
30

300

20

2011

10

2012 (FY)Interest-bearing Debt / D/E Ratio(JPY Bn)
250
200
150

0

35.7

2011

2012 (FY)

Number of Employees (Consolidated)(Times)

208.4
160.1
0.5

100

0.3

50
0

2012 (FY)

24

46.4

50

946.71

600

0

2011

22.3

Equity Ratio

1,500
1,200

Financial Section

Operating Proﬁt / Operating Proﬁt Margin(JPY Bn)

1,200

CSR

2011

2012 (FY)

1.0

35,0000.8

28,0000.6

21,0000.4

14,000

0.2

7,000

0

0

3,087530,882

20112012 (FY)*EBITDA: Operating Profit + Depreciation*EBITDA Margin: EBITDA ÷ Operating Revenue

JAL REPORT 2013

03

Upon Publication of the JAL Report

Be Humble, Avoid Arrogance, andContinue to Extend Efforts
My heartfelt gratitude goes out to you for your continued interest in the JAL Group.
I would like to take this opportunity to once again thank everyone who has offered
us their invaluable support, including our stakeholders, and our customers who
favored us with their ongoing patronage as we relisted our stock on the First
Section of the Tokyo Stock Exchange and brought an end to government support
in September last year.
After I accepted the request from the government and the Enterprise Turnaround
Initiative Corporation of Japan and set to work on rebuilding Japan Airlines, I wentaround the company, exhorting employees to adhere to the basic principles ofcorporate management, that is, a management committed to people’s minds. My
hope was that JAL would not only be revived in financial terms, but would also bereborn as an outstanding airline company we could proudly present to the world forthe exceptional commitment of its employees and the stability of its management.
With the help of many stakeholders, the directors and employees firmly positioned
the JAL Philosophy and the divisional profitability management system as the twinpillars of the company, single-mindedly pursued their aspiration to rebuild thecompany, and persevered in their efforts to create the new Japan Airlines.
I stepped back from the frontlines of management at the end of March this year,
entrusting the future of the company to its directors and employees with theseparting words: “Be humble, avoid arrogance, and continue to extend efforts. Today
is the fruit of your past efforts, while the future depends on the efforts you make fromthis point forward.” I believe they will continue to pursue outstanding managementthat meets stakeholder expectations by continually reminding themselves of theirresolve to create the JAL of tomorrow through their efforts.
At this key juncture, we sincerely seek your continued guidance and patronage
of Japan Airlines in the hope of together achieving our shared goal of prosperity
and well-being.

Dr. Kazuo Inamori
Chairman Emeritus
Japan Airlines Co., Ltd.

04

JAL REPORT 2013

Highlights

Messages from Management

Review of Operations

Each of Us Making JAL What It Is

CSR

Financial Section

Part with the Past andCreate the New JAL
Japan Airlines filed a petition for proceedings under the Corporate Reorganization
Act on January 19, 2010, which caused significant inconveniences and concerns
to financial institutions and other creditors, former shareholders, loyal customers,
business partners and the Japanese public. Moreover, we were allowed to continue
our operations as we proceeded along the path to rehabilitation.
Today, as we continue to advance step by step as the reborn JAL, we are entirely
indebted to the understanding, cooperation and support of a great number ofstakeholders, to whom I once again express my sincere gratitude.
I will always remember with a sense of appreciation having been given this lastchance to rebuild the company. To repay everyone for their strong support as quickly
as possible, I have poured all my efforts into developing a robust financial constitutionthat is highly resilient to risk.
This effort could also be described as a journey for creating a reborn JAL by uniting
the minds of Group employees, breaking with the value system of the past, thinking
and acting in line with the JAL Philosophy to realize our new corporate policy.
The culminating statement of the JAL Philosophy is “Aim High.”
Over the past three years since becoming president, I have visited all domestic
and overseas branch offices, meeting with many frontline employees to share mythinking, often through frank discussions, and we have all confirmed our mutualcommitment to create a new JAL.
Although we are only halfway there, we will always be grateful to society and ourcustomers. The directors and employees are moving forward as one to realize ourcorporate policy, maintaining safe operations as the foundation for our existence anddelivering unparalleled service to attain our highest aspirations of becoming the newJAL, the most preferred airline by customers.
I sincerely seek your patronage and hope you will continue flying with the JAL Group.

Masaru Onishi

Representative Director, Chairman
Japan Airlines Co., Ltd.

JAL REPORT 201305

President’s Message

Yoshiharu Ueki

Representative Director, President
Japan Airlines Co., Ltd.

Turning Our Promise
into True Value

For a year we put forth concerted efforts group-wide to demonstrate that JAL haschanged and has become a company that keeps its promises to its stakeholders.
From this point on, JAL’s true value will be put to the test as we strive to establish
a high profitability structure.

Looking Back on FY2012

a long way to go. We can never let down ourI extend my deepest gratitude to Japan Airlines

and we will do our best to further improve busi-(JAL) customers, our shareholders in Japan andness performance by ensuring flight safety andoverseas, and all our stakeholders with whom

providing unparalleled services. We must never

we have the pleasure of doing business.

forget our remorse and regret for past failures or

We were able to relist on the First Section of
the Tokyo Stock Exchange on September 19,

guard, even when business results are positive,

our gratitude to all who have helped bring us tothis point.

2012, repay the capital injection of 350 billion yen
to the Enterprise Turnaround Initiative Corporation of Japan, and have started anew as a privatecompany. We express our sincere gratitude to06

Resumption of Boeing 787 Operations

everyone for making all this possible. The JAL

JAL suspended its Boeing 787 operations fromGroup is now similar to a first-year company with

January 16 to May 31, 2013, owing to onboard

JAL REPORT 2013

Highlights

Messages from Management

Review of Operations

Each of Us Making JAL What It Is

battery failures. We sincerely apologize to our

margin declined by 1.2 point year-on-year but

customers and all those affected for the incon-

was maintained at a high level of 15.8%, there-

venience and concerns caused by this suspen-by achieving the management target of 10% orsion.

above set by the JAL Group Medium Term Man-

Subsequently, necessary modifications wereagement Plan for Fiscal Years 2012–2016 (here-

made to the suspended Boeing 787 aircraft andafter “Medium Term Management Plan”).

after sufficiently confirming safety and reliability

We are steadily accumulating capital. Our eq-

and completing meticulous preparations, we re-uity ratio was 46.4% at the end of March 2013

sumed flight operations starting on June 1, 2013.

compared to 35.7% a year ago. We are press-

Flight operations for the Narita-Helsinki route,ing ahead, confidently approaching the target ofwhich had been postponed by the Boeing 787

50%, set out in our Medium Term Management

suspension, commenced on July 1, 2013.

Plan.

We will ensure the safe, secure and reliable
operations of every aircraft in the Group’s fleet,

Overview of FY2012 Results

including the Boeing 787, so that customers canOperating Revenue

fly with JAL with a sense of security.
1,204.8

During the consolidated fiscal year ended March
31, 2013, consolidated operating revenue in-(JPY Bln, %)

204.9

17.0

Overview of Consolidated Results for
FY2012FY2011FY2012FY2011

creased 2.8% year-on-year to 1,238.8 billion
yen, operating profit declined 4.7% year-on-year
to 195.2 billion yen and net income fell 8.0%
year-on-year to 171.6 billion yen. Operating profit

Equity Ratio (%)

Financial Section

Operating Proﬁt(JPY Bln)

1,238,8

CSR

195.2

15.8

FY2012FY2011FY2012Year-on-Year
Change

35.7%

46.4%

+10.7pt

JAL REPORT 201307

Formulation of the JAL Group Medium
Term Management Plan for Fiscal
Years 2012–2016 Rolling Plan 2013
To achieve the management targets in the Medium Term Management Plan, the JAL Group did
its utmost to provide customers with unparaloperations; heightened the profit consciousnessof employees under its code of conduct, the JAL
Philosophy; and established a divisional profitability management system that promoted autonomous management.
We at the JAL Group must humbly reflect andlearn from our mistakes of the past. Despite having developed well thought out plans, we hadmanaged the company without sufficiently reviewing progress or the relative achievement ofour plans, or analyzing results. In implementing
the Medium Term Management Plan, we feel it isimportant to constantly confirm which measures
are on track to reach our targets, identify measures that need to be improved, and explain to
our staff, customers, shareholders and all otherstakeholders that we are earnestly working toachieve our targets.
To this end, we have confirmed that under thecurrent operating environment, the managementtargets in our Medium Term Management Plan
will remain unchanged.
We announced the JAL Group Medium Term
Management Plan for Fiscal Years 2012–2016
Rolling Plan 2013 (hereafter “Medium Term
Management Plan Rolling Plan 2013”) on April• To enable JAL Group staff to reaffirm the direction we are heading and to understand ourcurrent positioning; and• To demonstrate to customers, shareholders
and all other stakeholders that the entire JAL
Group intends to keep its promises.
We will humbly reflect on the past year, identify
measures that need to be improved to achieve
our targets in the remaining four years, correct
them and then execute them. On completingthe first year of fiscal years 2012 through 2016of the Medium Term Management Plan, we havedefined the positioning of each fiscal year, as
shown at right.
By achieving the management targets, we aim
to realize the JAL Group Corporate Policy.

08

JAL REPORT 2013

The year in which our ability
to execute the Medium Term
Management Plan was put
to the test

Drawing on lessons learned in the past,when we had neglected to execute or
analyze the cause of failures in our plan,we exerted group-wide efforts to prove
JAL had changed into a company thatkeeps its promises to its stakeholders.

FY

2013

The year in which the true
value of our Medium Term
Management Plan will be
put to the test
FY2013 will be the year that tests our resolve to overcome apparent risks at the
beginning of the year (e.g., suspended
operations of 787 aircraft, currency
trends), and establish a high profitability
structure.
We will polish human services, fromreservations and sales to airports and inflight services, without overdependenceon hardware (e.g., aircraft, seats, airport
facilities) or software (e.g., in-flight entertainment, in-flight meals), and provide
ever-refreshing, unparalleled services tosecure high profitability by continuously
minimizing costs through enhanced productivity and demonstrate that the Medium Term Management Plan is JAL’s
firm promise to its stakeholders.

FY
FY

2014–
2016

The period for achieving themanagement targets in the
Mid-Term Management Planand starting new growthWith the goal of establishing a highprofitability structure in FY2012–2013,
FY2014 onwards, which is the latter
half of the Mid-Term Management Plan,
represents the next stage for achieving
sustainable growth.
This will be the period in which we
steadily achieve the management targets in the Medium Term Management
Plan while leveraging business opportunities, especially the increase ofinternational departure and arrival slots
at Haneda Airport, enforce measures
for the next growth stage under the
keywords “autonomous,” “challenge”
and “speed,” and build a company that
defies future competition and achieves
sustainable development.

To the Next Growth Stage30, 2013 with these objectives in mind:

2012

Establishing a High Profitability Structure

leled services on the premise of maintaining safe

FYHighlights

Messages from Management

Review of Operations

Each of Us Making JAL What It Is

Market Outlook

domestic flights in FY2013 and for international

While the European sovereign debt crisis andbusiness opportunities due to the airport’s stra-

economic problems in the U.S. clearly pose ategic location.

CSR

Financial Section

fights in FY2014) is expected to generate major

downside risk to the global economy, the econ-

To optimize this business opportunity, we re-omy is nevertheless on the road to recovery.

alize we must continuously review our Medium

The Japanese economy is expected to recover

Term Management Plan, enforce new measuresthrough the economic measures and monetary

to survive future competition, and strengthen

policies of the new Japanese administration.

cooperation with our alliance partners.

The number of outbound passengers from Japan is expected to gradually rise, although thehigher consumption tax rate may have some impact. In particular, an increase in leisure demandis expected as well as demand generated byDifferentiation to Outlast theCompetition
Given the expected changes in the competitive

low-cost carriers (LCCs).
With respect to air cargo demand, exports

environment, we plan to clearly distinguish our-from Japan on the whole have been sluggish,

selves from our competitors in the three areas

and we do not expect significant recovery duringof “Enhancement of the JAL Brand,” “Routeor soon after FY2013.

Network, Products and Services” and “CostOn the supply side, the number of departure

Competitiveness” under the Medium Termand arrival slots in the Tokyo metropolitan area

Management Plan, toward our goal of becoming

will gradually increase. Severe competition isthe customers’ most preferred airline by provid-

seen to prevail in the domestic and international

ing unparalleled services to continuously deliver

landscape as other modes of transportationa fresh and enjoyable travel experience for cus-(e.g., Shinkansen) also evolve. The increase of

tomers.

departure and arrival slots at Haneda Airport (forOutline of the Medium Term Management Plan FY2012–2016

Surviving Future Competition (Three Differentiates)
Enhancement of the JAL Brand

We will maintain safety and provide
customers with unparalleled services
to enhance the JAL Group as a fullservice carrier.

Route Network, Products andServices

Cost CompetitivenessWe will build a highly convenient route
network and provide products andservices ahead of our competitors to
become the customers’ most preferred airline group.

We will continuously strive to improve
cost efficiency, maintain and improve
cost competitiveness to strengthen
our resilience to risks and build abusiness foundation for sustainablegrowth.

Key Initiatives (Five Areas)
Safety Initiatives

Group Management

Human Resources
Management

Route Network

Products andServicesManagement Targets (Three Targets)
JAL recognizes that ensuring safety in flight operations is the basisof the existence of the JAL Groupand our social responsibility. As aleading company in safety in thetransportation sector, JAL will
maintain the highest standards ofsafety.

JAL will provide unparalleled services to continuously deliver a
fresh and enjoyable travel experience for customers. We aim toachieve “Customer Satisfaction
No. 1”* by FY2016.

JAL aims to establish sufficientlevels of profitability and financial
stability to absorb the impact of
economic fluctuations and risk
events by achieving an operating
profit margin of 10% or more forfive consecutive years and an equity ratio of 50% or more in FY2016.

* In terms of the repeat
intention rate andrecommendation intention
rate on the Japanese
Customer Satisfaction Index(JCSI) announced by theJapan Productivity Center,
Service Productivity &Innovation for Growth.

JAL REPORT 201309

Enhancement of the JAL Brandof the Helsinki route and having to change air-

We have diligently worked in concert, group-craft for Asian routes, we intend to continue de-wide, to provide customers with unparalleledploying our aircraft on mid- to long-haul routes

services by maintaining the highest standards ofto achieve our goal of raising the quality of oursafety and by raising the quality of our products

route network, products and services. In do-

and services by, for example, introducing an in-mestic flights, we plan to build a route network

flight Internet service on our international flights

with highly convenient connectivity by launch-and new seats, while also achieving the world’s

ing new routes and increasing the frequency of

top on-time performance. We remain committed

flights, with a primary focus on Haneda airport

to pursuing the JAL brand as a full service carrier

and Itami airport.

that is distinctly different from LCCs.
Cost Competitiveness
Route Network, Products and Services

We are always striving for greater cost efficien-

During FY2012, we expanded our mid- to long-cies while systematically pursuing safety initia-

haul routes, including the launch of new routes

tives as we maintain and improve quality, and infrom Narita to Boston and San Diego, and in-

FY2012 we boosted cost efficiency by 10 billion

creased flights from Narita to Singapore andyen. We will relentlessly make these efforts with

Delhi. We also enhanced our service lineup by

outside-the-box approaches to establish a costinstalling new seats on Boeing 777-300 aircraft,

structure that stands firm in the face of a volatilerefreshing our in-flight meals with a new concept,

external operating environment influenced byand becoming the only Japanese airline to offer

such factors as currency fluctuations.

an in-flight Internet service. For domestic flights,
we expanded our routes, including the resumption of flights between Fukuoka and Hanamaki
and between Niigata and Sapporo.
Operations of Boeing 787 aircraft were sus-

We are taking concrete actions in the areas of unit

pended on January 16, 2013, and although thiscost reduction and productivity improvement tohas caused some delay in our business develop-

further enhance cost competitiveness.

ment, such as the postponement of the launch

10

Unit Cost Reduction

JAL REPORT 2013

In terms of unit cost reduction, JAL uses unit

Highlights

Messages from Management

Review of Operations

Each of Us Making JAL What It Is

cost, which we define as consolidated operating

which can be reduced through independent ef-

expenses related to air transport per available-

forts. By FY2016 we plan to achieve a unit costseat-kilometer (ASK), as an indicator for settingof 8.0 yen, excluding fuel costs, which is equiva-

targets and monitoring progress to manage

lent to the original target.

group-wide costs.

CSR

Financial Section

The entire Group will work together to further

Targeted ASK for the Group in FY2012, as in-enhance cost competitiveness and come as

dicated in the Medium Term Management Plan,close as we can to our original target for total

was 105% compared to FY2011, but the resultcost.

was 103% due to the grounding of our 787 fleet
in the fourth quarter.
As for operating expenses, despite upward
pressure from factors such as the service en-

Productivity Improvement

hancement measures, we managed to contain

As for another major area for enhancing cost

increases by reducing costs through improved

competitiveness, productivity improvement, we

productivity and raising cost awareness throughhave been undertaking activities from the three

the divisional profitability management system.

perspectives of labor productivity improvement,

As a result, unit cost in FY2012 was 11.5 yen.

efficient use of resources and response to envi-

Until now, our unit cost indicator was basedronmental change.

on consolidated operating expenses and ASK of

As for labor productivity improvement, we

the Group’s six airline operators, respectively. As

will carry forward our efforts from FY2012 tothe cost structure of the air transport business

improve productivity in every division in orderactually covers the businesses of many Groupto achieve lower unit cost. For the efficient use

companies, starting in FY2013 we will increaseof resources, we will achieve improvements inthe number of applicable air transport-related

every possible field through creative and inven-consolidated companies to 32 in order to im-tive strategies. With regard to actions to address

prove group-wide cost reduction measures andenvironmental changes, we will consider mea-build an efficient and effective cost management

sures for minimizing expenses upon increasing

structure.

the international slots at Haneda. In addition, we

We will also divide costs into those related towill steadily strengthen our IT Project structure

fuel and non-fuel items, and separately computeand execute priority proposals to achieve cost

unit cost to clarify the level of non-fuel costs,

reductions.

JAL REPORT 201311

Group Management and Human
Resources Development

participating in the courses. We have also been

We are pursuing key initiatives in the five areas

reach a greater number of employees outside ofof safety initiatives, route network, products andTokyo. We intend to continue these efforts by of-services, Group management and human re-fering four JAL Philosophy courses in FY2013.

promoting measures such as sending textbooks
and dispatching educational staff so that we cansources development in order to realize the threedifferentiates.

ASK per employee, which indicates productivity per JAL Group employee, has also increased

In the area of Group management, we are

year-on-year, which reflects our efforts in humanaiming to foster a management mentality among

resources development and measures in place

all Group employees and establish autonomousat each division to improve productivity.

and sound management at each Group com-

In FY2013, we also established the Humanpany by firmly instilling the JAL Philosophy andResources Management Division by consolidat-

developing the divisional profitability manage-

ing departments related to human resources,

ment system.

including work philosophy reform and human

The divisional profitability management system was introduced to 9 companies in FY2012,
bringing the total number of companies that use
it to 11, or 63% in terms employee numbers.

resources development to promote uniform
measures.
We are seeking to further improve the effectiveness of our education by utilizing the func-

In FY2013, we plan to introduce the system totions of the JAL Education Center set up within

9 more companies, bringing the total to 20, or

the Human Resources Management Division.

76% in terms of employee numbers at the endof FY2013.

We will continue to recruit the appropriate
number of staff members and maintain the head-

As for instilling the JAL Philosophy, we con-count at around the 32,000 level (consolidated

tinued to provide JAL Philosophy education in

number of employees for the Group) targeted by

FY2012. Through this program, all Group em-

the Medium Term Management Plan, even as weployees learn about the four themes, which areexpand the scope of our business, by promot-

each covered separately for three months at a

ing the efforts to improve quality and productivity

time over the course of one year. Approximately

being undertaken in human resources develop-

61,000 employees (cumulative) in the Tokyo

ment and by each division.

metropolitan area spent 544 days (cumulative)

Group Management and Human Resources Development

Divisional Profitability Management System

Productivity per Employee

Introducing Divisional Profitability
Management System into Group companies

ASK per Employee

Result Introduced into 9 companies in FY2012,
including one earlier than plannedPlan

9 additional companies in FY2013

Ratio of employees covered

63%
44%
2
2011

11

2012

76%

JAL REPORT 2013

2,500

20

2013
(Plan)

Number of companies under Divisional
Profitability Management System

12(Thousand seat km/employee)
2,700

(FY)

0

2011

2012

2013 (FY)(Plan)

Highlights

Messages from Management

Progress on Management Targets

1

JAL recognizes that ensuring safety inflight operations is the basis of the existence of the JAL Group and our social responsibility. As a leading company in safety in the transportation
sector, JAL will maintain the highest
standards of safety.

2

Review of Operations

Each of Us Making JAL What It Is

CSR

Financial Section

JAL will provide unparalleled services
to continuously deliver a fresh andenjoyable travel experience for customers. We aim to achieve “Customer
Satisfaction No. 1” by FY2016.

We have narrowed the gap with higher ranking
airlines in the JCSI survey by improving our route
network, products and services. Consistent efforts, however, are necessary to achieve our

Despite our utmost efforts to achieve the targets

target of No. 1 in customer satisfaction. We willof zero aircraft accidents and zero serious inci-

analyze our results in FY2012 and meet the chal-dents, regrettably, one aircraft accident and four

lenges of quickly developing new services.

serious incidents were registered in FY2012. We
sincerely apologize to passengers and all thoseaffected for the resulting concerns and inconve-

JCSI (Japanese Customer Satisfaction Index) Source: JCSI Survey

nience. We take these matters seriously and will

International Routes– Repeat Intention Rat

thoroughly investigate these incidents, rigidly enforce preventive measures, and reinforce measures to ensure flight safety so that customers
can rely on us and fly with peace of mind.
Indicators andResults

1

JAL877 (Narita-Shanghai Pudong)reached 36,000 feet cruising altitude
and then shook when encountering
turbulence after the seatbelt sign was
turned off. One passenger was injured.

July 8, 2012

October 20, 20124

JAL1471 (Haneda-Matsuyama) madean emergency landing at Haneda due
to engine trouble in flight.

October 31, 2012

■

ANA
SQ
JAL

70

3rd

65

60

55

65

3rd

60

3rd

2010

2011

2012 (FY)

Domestic Routes– Repeat Intention Rate75■

December 25, 2012

60

55

3rd

2010

2011

2012

(FY)

ANA
Star Flyer
JAL

75

■

ANA
Star Flyer
JAL

70

65

5th

6th

3rd
60

5th
55

3rd

Domestic Routes– Recommendation Intention

70

65*1: Investigations into this incident by the Japan Transport
Safety Board have been completed, and no problems wereindicated with the JAL Group.
*2: Investigations into this incident by the Japan Transport
Safety Board are in progress, but there have been no
findings to date indicating problems with the JAL Group.

75

2nd

When JAC3745 (Kagoshima-Yakushima) landed at Yakushima and was stillon the runway, another aircraft took
off.*2
JAL2837 (Sapporo-Hanamaki) overran
the runway after landing at Hanamaki(unable to self-propel).

ANA
SQ
JAL

70

JAC3635 (Fukuoka-Miyazaki) entered
the runway to prepare for take-off
under instructions from air traffic
control while another aircraft wasapproaching to land.*1

Serious
Incidents■

OutlineNovember 26, 2012

Aircraft
Accidents

75

International Routes– Recommendation Intention

2010

2011

2012

(FY)

55

3rd

4th

2010

2011

JAL REPORT 2013

2012

(FY)

13

3

JAL aims to establish sufficient levelsof profitability and financial stability toabsorb the impact of economic fluctuations and risk events by achieving
an operating profit margin of 10% orabove for five consecutive years andan equity ratio of 50% or above in
FY2016.

CSR Activities
JAL Group employees are sincerely grateful forthe support we have received from the many
stakeholders who enabled the company tohave a fresh start. We established a CSR Committee in April 2013 to give practical form to
our gratitude by actively contributing to social
progress and development as well as regional
revitalization.

In FY2012 we achieved an operating profit of

In June 2013, we resumed our support for

195.2 billion yen and an operating profit margin

reconstruction efforts by launching the JALof 15.8% as a result of an increase in revenue,

Tohoku Support Project, “Visit Tohoku!” as ourparticularly from international passengers, andresponse to the current needs and hopes ofcost reductions through productivity improve-those affected by the Great East Japan Earth-ment. As a result, equity was 565 billion yen

quake. We hope to contribute to reconstructing

and the equity ratio was 46.4% as of the end of

the Tohoku region by uniting the efforts of JAL

FY2012.

employees in facilitating regional development
primarily through our business activities andencouraging people in the affected region
through our social contribution activities.

Dividend Policy
Passing benefits to shareholders is one of themost important management goals of the company. It is our basic policy to distribute benefits toour shareholders in the form of dividends, while
executing capital expenditures to respond to future business growth and changes in businessconditions, and maintaining internal reserves forbuilding a strong financial structure.
With respect to dividends for FY2013, we
will maintain a dividend payout ratio of approximately 20% of consolidated net income. We will
announce the actual amount of dividends when
final performance calculations have been completed. We will also do our utmost to maximize
profit as well as shareholder benefits.
Dividend
FY2012 Result

Net Income

171.6 JPY Bn

Shares Issued

181,352,000

Dividend Per Share

190.00 JPY

Dividend Payout Ratio

14

JAL REPORT 201320.1%

Highlights

Messages from Management

Review of Operations

Each of Us Making JAL What It Is

To Become the Customers’ Most
Preferred Airline in Japan and the World

the profitability of each route and continuouslyWith an overarching commitment to ensuring

vices, increase corporate value and incorporate

safe operations, we introduced the JAL Philoso-

the perspective of CSR into our activities. We will

phy and the divisional profitability management

also strive to pass on benefits to shareholders

system to increase the profit consciousness ofthrough ongoing dividend payments.

CSR

Financial Section

improve our network to offer convenience for ourcustomers, provide them with unparalleled ser-every Group staff member. In formulating the

Looking ahead, we plan to sustain the evo-

Medium Term Management Plan Rolling Planlution of our Group by intentionally developing

2013, we reviewed our revenue, expenditure andautonomous management that is consistently

financial results and sought to free ourselvesaware of the risks, embracing the challenge offrom conventional thinking to revise our plan in

new tasks without fear of making mistakes, andresponse to the changing environment. We wantquickly responding to new and unforeseen situ-

to contribute to the betterment of society in vari-ations. We thank you in advance for your contin-

ous ways by continuing to thoroughly analyze

ued patronage and support.

JAL REPORT 201315

Review of Operations

Air Transport Segment

International Operations
International Passenger BusinessWe stepped up measures to improve profitability, products andservices in order to become the world’s most preferred airline
group by customers.
In our international route network, we launched nonstop
service between Narita and Boston as well as San Diego by
Boeing 787s fleet. The inauguration of the Narita-Helsinki route
was postponed due to the grounding of Boeing 787s, but was
subsequently launched on July 1, 2013.
In FY2013 we will consider launching or increasing the frequency of routes between Haneda Airport and China to makemaximum use of the expanding international slots from FY2014.
Also, we will improve our capability to support at Narita International Airport as our hub.

With respect to alliances, our joint businesses with American
Airlines on transpacific routes and with British Airways on European routes are going smoothly and are steadily showing asynergetic effect.
Looking forward, we would like to further enhance our alliances hand in hand with our partners, expand the scope of ourbusiness and actively seek new partners.
As for collaboration with the oneworld alliance, which has inducted new partners, we would like to maximize the networksof the member airlines in our continuing effort to improve customer convenience.
Alliances and Business Strategy
Implemented

Scheduled

Began joint business with British Airways

Route Network

Maintained an alliance with American Airlines with favorable results
Implemented

Scheduled

Launched routes between Narita-Boston, and Narita-San Diego
Increased flights between Narita-Singapore, and Narita-Delhi
Changed aircraft for routes between Narita/Haneda-Singapore,
Haneda-Moscow, and Haneda-Beijing
Postponed the launch of the Narita-Helsinki route until July 1, 2013
Considering launching and increasing flights between Haneda andChina in FY2013
Making maximum use of planned expansion of slots from FY2014

Further development of joint business to improve customer
convenience, expansion of the scope of our business and addition of
new partners
Making maximum use of the oneworld® alliance network including our
new partners** Malaysia Airlines (joined February 2013), Qatar Airways (to join in FY2013),
SriLankan Airlines (to join in FY2013), TAM Airlines (to join in FY2014), US
Airways (to join as a joint venture with American Airways)

Member Airlines of the oneworld® Alliance (as of July 1, 2013)

Improving Narita’s capability as a hub for connecting international
flights
Flight Operations Using Boeing 787s (as of July 1, 2013)

Helsinki
Moscow
Beijing
Delhi

Singapore

16

JAL REPORT 2013

Tokyo

San Diego

BostonOn international routes, we launched JAL SKY SUITE 777,
which offers greater comfort and high quality amenities in everyclass under the theme of “a class above the highest quality.”
The service has been well received by customers. These flights
started on the London route and will be progressively expanded
to the other North America and Europe routes.
We are also the only Japanese carrier offering an in-flight
Internet service called “JAL SKY Wi-Fi,” which many customers have already used. This service will be gradually expanded
throughout our network.
In addition, we will reconfigure our 767 aircraft and install full flatseats in our business class.

Highlights

Messages from Management

Enhancing the JAL Brand (High quality, full service)
Implemented

Scheduled

JAL SKY SUITE 777 deployed on the New York route from May 2013,
following its introduction on the London route
Expand JAL SKY SUITE 777 routes
Install full-flat Business Class seats on 767 aircraft (to be introducedon the Vancouver route from December 2013)

Review of Operations

Each of Us Making JAL What It Is

Financial Section

As a result, international supply for FY2012 increased by
4.0% year-on-year when measured in available-seat-kilometer(ASK), demand in terms of revenue-passenger-kilometer (RPK)
increased by 12.3%, load-factor (L/F) increased by 5.6 points
to 76.1%, and international passenger revenue increased by
5.5% to 406.6 billion yen.
Operating Revenue(JPY Bn)

385.2

406.6

Revenue-Passenger-Kilometer (RPK) /Available-Seat-Kilometer (ASK)(Mn passenger-km, Mn seat-km)

2011

2012

44,74543,03634,03630,313

(FY)

2011

2012
RPK

JAL SKY SUITE 777 first class

CSR

Revenue Passengers Carried

Load-Factor(Thousand passengers)

6,844

(FY)

ASK

(%)

7,525

76.1
70.4

2011

2012

(FY)

2011

2012

(FY)

International Cargo

JAL SKY SUITE 777 business class

In 2013, JAL SKY SUITE 777 was named "BestBusiness Class Airline Seat" by SKYTRAX.
BEST BUSINESS CLASS AIRLINE SEATInternational cargo operations experienced sluggish inboundand outbound demand on the whole, but sales sections responded flexibly by pursuing measures such as seeking newcustomers, improving services to existing customers, and capturing transit cargo in order to maximize revenue.
The volume of international cargo increased by 4.9% yearon-year on a revenue-cargo-ton-kilometer basis (RCTK). However, revenue declined by 6.1% to 50.4 billion yen due to intense competition.

Began our in-flight “JAL SKY Wi-Fi” Internet connection service on
flights to New York, Chicago, Los Angeles and Jakarta
Began offering “JAL SKY Wi-Fi” on flights to London and Frankfurt
from April 2013
“JAL SKY Wi-Fi” to be progressively launched on the other Europe
routesJAL REPORT 201317

Air Transport Segment

Domestic Operations
Domestic Passenger BusinessWe strove to improve profitability by enforcing measures tostimulate demand and adjusting capacity according to demand.
New departure and arrival slots at Tokyo (Haneda) havebeen used to launch services from Tokyo (Haneda) to Nagoya
and we also resumed the flights between Fukuoka and Hanamaki as well as Niigata and Sapporo. At Itami, flights wereincreased by using slots for low-noise jets.
In our partnership with Jetstar Japan, we launched codeshare flights and aligned our mileage programs.
We will continue to improve our route network with moreconvenience to customers in order to achieve further growth
in revenue.

On our domestic routes, we have installed first class on all
Boeing 777-200s and Class J on all 737-800s. We will launch
new services to improve the customer’s convenience at the
airport and onboard as part of our JAL Smart Style program.
In addition, in 2012 JAL was recognized by FlightStats as
the most punctual airline for on-time arrivals in the Major International Airlines category and the Asia Major Airlines category.
JAL Group operator J-AIR ranked first in the Asia Regional Airlines category.
We will continue to enhance the JAL brand as a full-service
carrier by reinforcing our image through measures in the areaof hardware, such as by refurbishing our aircraft, and by offering the highest level of service to customers through the unitedeffort of all employees.

Route Network
Implemented

Scheduled

Launched (resumed) the Fukuoka-Hanamaki and Niigata-Sapporo
routesLaunched the Haneda-Chubu route
Launched (resumed) Itami routes to Matsuyama, Hakodate andMisawaIncreased flight frequencies at Itami
Started codesharing and mileage tie-up with Jetstar Japan, which will
enable us to utilize its network for improved connections to ourinternational services

JAL Smart Style
JAL Smart Style is our concept for service that maximizes thevalue of customers’ time by offering convenience and simplicity at each point of contact between the customer andJAL. Under this concept, we began offering the JAL Touch& Go service in August 2012, which enables passengers toboard a plane after simply using a mobile device from which
their boarding pass can be scanned.

Routes Launched/Resumed in FY2012

SapporoHakodate
MisawaHanamakiNiigata
Chubu
Fukuoka

Itami
Oita

Matsuyama

Miyazaki18

JAL REPORT 2013

SendaiHanedaJAL Touch & Go
This Android free app can be
downloaded from Google Play.

Highlights

Messages from Management

Enhancing the JAL Brand: Convenience and Simplicity
Implemented

Scheduled

Introduced first class on all 777-200 aircraft
Introduced Class J on all 737-800 aircraft
To enhance JAL Smart Style, we will progressively introduce newservices to improve convenience at airports and during flights.

Review of Operations

Each of Us Making JAL What It Is(JPY Bn)

481.1

485.2

Revenue-Passenger-Kilometer (RPK) /Available-Seat-Kilometer (ASK)(Mn passenger-km, Mn seat-km)

2011

2012

36,44335,52323,012

22,264

(FY)

2011

2012
RPK

Revenue Passengers Carried
28,965Load-Factor(%)

30,020First class in-flight meals

Breakfast

62.7

2011

2012

(FY)

(FY)

ASK

(Thousand passengers)

JAL collaborates withrestaurants that arecommitted to offeringseasonal ingredientsand tastes and arehighly regarded forthe care with which
they treat their guests.
We change our inflight menu every 10
days in order to offer
passengers the best
ingredients of eachseason.

Financial Section

As a result, domestic supply for FY2012 increased by
2.6% year-on-year when measured in available-seat-kilometer (ASK), demand in terms of revenue-passenger-kilometer(RPK) increased by 3.4%, load-factor (L/F) increased by 0.5
points to 63.1%, and domestic passenger revenue increased
by 0.9% to 485.2 billion yen.

Operating Revenue

First class

CSR

2011

63.1

2012

(FY)

Domestic Cargo

Domestic cargo operations encountered sluggish demand fromthe second half of the fiscal year while we strove to capture
perishables and home delivery parcels by improving customer
relations.
The volume of domestic cargo increased by 1.2% year-onyear on an RCTK basis, and revenue increased by 0.2% to 25.0
billion yen.

Dinner

JAL REPORT 201319

Air Transport Segment

Others

Aircraft Investment and Fleet
Investment in aircraft totaled 103.0 billion yen in FY2012.
After revising the assumed foreign exchange rate from 85
yen to 95 yen per U.S. dollar, we expect the aircraft investment
to increase starting in FY2013. We plan to invest approximately
517.0 billion yen by FY2016.
By the end of FY2016, the JAL Group’s fleet will consist of
222 aircraft (83 international and 139 domestic aircraft), in linewith the original Medium Term Management Plan.

Aircraft Investment and Fleet

We strive to maximize the JAL Group’s corporate value andimprove our profit margin. The financial results of two major
companies in this segment are as follows.
JALPAK Co., Ltd. offered additional products to respond tochanges in demand and the timely JAL Dynamic Package tomaximize revenue and improve cost efficiency. The numberof overseas JALPAK customers increased by 3.4% from theprevious year to 323,000. The number of its domestic customers increased by 3.3% to 1,972,000. As a result, operating revenue (prior to intercompany transaction elimination) increased
by 5.5% from last year to 161.6 billion yen.

Amount Invested in Aircraft (JAL Group)(JPY Bn)

Result
Plan

1,500
1,250
1,000
750
500
250
0

2012

2013

2014

2015

2016

(FY)

Changes in the Number of Aircraft (JAL Group)(Number of aircraft)
250
200

216

220

218

222

222

2012

2013

2014

2015

2016

Large
Medium
Small
RJ

150
100
50
0

(FY)

Figures are as of the end of the fiscal year. Large: 777, Medium: 787/767, Small:
737/MD90, RJ (Regional Jet or smaller): E170/CRJ/Q100–Q400/SAAB

Implemented

Scheduled

Invested 103.0 billion yen in aircraft in FY2012
Invest 517.0 billion yen by FY2016, introduce 33 787 aircraft by the endof FY2016, and start introducing 787-9 aircraft in FY2015
Upgrade six 767 aircraft for improving fuel efficiency in FY2013(winglet installation)
Receive E170 ahead of schedule to develop domestic network sooner
Retire aged 777 and 767 aircraft to optimize fleet efficiency

20

JAL REPORT 2013

JALCARD, Inc. aggressively carried out activities to increase members and promote the use of JAL Card. In December 2012, it issued a new brand card, the JAL American
Express® Card, for the first time in six years, and by adding
platinum cards to its lineup, it targeted top tier customers. As
for member services, it extended call center service hours
from October 2012 in order to improve service quality from thecustomer’s standpoint. As a result, the number of members
increased by approximately 120,000 from that of March 31,
2012 to 2.76 million as of March 31, 2013, and operating revenue (prior to intercompany transaction elimination) increasedby 7.4% from the previous year to 17.3 billion yen.

Highlights

Messages from Management

Review of Operations

Each of Us Making JAL What It Is

CSR

Financial Section

Each of Us Making
JAL What It Is
JAL REPORT 2013

JAL REPORT 201321

Each of Us Making JAL What It Is
Putting Ourselves in the Customer’s Position
Every JAL employee is committed to providing the finest level of service reflecting the style of hospitality
associated with Japan, and by putting ourselves in the customer's position.

01

Providing Quality Time for
Customers through Extensive
Use of Mobile Devices
We provide services through smartphones and tablet devices to increase the
comfort and convenience of customers traveling with JAL. For example, ourcountdown app keeps track of the time remaining before boarding, a real-timevideo app displays the congestion situation in security screening areas and aguide app provides directions to the boarding gate. We intend to further enhance the breadth of information and depth of our services by expanding theuse of these apps for both domestic and international flights departing fromJapan in addition to the flights bound for Japan.
We are thoroughly committed to providing quality time to customers by
fully utilizing information devices in order to deliver a rich and rewarding travel
experience.

Toshiya Shimizu Planning Group, Web Sales Department

02

Giving Personal Attention to Every Customer
My job is to provide easy –to- understand explanations in response to a lot of customer feedback
received by phone, email and comment cards. I also take part in incorporating this feedback into
proposals for the purpose of improving our products and services. Every time I respond to feedback, I remember to show compassion for our customers so that more customers will becomefans of JAL.
Concrete improvements that have resulted from customer feedback include drink menus ondomestic flights with photos of items and redesigned domestic flight schedule that display flightnumbers in distinctive colors.
In the future, when I return to in-flight duty as a cabin attendant, I hope to draw upon these experiences and be even more conscientious in offering services from the customer’s perspective.

Fumi Tajiri Customer Support, Marketing Department

22

JAL REPORT 2013

Highlights

Messages from Management

Review of Operations

Each of Us Making JAL What It Is

CSR

Financial Section

03

Bringing Japanese Quality
to Customers in Bangkok
Bangkok’s Suvarnabhumi Airport is one of Asia’s busiest airports. My job
is to provide services with a smile to passengers who are flying on JAL’s
four regular flights to and from Japan.
Smoothly guiding all of our passengers is not always easy. For example,
when the flight of another airline arrives late with a passenger scheduled
to take a connecting JAL flight, we do not have much time to transfer theirluggage. At those times I try to put myself in the customer’s position anddo my very best to coordinate with the other airline right up to the time ofdeparture, so that the passenger and luggage will be on the same flight.
I hope that JAL becomes the most preferred airline in the world byconsistently delivering the quality of service established in Japan to every
customer.

Attarapadung Natcharee Passenger Trafﬁc Section, Bangkok Airport Ofﬁce

04

Pursuing “a Class Above the Highest Quality”
I was a member of the team that developed the business class passenger seats
for JAL’s SKY SUITE 777, which entered service in January 2013. Our goal is
to turn JAL into a full-service carrier offering a higher overall level of quality andproviding first-class comfort in our business class. We set out to meet this goalwith unprecedented speed and enthusiasm, confident that nothing would pleaseus more than customers experiencing “a class above the highest quality” while
sitting and sleeping on our flights.
We plan to similarly upgrade the interiors of our other aircraft to provide thefinest in-flight experience in the world for customers on all our routes and fully
demonstrate our Japanese sensitivity for function and design.

Koichiro Fujishima Planning Group, Product and Service Strategy Department
In 2013, JAL wasnamed "Best BusinessClass Airline Seat" by
SKYTREX.

BEST BUSINESS CLASS AIRLINE SEATJAL REPORT 201323

Putting Ourselves in Custmer’s Position

The World’s Most
Punctual Airline

We Promise On-time Operations Now and into the Future

Major International AirlinesJAL

On-time performance rate:

Asia Major AirlinesJAL

On-time performance rate:

Asia Regional Airlines

J-AIR

On-time performance rate:

By achieving an on-time performance rate of 90.35% for
domestic and international flights from January throughDecember 2012, JAL was recognized as the best of 29
major airlines in the Major International Airlines category by
FlightStats, Inc., a company that analyzes on-time performance and other data.
JAL also came in first in the Asia Major Airlines category, marking the third time it has achieved the distinctionof being No. 1 in both categories since the awards were
established in 2009.
Furthermore, JAL Group member J-AIR was recognized as No. 1 in the Asia Regional Airlines category withan on-time performance rate of 92.58%. In this category,
JAL Group airlines have dominated the No. 1 spot for four
consecutive years since this award was established. This
was J- AIR’s second time to be recognized as the top per-90.35%
90.35%
92.58%

World’s No.
Asia’s No.
Asia’s No.

1
1
1

former, after previously hitting the mark in 2010.
In addition, the oneworld alliance, of which JAL is amember, won No. 1 recognition in the new Airline Alliancecategory.
We received a trophy from Jeff Kennedy, president of
FlightStats Inc., at an award ceremony on February 19,
2013. This honor encourages us to continue striving tomaintain the quality of our on-time performance.

Jeff Kennedy, CEO (left) and president
Yoshiharu Ueki

Passenger Cooperation Makes On-time Performance Possible

All of the following preparations must be completed before punctual departure, including preparations for safety that continue even after the passengers have boarded. An aircraft can only depart after the staff has completed all required safety
confirmations.
Departure preparation procedures after passenger boarding

Stow carry-on
baggage

Fasten seat belts

Close cabin door
(confirm door mode)

Remove boarding bridge

Contact air traffic
control

Departure(push back)FlightStats, Inc.
Founded in 2001, headquartered in Portland, Oregon and led by Jeff Kennedy, CEO, FlightStats gathers data from multiple global sources, including civil aviation
authorities, airlines, airports and taravel agent reservation systems, and provides flight status data, airport delay information and more on its website. Its data isshared and cited by overseas media and other travel information sources.

24

JAL REPORT 2013

Highlights

Messages from Management

Review of Operations

Each of Us Making JAL What It Is

CSR

Financial Section

Employee Dialog

United under the JAL Philosophy
How have the experiences of corporate bankruptcy, share relisting anddramatic recovery affected each operation?
Nine employees who practice “Make the Best Baton Pass” every day werebrought together to talk about the past, present and future of the JAL Group.

Filing for proceedings under
the Corporate Reorganization
Act on January 19, 2010 and
subsequent changes in theworkplace
Kaburagi (Cabin)
On January 19, I
was aboard a flight and doing my usual
work. I can still recall the tension I felt
as well as my gratitude for many customers who had been aware of thecompany’s plight however still flew withus. I wanted to welcome passengers
with my usual smile, but I felt hesitant,unsure of whether acting in my usual
manner would be appropriate. Eventhese days as I go about my daily work,that feeling of tension often comes tomind.
Matsumoto (Cargo)
It took a while
for JAL’s bankruptcy to hit me, partly
because of my job, which is handlingcargo business related to foreign companies. After the bankruptcy, however,I became acutely aware of the importance of cost savings in areas such as
copy paper and electricity use. In thepast, I focused on doing my own job
well, but now I also try my best to grasp
the situation in other departments so
we can help each other in our mutual
efforts as well as control overtime.
Takenouchi (Maintenance)
At maintenance sites, the pace of generational
turnover picked up over the course of
rehabilitation. Before, when senior mechanics retired, “younger generation”
mechanics stepped up to take on thechallenges of acquiring new qualifications, training new recruits and exercising leadership in the organization. I
began thinking more deeply about myown mission.
While safety has always been important, I have made a habit of putting myself in the customer’s position, asking
myself what I can do as a mechanic tomake passengers smile.
Hasegawa (Airport)
Those of us whomake up the ground service staff are
the first to come into contact with passengers after they arrive. We are attending to them with greater care andresponding with greater flexibility evenunder unexpected circumstances.
JAL Philosophy education has begun in the company and we are striving
to “Make the Best Baton Pass” so thateveryone can effectively relay tasks, forexample, directly following up onboard
with passengers who may not have received sufficient care prior to boarding.
The ground service staff at the customer’s departure point passes the baton
to the cabin attendant and then on to
the ground service staff at the passenger’s destination. Although we may
not know each other, we work together
with the knowledge we are connected
through the JAL Philosophy.
Yabumoto (Network Planning)
We significantly adjusted our flight frequency
at the time of the bankruptcy. I was
engaged in planning routes and that
was all I felt I was responsible for. I did
not really consider overall operations
beyond my immediate responsibility.
Now I pay more attention to flight quality and customer feedback, and I seek
to communicate with staff members
at the operational sites to incorpo-

JAL REPORT 201325

Employee Dialog

Daisuke Hirata
Sales

International Sales Strategy & Promotion
JAL Sales Co., Ltd.
Joined JAL in 2001

Ayumi Matsumoto
Cargo

Export Traffic Group1
JAL Cargo Service Co., Ltd.
Joined JAL in 2007

Takumi Ajima

Ground Handling

Ramp Service No. 2 Division
JAL Ground Service Tokyo Co., Ltd.
Joined JAL in 1996

Mina Uehara
Reservations

International Reservations Group,
Travel Agency Support Division
JAL Navia Co., Ltd.
Joined JAL in 2005

Yusuke Yabumoto
Network Planning

Domestic Network Planning,
Japan Airlines Co., Ltd.
Joined JAL in 2001

26

JAL REPORT 2013

rate their thinking into flight frequency.
While JAL has achieved the world’s
No. 1 on-time performance mark, wewill continue to work hard because thepursuit for quality and cost efficiency isnever-ending.
Uehara (Reservations)
In reservation
sections, we seldom took it upon ourselves to think about issues beyond
the content of the manual. This attitudechanged after the bankruptcy, and we
now exercise greater initiative in ourwork, offering ideas that we can act
upon, such as experiencing for ourselves the discomfort of being kept on
hold for an extended period of time.
Hirata (Sales)
I was a member of the
project team for the inaugural flight toBoston, which marked the first newtranspacific flight launch in 13 years
for the reborn JAL. I felt failure was unacceptable for such a key item in our
Medium Term Management Plan. Team
members came up with various ways
to get customers interested in Boston,such as serving clam chowder anddonuts from Mister Donut – a Boston
original – for in-flight meals and holding
luncheons with the flight crew in Boston, and we promoted these ideas inour sales activities. Creating a corporate culture in which route marketing,marketing, and sales collaborate to
add value to a product has been one
new significant change.
Iwama (Flight Operations)
As a flightcrew, we analyzed and refined ourclassification of required crew skills,
both technical and non-technical, fromthe standpoint of achieving even greater safety and quality. The results weresystemized so that we could review
our own flight operation to understandthe specific tendencies of flight crews
based on scientific analysis and apply
the knowledge during future flights.
With respect to communication, a lot ofeffort has gone into language training
to cultivate skills for efficient, accurate
communication. We have enhanced
the overall quality of our flights by facilitating communication with everyone
involved in flight operations and not justthe flight crew.

Extending record revenues andshare relisting in September 2012;
building on current strengths toachieve further growth
Yasujima (Ground Handling)
Our business results are steadily improving andwe continue to make positive changes
every day. Even the strongest resolve,
however, can waver, so it is importantthat we remain steadfast in our stancetoward change. Having experienced thebankruptcy, I want to consistently communicate our resolve to younger employees. The moment we forget this determination, the company will go to ruin.
Kaburagi (Cabin)
I think it is important to care about the company and ourcolleagues and to work with a positive
attitude. It has only been a few years
since the bankruptcy, and we haven’t
forgotten the pain. Then again, we
can’t be driven by pain alone. We resumed the charity bazaars we had heldat Narita Airport before the bankruptcy
and welcomed crowds of visitors fromthe neighboring community and fromregions affected by the Great East Japan Earthquake. I hope to actively create more opportunities for cultivating
JAL fans besides our passengers.
Yabumoto (Network Planning)
In orderto safely fly an airplane, a number ofdifferent jobs must be performed, requiring the participation of many colleagues. If even one task is missed, theairplane could be prevented from flying.
However obvious this may seem, it’s
important and must be communicatedin simple terms to younger colleagues
who did not experience the bankruptcy. By doing this, the company will recover and return to its place in society.
I believe that in a decade or so there will
be a great number of JAL fans.
Takenouchi (Maintenance)
I want tocontinue pursuing customer safety andcomfort. The wreckage of Flight 123
is on display at the Safety Promotion
Center, and I’ve visited from time totime to reflect on lessons from the pastas the foundation of my daily maintenance operations. Mechanics havealso developed a strong sense of costHighlights

consciousness. Some costs, however,
simply shouldn’t be cut. For example,
while we strive to reduce costs by honing our ability to prevent malfunctions
by proactively replacing components
during maintenance, we shouldn’t cut
back on costs related to human resources development. We must continue to offer thorough education, notonly in maintenance, but in the JAL Philosophy and safety as well.

The pride of being a member of
the JAL Group; favorite phrases
from the JAL Philosophy
Hasegawa (Airport)
The sight of an
airplane crossing the sky can inspire
dreams. And an airport should always
be an exciting place. Regardless of
our passengers’ reasons for traveling– pleasure, visiting loved ones, or multiple business trips in a single month– I hope they will always experience
excitement as they aboard their flights.
Matsumoto (Cargo)
For me, “Makethe Best Baton Pass” is a phrase that’s
close to my heart. Our work is not simply about handling the flights assigned
to us; it’s also about making a united effort through collaboration, cooperation,
support and seamlessly passing along
responsibilities from one colleague toanother . Consequently, we must constantly be talking and confirming witheach other. Throughout the process, I
have to make sure I don’t make evena single error in the designated cargoweight. I am acutely aware that the safe
operation of every flight depends on
the accumulated impact of each individual effort.
Yasujima (Ground Handling)
JAL connects one person to another, and theworld to Japan. We are a company
that connects children with their future
and their dreams. Sometimes, I feel ourwork itself is like a child’s dream cometrue and that I am a part of it. That’s how
proud I am working for the JAL Group.
“Put Yourself in the Customer’s Position” is my favorite phrase in the JAL
Philosophy. I think all staff members at
JAL should see themselves as the castMessages from Management

Review of Operationsin the Tokyo Disney Resort.
Uehara (Reservations)“Put Yourself in
the Customer’s Position” is my favorite
phrase too, because it ties the entire
Group together. I think the JAL Philosophy provides a lateral connection
among professionals across all of JAL’s
departments. During the bankruptcy, it
was difficult for me to say “I love JAL.” I
hope I can say it with pride for the nextten years and that we can turn JAL intoa highly respected company.
Iwama (Flight Operations) I hope to turnJAL into a company in which we can all
take pride. Pride is nurtured when eachof us realizes how far we have grown as
human beings, in addition to enhancing our skills in the course of our daily
operations. Furthermore, when we respect each other and express our gratitude in words, pride also comes fromfeeling your colleagues depend on you.
We have come together at this company, and as we seek personal development and encourage each other, we
will begin to feel greater pride and caremore deeply about the company andthe communities around its operations.
I firmly believe this chain reaction will
create a great company and the sourceof customer recognition.
Hirata (Sales)
I place great value inthe phrase: “Each of Us Makes JAL
What It Is,” and other employees nothere today also feel just as strongly
about JAL. Each one of us has taken
the corporate bankruptcy personallyand we are working in concert toward
complete rehabilitation. I hope we cansustain JAL as a company long into the
future and that our feelings will takeflight upon the wings of the “Tsurumaru” brand.

Each of Us Making JAL What It Is

CSR

Financial Section

Tomoko Kaburagi
Cabin

Cabin Attendant, The 1st Cabin
Attendants Department
Japan Airlines Co., Ltd.
Joined JAL in 2007

Hirofumi Iwama
Flight Operations

Captain, 787 Flight Crew
Japan Airlines Co., Ltd.
Joined JAL in 1986

Hitomi Hasegawa
AirportPassenger Services Department,
JAL Sky Sapporo Co., Ltd.
Joined JAL in 2009

Tomohiro Takenouchi
MaintenanceLine Maintenance Office #1 Section
Line Maintenance Department
Aircraft Maintenance Center, Haneda
JAL Engineering Co., Ltd.
Joined JAL in 2007

JAL REPORT 201327

JAL Group’s Corporate Social Responsibility
The JAL Group promotes CSR activities so that we may pass on a better society to future generations.

Contribute to the betterment of society in ways only the JAL
Group is capable of, and achieve sustainable, synergistic
development with society.
The JAL Group is embarking on a new journey as a privatecompany through the understanding and cooperation ofmany people. We will press forward with optimism andpositivity through joint efforts, while never forgetting our
gratitude to society, so that we may become the world’s
most preferred airline group by customers.
We will fulfill our responsibilities as a corporate citizen
not only through activities that build the basis of our company, such as flight safety, which constitutes the Group’s
foundation, as well as compliance and corporate governance, but also through activities that only the JAL Groupcan perform. We will accomplish this by practicing the
JAL Philosophy, our code of conduct, and adhere to our
Corporate Policy. Moreover, we will increase our corpo-

Basic CSR Policy of the JAL GroupThe JAL Group will strive to meet the expectations ofsociety, address social issues, and pass on a better
society to future generations through its core air transportbusiness.

JAL Group Corporate
PolicyJAL Philosophy
CSR
CreateValue
Increase Value
Build Trust

28

JAL REPORT 2013

rate value and contribute to the betterment of society. In
other words, we will do our best to meet society’s expectations through our core air transport business. Each
employee will ask “What can I do for society?” and present new value unique to JAL while also striving to address
and alleviate social issues.
Through our CSR activities, we would like to achieve
growth together with society in a sustainable and synergistic manner.
April 2013
Yoshiharu Ueki

Representative Director, President
Japan Airlines Co., Ltd.

JAL Group’s CSR Activities

The JAL Group will carry out corporate social responsibility activities that embody its code of conduct, the JAL Philosophy,
which is closely aligned with our Corporate Policy.
Activities to Present New Value to Society that Only
JAL Can Perform
We will strive to address and alleviate social issues throughour core air transport business, and present new value that
only JAL can deliver.
Activities that Meet Society’s Expectations of theAirline BusinessWe will increase corporate value through activities that meetsociety’s expectations of the airline business, such as by improving our network, tourism promotion and social contribution activities.
Activities that Form the Foundation of the Company
as a Member of Society
Referring to ISO26000 Guidance on Social Responsibility, theJAL Group will fulfill its responsibility as a corporate citizen
by incorporating a CSR approach to activities that create thebasis of the company in order to build a relationship of trustwith society.

Highlights

Messages from Management

Review of Operations

Each of Us Making JAL What It Is

CSR

Financial Section

Four Key Areas of the JAL Group’s CSR Activities
The JAL Group will carry out a wide range of CSR activities in various fields in accordance with ISO26000 Guidance on Social
Responsibility, especially in four areas that correspond to the features of our business.

1

Flight safety is the very foundation and social responsibility of the
JAL Group. We will maintain thesafe operation of every flight, provide support at times of disaster inways that only JAL is capable of,
eliminate all kinds of barriers, andprovide customers with pleasant,enjoyable travel experiences. Ensuring safety and security is mostimportant to us.

32

Safety and Security

Page

30

The Environment

The JAL Group is aware of the
impact its business activities haveon the environment and has been
exploring ways to reduce its environmental footprint in every area of
its operations. We will also conduct
ecological activities unique to JAL,
such as tropospheric observations
by aircraft to ensure that our planet, as seen from the sky, remains
beautiful for future generations.

The JAL Group wants to pass on apromising future to the next generation and therefore strongly hopesthat children will have dreams topursue for the future. We will support the futures of children of diverse ages through employee participation programs.

4

Page

38

Nurturing the Next Generation

Page

36

Page

41

Bridging Japan and the World

JAL was founded and developedin Japan. Returning to the pioneer
spirit of our former colleagues at
the time of the company’s founding, we will bridge Japan and theworld as the “Wings of Japan,”promote human, economic andcultural exchanges, and contribute to economic growth and world
peace as a network carrier.

Highlights

Participation in the UN Global Compact

Since December 2004, the JAL Group has been participating in the Global Compact, advocated by the United
Nations.
On January 31, 1999, then UN Secretary-General Kofi Annan called on business leaders to join an international
initiative, the Global Compact, to support nine (now ten) principles in areas including human rights, labor, theenvironment and anti-corruption. The Global Compact’s operational phase was launched at the UN headquarters
in New York on July 26, 2000.
The JAL Group will support and implement the ten principles of the UN Global Compact in all its businessactivities, and will act as a bridge to bring people, their cultures and their hearts closer together through its airtransport business, and thus contribute to world peace and prosperity.

JAL REPORT 201329

Dialog

Kunio Yanagida
Chairperson, JAL Safety Advisory Group

Masaru Onishi
Safety Manager* (Representative Director
and Chairman), Japan Airlines Co., Ltd.

Kunio Yanagida (at right)
Born in Tochigi Prefecture in 1936, Mr. Yanagida graduated from the University of Tokyo’s Department of Economics. He then worked as a city news reporter for NHK
until 1974, when he became an author. He won the Oya
Soichi Prize for Non-Fiction in 1972 for his book Mahha
no Kyofu (Terror at Mach 1). Mr. Yanagida won numerous
awards for his book Gan Kairo no Asa (Morning on theCancer Corridor), including the Kodansha Non-Fiction
Award in 1979, the Vaughan-Ueda Memorial Prize forfreelance broadcast journalists in 1984, and the Kikuchi Kan Prize in 1995. In 2002, he received an award
from the Ministry of Land, Infrastructure, Transport andTourism in commemoration of the 50th anniversary ofthe development of commercial air services, for hisrole in raising awareness about airline safety issues. He
has served as the chairperson of JAL’s Safety Advisory
Group since 2005.
* Position with the responsibility and authority to supervise the Group’s safety management system. Registered with the Ministry of Land, Infrastructure, Transport and Tourism under Article 103-2 (ii) of Japan’s Civil
Aeronautics Act.

1

Safety and Security

Current Status and Future Challenges
of JAL Group Safety Operations
How has the safety and security of the JAL Group changed since the corporate reorganization and subsequent relisting of shares?
Kunio Yanagida, Chairperson of the Safety Advisory Group, and Masaru Onishi, Safety Manager of the JAL Group (Representative
Director and Chairman), discussed the Group’s recent history and current state of operations as well as
challenges for the future.

From Corporate Bankruptcy to a Turnaround, and
Our Front-line Operations Today
Yanagida
The Safety Advisory Group was established inAugust 2005 due to the repeated occurrence of safety-related
problems even after a Business Improvement Order was issued
by the Ministry of Land, Infrastructure, Transport and Tourism inMarch of that year. As Chairperson, I was responsible for writing
up the Recommendations in December that would guide JAL increating a corporate culture of ensuring safety and in restoring
itself as an enterprise with high safety standards.
OnishiAt the time, I was truly grateful that experts who thoroughly understood safety had conducted more than 130 hoursof staff interviews to obtain invaluable, first-hand information for
the Company. After the bankruptcy, we implemented various
surgical actions to modify our management structure, with themost effort directed at reforming the work philosophy of ouremployees. Your Recommendations offered advice specificallyfrom the standpoint of safety, but upon reviewing the Recom-

30

JAL REPORT 2013

mendations after JAL’s emergence from bankruptcy I realizedthat the importance of work philosophy reform had already been
pointed out in that paper. Back then, perhaps the managementof the Company had already begun to waver, and we had failed
to clearly recognize that fact, or had we noticed it, perhaps wewere unable to take action as a Group. Having gone throughbankruptcy and the subsequent corporate restructuring, I feel
we have been realizing the work philosophy reform that waspointed out in your Recommendations.
Yanagida
Once an organization becomes aware of theneed to transform itself, time is required to make the necessarychanges. For example, it took eight years for the government
to establish the Aircraft Accident Investigation Commission
following a series of airline accidents in 1966. Companies,
however, must act with greater speed. I think JAL has turned
the bankruptcy into an opportunity to become a company
that can make quick decisions. The members of the Safety
Advisory Group have continued conducting onsite interviews
after the bankruptcy, and motivation in the workplace began

Highlights

Messages from Management

Safety in flight is a social responsibility and a vitalmanagement issue of the JAL Group. Recognizing the need to declare our policy of safety inflight under the JAL Group Corporate Policy intangible terms we have established the Safety
Charter.
The JAL Group strives to provide customers
with safe and comfortable flights.

Safety Charter
Safety in flight operations is the very foundation and social
responsibility of the JAL Group.
To carry out our mission of assuring safety, the management will exert its strong resolve and the employees will bear
an awareness of their individual roles and responsibilities,
and together we will combine our utmost knowledge and capabilities to ensure the safety and reliable operation of eachand every flight.
In order to carry out our mission, we will;• 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,and ensure transparency.
• Respond to problems and issues quickly and precisely.
• Maintain a constant awareness of issues, and make necessary reforms without hesitation.

to markedly improve around the start of the third year of corporate restructuring.
OnishiSince becoming President in February 2010, I’ve
spent as much time as possible on the front-line of our operations. We have approximately 90 branch offices where weinteract with customers on a daily basis, and these essentiallyserve as the starting point for the JAL Group. I think you haveshared my experience of getting a quick sense of how well abranch office is doing by its overall energy level. And like you, I
have certainly felt that motivation is rising.
Nearly two years have passed since we began conducting
JAL Philosophy education, and our philosophy has graduallytaken root, which has a great deal to do with the growing motivation. Incidentally, while each Group company had provided
corporate education individually in the past, this was our firstattempt at corporate education intended for all JAL Group employees.
Yanagida
The JAL Philosophy, safety and JAL brand constitute the three pillars of the Management Targets in yourongoing corporate restructuring efforts. Instead of addressing these elements individually, they must be expressed as anintegrated concept and effectively instilled into the minds ofevery Group employee through education.
OnishiI see the JAL Philosophy as the foundation forsafety and the brand. We are still educating employees about
the basics of each of these. Since problems that arise in ourfront-line operations are associated with a combination of theseelements, our employees need to come up with the best comprehensive response and act on it. Our training in this area has
started for cabin attendants, but as the JAL Group we have only

Review of Operations

Each of Us Making JAL What It Is

CSR

Financial Section

just begun. We are therefore developing an educational system
whereby employees can first obtain an understanding of eachelement before learning to integrate them.
Yanagida
The Safety Advisory Group has consistently
pointed out that ensuring safety is everyone’s responsibility,
regardless of their position or where they work. It is not a concern only for the maintenance crew and pilots. To ensure thisawareness takes root throughout the entire Group, we strongly
encourage you to establish an educational system that integrates the JAL Philosophy, JAL brand and safety.

Significance of the Chairman’s Dual Role as Safety
Manager
Yanagida
Mr. Onishi, you were the first person with a technical background to be appointed President and Chairman.
Regardless of your additional heavy responsibility of having
to deal with corporate restructuring, you have assumed the
top safety-related position as Safety Manager in an effort torespond to our recommendations. I consider this highly commendable. How do you see your role?
OnishiSince joining the Company, I’ve always worked in
the technological areas, so safety has always been my primary concern. I feel in my very bones, the critical nature of
our unceasing efforts for safety. I am grateful that I’ve had theopportunity to serve as Safety Manager as well as President
and Chairman.
Moreover, I think corporate management and safety are similar in that leadership is vital to both of them. Members of anorganization observe leaders to see how they make decisions.
When the issue is safety, you must maintain a solid commitment to protect it to the end, be well prepared to exercise theutmost care in planning, and finally face challenges with courage to ensure safety. You must be unwavering in your stance as
you make decision after decision. Our employees always watch
to see how leaders make decisions, and share the same senseof commitment as they go about their work. I think it is truly
significant that being the top manager of the Company as wellas the top safety officer allows me to declare my commitment
to pursue management and safety as
one concern from a
position of authority,
so that my decisions
actually influence theentire Group.
Yanagida
I heardthat when President
Ueki was appointed
General Manager of
FlightOperations,
he requested thenChairman
Inamorito grant him the au-

JAL REPORT 201331

thority to suspend
all flights if he determined there wasany danger, at a time
when JAL was seeking to rationalize its
operations. For me,
this exemplifies theimportance of decision making. I refer to this as “management that can decide” or“an organization that can decide,” and I think JAL is becoming
this type of organization. Decisions are required not only by the
President and Chairman but by employees at all levels of theorganization, and as we pointed out in the Recommendations,
JAL should completely dispel the notion that it can depend onother people’s decisions and firmly establish a decision making mentality at all levels.
OnishiAs you have pointed out, decisions are not only required from top management, but also from each and every
member of the JAL Group. In my earlier remark about leadership, I wanted to convey that leaders must clearly explain the
background and intentions that lead to a decision as well as
their underlying convictions in an effort to share with subordinates the thinking of the organization and its leadership. To
that end, I think it’s important to take the initiative to explain
ideas in one’s own words. It is also important to maintain aconstant effort. Emphasizing the underlying principles behindeach decision will reinforce their role in indicating the directionof the organization.
We are sometimes tempted to hesitate in making decisions
when we are uncertain as to whether the entire organization
will follow them or whether employees will share our feelings.
But such doubts disappear once you hold the conviction: “I’ll
go with this idea; everyone will follow me.”
Yanagida
By openly communicating the decision making
process to the entire Group, employees will be able to sharethe leader’s conviction and ultimately make their own decisions based on that assurance. This is the type of organization I’d like to see JAL become. But in order for this to happen, I think you must work to instill a mindset that will prevent
employees from merely following the manuals, especially inyounger employees who were raised in the information society. In the Recommendations we indicated that the tendency
to “do only what the manual says” is a problem that must be
overcome. Instead of dealing only with the job at hand, consideration must be given to how the job is significant to the entire
Company. That’s why we’ve been trying to communicate theimportance of seeing the forest and mountains beyond justseeing the tree.
OnishiI remember that point well. I think it’s also related to
the “second-to-third person perspectives” suggested by the
Safety Advisory Group. The “second-to-third-person perspectives” are an essential element of safety culture, combining
two people’s perspectives in order to, for example, allow for

32

JAL REPORT 2013a maintenance crew to possess a second-person perspective
so that they can visualize their own family boarding a planewith each bolt they fasten, and the third-person perspective of
being a technical expert. Your advice was eye-opening. We intend to develop an educational program for instilling and practicing the “second-to-third person perspectives” especially foryounger workers.

Becoming the Leading Company in Safety
Yanagida
In 2009, four years after the Recommendations,
we submitted the new Recommendations that emphasized thereview and thorough establishment of the “four cultures” including the culture of enhancing manuals and culture of thinking
and acting from the “second-to-third person perspectives.” At
present, are you facing any problems or challenges in any ofthese areas?
OnishiWe have yet to begin tackling the culture of enhancing our manuals on a full scale. The volume of manuals we already have is enormous, and the first step we must take in thisculture is to close the gap between the writers and users ofthese manuals. While something a worksite might need to referto may be in a manual, the information may not always be soeasy to find. We must also think deeply about what we’re trying
to convey through a manual. These issues are all a part of what
it means to understand “enhancing” manuals. We are therefore going to review our operations, which serve as the basisof the manuals, before we begin to work on the materials. As I
declared at the start of the year, these actions will be my duty
for Corporate Safety and Security, and I’m committed to seeing
them through.
Yanagida
The “leading company in safety” is a key phrase
in the Safety Advisory Group’s new Recommendations, and I
see you have adopted it as the first Management Target in yourMedium-Term Management Plan. What will you be working on
and how do you intend to communicate your efforts to society?
OnishiI believe there is nothing more important than humanresources in maintaining safe daily operations. Each and every
employee who works for the JAL Group must be thoroughlycommitted to safety, meticulously prepared, and willing to takeon challenges to ensure safety. I will continue to do everything
I can to ensure this becomes deeply rooted as our corporate
culture. I feel that over the years we have been able to thicken
our safety layer by learning from the safety practices of othercompanies. Given the lessons we have learned from the Mt.
Osutaka accident and our wealth of experience, I believe wecan contribute in some way to the people working in safetyrelated positions who face similar problems. So in the future,
we intend to contribute to society from this perspective as well.
As you have mentioned, safety is a never-ending concern. All
our employees stand united with an unwavering commitment toprotect the flight safety as we pursue our goal of becoming theleading company in safety in the transportation sector.

Highlights

Messages from Management

Review of Operations

Each of Us Making JAL What It Is

CSR

Financial Section

Four Key Areas
1

Safety and Security
Many professionals are at work to ensure the safety and comfort of passengers during flight.

Safety Advisory GroupThe JAL Group established its Safety Advisory Group on
August 3, 2005 due to the repeated occurrence of safetyrelated problems even after the Japanese Ministry of Land,
Infrastructure, Transport and Tourism (MLIT) issued thecompany a Business Improvement Order on March 17, 2005.
The Safety Advisory Group is a panel of five experts outside
the JAL Group who have extensive knowledge and experiencein such areas as human factors, analysis of failure and imperfection, organizational operation and culture, and safety. The groupis chaired by Mr. Kunio Yanagida, a nonfiction writer and critic,
and meetings are held with JAL management twice a year,
where the members check the progress of the JAL Group’s
safety activities and offer recommendations and advice.
At a meeting held on April 5, 2013, JAL Group management
reported on current issues and heard the opinions and valuable advice of panel members about measures that will be
implemented in the future.
The JAL Group will reflect the feedback and advice offeredby the Safety Advisory Group in group management and safety operations.
Members of the Safety Advisory Group

Mr. Kunio Yanagida (Chairperson) Nonfiction writer, critic
Mr. Yotaro Hatamura

Professor at Kogakuin University, Professor
Emeritus of the University of Tokyo

Mr. Shinichi Kamata

Professor at the National Defense
Academy of JapanMr. Shigeru Haga

Professor at Rikkyo University

Mr. Akinori Komatsubara

Professor at Waseda University

Meeting of the Safety Advisory Group and JAL executives

Disclosure of JAL Group Safety Report

Information about the safety-related initiatives of the Group’s
six air transport companies is disclosed every year in the JAL
Group Safety Report in accordance with the rules of Article111-6 “Release of Safety Report by Domestic Air Carrier” of
the Civil Aeronautics Act. The JAL report simply and concisely
explains the safety initiatives of these companies.

Safety Troubles and Measures in FY2012

The JAL Group proactively discloses safety-related information
so that passengers can board our flights with peace of mind.
Aircraft Accident*1
Passenger injured by sudden rocking of JAL877 during
flightOn November 26, 2012, a passenger onboard JAL877 (Narita
to Shanghai Pudong) fractured his right instep when the aircraft encountered turbulence while cruising. The aircraft subsequently landed in Shanghai as scheduled. The incident wasclassified as an Aircraft Accident by the MLIT.
Causes and Countermeasures:Japan Airlines is fully cooperating with the Japan Transport
Safety Board, which is investigating the cause of the incident.
The Company issued a memorandum to inform and alert allinternal organizations about this incident. We are also considering flight crew training to improve skills related to meteorological analysis, and installing handles for passengers to use
in the event of sudden, unpredictable turbulence. Additional
measures may be implemented pending the results of investigations by the Japan Transport Safety Board.
Serious Incident*2
Engine trouble on JAL1471
On October 20, 2012, JAL1471 (Haneda to Matsuyama) experienced a left engine malfunction during climb after take-off.
The left engine shut down and the aircraft had to turn back to
Haneda Airport. Subsequent inspection confirmed significant
damage inside the engine, and the incident was classified as a
Serious Incident by the MLIT. None of the passengers or crew
was injured.
Causes and Countermeasures:Japan Airlines is fully cooperating with the Japan Transport
Safety Board, which is investigating the cause of the incident.
As an immediate measure, the Company issued a memorandum informing all internal organizations about the situationand conducted thorough internal inspections, including an
endoscopic examination of engines manufactured during thesame period.
*1 A ircraft Accident: Fatal or serious injury of a person as a result of the operationof an aircraft, or an aircraft crash, collision or fire, or damage (requiring major
repair) to an aircraft caused during flight, as classified by the MLIT.
*2 Serious Incident: An incident involving circumstances indicating that there wasa high probability of an accident, such as overrunning, emergency evacuation,
fire or smoke inside the cabin and abnormal depressurization, encountering
abnormal weather conditions, etc., as classified by the MLIT.

The JAL Group Safety Report (in Japanese) is available for download from:http://www.jal.com/ja/flight/safety/report/

JAL REPORT 201333

Four Key Areas

Runway excursion on JAL2837
On December 25, 2012, after landing at Hanamaki Airport, thenose tires of JAL2837 (Sapporo to Hanamaki) ran off the sideof the runway while decelerating and the aircraft came to a
halt. This incident was rated a Serious Incident by the MLIT.
None of the passengers or crew was injured.
Causes and Countermeasures:Japan Airlines is fully cooperating with the Japan Transport
Safety Board, which is investigating the cause of the incident.
As an immediate measure, the Company issued a memorandum informing all internal organizations of the situation andalerting them to the necessary precautions to take during winter operations. In addition, since degraded runway conditions
due to snowfall was suspected as a contributing factor in theincident, the Company reminded flight crews of these specificrisks and mandated thorough implementation of deceleration
methods for avoiding skidding under poor runway conditions.
Number of Safety-Related Incidents

In brackets: number of incidents per 1,000 flights

Type of Incident

FY2010FY2011FY2012

Aircraft Accident

1 (0.003)

1 (0.003)

1 (0.003)

Serious Incident

2 (0.005)*1

1 (0.003)*1

4 (0.011)*1

Irregular Operation*2

81 (0.213)

58 (0.160)

69 (0.194)

Safety-Related
Issue*3

307 (0.808)

258 (0.740)

276 (0.776)

Total Annual Flights

380,154348,815355,489*1 JAL was included in this count in relation to Serious Incidents caused byaircraft operated by other carriers in one of the two incidents in FY2010, theincident in FY2011 and two of the four incidents in FY2012. No issues wereraised with regard to JAL Group aircraft in these incidents.
*2 Irregular Operation: Incidents resulting in a flight schedule change, such as achange of the flight destination. When a malfunction occurs in part of the multiple
systems of an aircraft, the aircraft is turned back to ensure maximum safety after
the flight crew has completed actions in accordance with the flight manual. In
general, these incidents do not pose any immediate risk to flight safety.
*3 Safety-Related Issue: Legally mandated incident reports to the MLIT underregulations that went into effect on October 1, 2006 (Civil Aeronautics Act,
Article 111-4; and the Ordinance for Enforcement of the Civil Aeronautics
Act, Article 221-2 (3) and (4)). Such incidents include aircraft damage caused
by lightning or bird strike, and situations in which the TCAS (Traffic Collision
Avoidance System) is activated and appropriate avoidance maneuvers aresubsequently undertaken. In general, these incidents do not immediately
result in an aircraft accident.

JAL Group Safety Education

This educational program for all JAL Group employees is intended to cultivate “safety professionals” and was developedwith the cooperation of many people, including members of
the Safety Advisory Group. It is designed to raise awareness34

JAL REPORT 2013of safety in daily operations
by having participants observe wreckage from Flight
123 and watch videos ofinterviews with bereaved
families and other related
persons. Through these
activities, participants learn
about the accident and are encouraged to reflect on and form
an emotional attachment to the event so that they more deeply
consider what must be done in the context of maintaining safe
operations. They also compose their own safety pledges to ensure their commitment to safety in daily operations.
The program was launched at the end of October 2012 and
5,800 employees have completed the training as of March
31, 2013.
* On August 12, 1985, JAL Flight 123 took off from Haneda Airport bound for
Itami (Osaka). During the flight, the aft pressure bulkhead was ruptured and thepressurized air in the cabin blew out into the aft fuselage, causing the verticalstabilizer to break off and severing all hydraulic systems, which rendered theflight control surfaces inoperable. The aircraft continued to fly for about 32
minutes before crashing into the south ridge of Mount Osutaka. A total of 524
passengers and crew were on board, and the accident resulted in 520 fatalities
and four heavily injured survivors.

Safety Education Facilitator
Safety education is about teaching the heart to feel. It was
not always easy getting across why it was necessary to revisit
and learn from the Flight 123 accident in order to maintainsafe operations. At the same time, I learned a lot by repeatedly providing this education.
We work in an environment that affords few opportunities
for direct contact with our customers, separated from us by
the cockpit door. It was an invaluable experience for me towitness participants at the Safety Promotion Center breakinto tears at the sight of messages that victims wrote on theaircraft and images of the loved ones they left behind. I am
convinced that if all our employees apply what they learned
from this education in their respective workplaces, it would
dramatically thicken our “safety layer” and nurture a safety
culture that cannot be matched by any other airline company.

Masahiko Yoshimatsu
Captain, 787 Flight Crew

Highlights

Messages from Management

Review of Operations

Each of Us Making JAL What It Is

CSR

Financial Section

Safety and Security
Flight safety is the very foundation and social responsibility of the JAL Group. We believe our goal of becoming the leading company
in safety can only be attained by providing safety with security. Here are some of our programs designed to ensure that all ourcustomers can safely enjoy their flights.

Becoming a JAL that is Friendly to Everyone

We aspire to provide products and services that ensure asafe and comfortable flight for every passenger on JAL Groupflights, from small children to elderly customers and customers who require special assistance, by fulfilling the “Friendly
JAL = Universal Design”* initiative, which embodies our spiritof hospitality.
We offer universal design in the sense of both “hardware,”such as Domestic Class J Seats and desks at the JAL Smile
Support Counters for customers requiring assistance, and“software,” including the 14 special international in-flight meal
options for passengers with allergies or health conditions. Furthermore, we strive to deliver “universal design for the heart”
that is born in the hearts and actions of each employee bytraining them through a program of simulated experiences.
* A concept for the development of “design that is easy for everyone,” regardlessof age, physical capability or environmental conditions.

the elderly and passengers requiring the useof a wheelchair.

Mother and Baby
Travel Support Guide

Baby Travel Support Service
Assisting passengers travelingwith babies or infants

Kids Travel Support Service
Assisting children traveling on
their own

Expectant Mother Travel
Support Service

Assisting pregnant passengers totravel in comfort

Senior Citizen Travel Support
Assisting elderly passengers

Highlights

Joint Development with Customers

Priority Guest Support

The JAL Group refers to customers with reduced mobility or
who are sick or injured as “Priority (Preferred) Guests,” serving
them with precedence over other customers.
In 1994 we launched the Priority Guest Center as the firstof its kind in the airline business in Japan, and it has subsequently handled a wide range of situations. The center’s experienced staff members are on standby to respond with care tocustomer needs.
• Transport of the Japan national team participating in the
London Paralympics Games 2012• Transport of passengers who will undergo an overseas hearttransplant operation• Medical transportation of pediatric patients using stretchers• Joint Priority Guest operations with American Airlines andBritish Airways

We worked on a joint development project to implement
suggestions for improvements that had been proposed bya hearing impaired high school student (currently attending
university).

Sign Language
Badge
Worn by cabincrew members
proficient in sign
language

Communication boards(domestic flights)

Drink menu cards“After spending a year on this effort withthe people at JAL, I was overwhelmedwith tears when it finally took shape. Thishas made me feel secure when I travel byair. Thank you so much.”
Ayaka Inoue, proposer

Passengers with walking disabilities

Physically challenged passengers
requiring an assistance dog

JAL Smile Support (Domestic Flights)

The JAL Group has a dedicated support desk for customers
requiring assistance on our domestic flights. We provide various types of assistance to ensure comfortable trips for as manycustomers as possible, including pregnant women, children,

Activities that Meet Society’s Expectations Throughthe Airline Business

The JAL Group readily utilizes its business operation as an airtransport provider to support relief efforts in times of disasteraround the world. Coordinating closely with the governmentand other non-profit organizations such as Japan Platform, JALestablished a system to speedily provide air transport of relief
supplies and personnel to affected areas.
* For a report on the JAL Group’s emergency support following the Great East
Japan Earthquake, see page 41.

JAL REPORT 201335

Four Key Areas

Nurturing the Next Generation

2

The JAL Group strongly hopes that children will have dreams to pursue for the future, and supports their future throughprograms for children of diverse age groups.

JAL SORAIKU“JAL SORAIKU” is a collective term for the educational programs organized and conducted by the JAL Group for nurturing
the next generation. We offer introductory courses on subjects
such as jobs related to air travel and JAL initiatives for participants from pre-school children to adults.
JAL Sky Eco: Talks on Environmental
IssuesJAL Origami Hikoki: Fun PaperAeroplane Activity

JAL Origami Hikoki: Fun
Paper-Aeroplane Activity

JAL Sky Eco: Talks on
Environmental Issues

JAL Career Talk
for Students

JAL Safety Demonstrations
by Cabin Attendants

JAL Professionals
Interviewed by Students

Age groupSix years old and older

Elementary schoolchildren(from third grade), junior highschool students, high school
students, college students(adult-only class available)

Junior high school students,
high school students

Junior high school students,
high school students

Junior high school students,
high school students

FormatOnsite course

Onsite course

Onsite course

JAL Haneda facility

JAL Haneda facility

Time required

90 minutes

90–120 minutes

60 minutes

60 minutes

40 minutes (including 20 minutesof travel)

Number ofcourses permonth (in general)332 (arranged by job)

2

4

Number ofparticipants percourse30 to 10030 or more

30 or more

20 to 50

3 to 15

For more details on JAL SORAIKU, visit: http://www.jal.com/en/soraeco/

Tour of the JAL Aircraft Maintenance Center
The JAL aircraft maintenance center adjacent toHaneda Airport offers factory
tours so that people can observe aircraft maintenance.
Participants listen to an overview presentation on aircraft
before having a guided tour
to see maintenance work in
the hangar. The factory welcomed more than 90,000 visitors in FY2012.

Cooperation with UNICEF

In 1991, JAL launched the “Change for Good®” fundraising
campaign for UNICEF on its flights between Tokyo (Narita) and
New York to collect leftover foreign coins from passengers. The
campaign was expanded in 2006 to all international flights operated by JAL. Coins collected through this initiative are donated to support UNICEF activities for protecting children’s
lives, health and rights. As a member of the Steering Committee for UNICEF’s Foreign Coin Collection Program, we also
provide support by transporting
foreign coins collected on flights
through this campaign and on
the ground in Japan to different
countries for free.

Highlights

JAL Scholarship Program – Human Resources Development
Distinctive to JAL

The JAL Scholarship Program invites college students from across Asia and Oceania to Japan every year and provides them with opportunities for workshops and cultural interchange.
Through these activities, the program aims to enhance the students’ understanding of Japanand promote mutual understanding beyond national borders. Another program goal is todevelop young men and women who will assume future leadership roles in the region.
The JAL Scholarship Program was launched in 1975 by JAL. When the JAL FOUNDATION* was established in 1990, it took over the management of the program.
To date, 1,471 students have participated, and many program graduates have gone on
to make their marks around the world.
* Currently the JAL Foundation, Public Interest Incorporated Foundation.

36

JAL REPORT 2013

Highlights

Messages from Management

Review of Operations

Each of Us Making JAL What It Is

CSR

Financial Section

JAL Group Human Resources Development
Nurturing human resources to keep JAL flying into the future is our key Group mission.
We are actively developing human resources for the next generation, which will embody the JAL Group Corporate Policy bypracticing the JAL Philosophy.

JAL Philosophy Education

JAL Group Basic Education and Training System
Organizational
development
Consciousness reform / Customized training programs of the Work Philosophy and
HR Development Ofﬁce

Professional education and training (by company and department)

Distance learning, preferential treatment, etc., for language schools

Professional
education and training

Seminar to create outstanding human resourcesLife planning seminar

Leadership training for new employees

Learning about
the airline
business

New instructor and facilitator training

Work IKI-IKI course(to increase moralein the daily workplace)

Inter-grouptraining for the
next generation

Basic leadership training

Motivation andcommunication
training

Business leader training

Global humanresourcesdevelopmenttraining

Organizational mental health management training

General Staff

Reborn JAL brand seminar

Inter-grouptraining for the
next generation

Challenge Training(open participation)

Optional training (management and business skills)

Training for newly-appointed
area managers

Training for newly-appointed managers
JAL Group Safety Education

Assistant Manager

The “JAL Group Medium Term Management Plan for Fiscal
Years 2012–2016” identifies “Human Resources Development”
as a Key Initiative, under which we have been implementing avariety of action plans.
We established a common basic education and training system for the JAL Group in FY2012 aimed at developing leadership as well as safety and service professionals. In addition toposition-based training (e.g., “education for new employees”
and “training for newly-appointed managers”), we also established organization-wide programs such as “training to enhance
management power” for improving management and businessskills (e.g., “inter-group training for the next generation” and“global human resources development training”) and “training
for understanding challenges” (open participation). Full-scale
implementation of this system began in FY2012. We also provide a broad range of personal development programs.

Groupmanagement
training

Group leader
workshop(follow-up)

Work WAKU-WAKU course(to increase moralein the daily workplace)
Work UKI-UKI course(to increase moralein the daily workplace)

JAL Group Basic Education and Training System

Training toenhancemanagement
power

Personal development

SafetyTraining tomatch various
positionsGroup leader
workshop

JAL Philosophy Education

The JAL Philosophy
pocketbook is carriedby all employees. Eachstatement of principle isaccompanied with a short
explanation.

What gives JAL
a good image

JAL Philosophy
Managerial position

Executive Manager Manager

JAL Group employees are engaged in continuing education
through courses that deepen their understanding of the JAL
Philosophy and encourage its ongoing application for solving
problems and taking action. As a result, they become united bymutual trust in a company that contributes to the betterment ofsociety. The courses are facilitated by employees with experience as flight crew members, cabin attendants and mechanics who belong to the Work Philosophy and HR Development
section.

Education for new employees
Education for prospective employees

Moreover, each department at every JAL Group company is
responsible for conducting specialized professional educationand training programs to provide employees with the knowledge and skills they need in their particular fields of expertise,
thereby furthering our goal of delivering the best service.
We will address the task of maximizing the effectivenessof our education andtraining through enterprise-wide program
management by utilizing the JAL Education
and Training Center, established in April 2012.

Highlights

JAL Group New Employee Training
for FY2013

For the first time since the founding of JAL, all
20 companies of the JAL Group collaborated in
conducting new employee training. During thefour-day period starting April 1, 2013, 497 new
employees learned about the Group’s fundamental values and principles, including the JAL Group
Corporate Policy and JAL Philosophy.

Program• Being a JAL employee•H istory of the JAL Group (including corporate bankruptcy)• Valuable lives are entrusted to us in our work (safety
and the flight 123 accident)• Putting ourselves in the customer’s position (learning
about the JAL brand)• Compliance initiatives• “Gambaru JAL Daisakusen” (“Keep going! JAL” activity) (directly expressing our gratitude to customers)

JAL REPORT 201337

Four Key Areas

The Environment

3

JAL Group promotes “Sky Eco” for a Greener Tomorrow.

Environmental Guidelines and Action Plan

We have placed the control of our environmental impact andthe protection of the environment as core themes in our business operations, and create action plans for these areas. Our
philosophy and dedication toward them are set out in the 2012
“Environmental Guidelines” and “Action Plan.”

Our Eco-First Commitment

In 2010, the JAL Group made an “Eco-First” commitment torenew its efforts for preserving the
global environment and received
certification as an “Eco-First Company” from the Ministry of the Environment of Japan.

Environmental Guidelines
As an airline transportation company that is an importantsocial infrastructure, we are conscious of the fact that wehave a responsibility to the global environment, and assuch, the JAL Group has placed the control of our environmental impact and the protection of the environment ascore themes in our business operations, as we continue
to implement “Sky Eco,” so we will be able to pass thisrich earth on to the next generation and they will always beable to see the beautiful earth from the sky.

Action Plan 1 We actively conduct initiatives to prevent global warming.
Commitment

StatusWe are working to reduce CO2 emissions per revenue-tonkilometer from JAL Group aircraft by 23 percent in 2020 ascompared to 2005 level.

• CO2 emissions per revenue-ton-kilometer for FY2012 declined by 11.2 percent from FY2005 levels.
• We achieved our target of 1.5 percent average annual improvement (average figure for FY2005 to FY2012).

We are upgrading our fleet to lower fuel consumption andlow noise aircraft (e.g., Boeing 787, 737-800 and Embraer170).

• We introduced 15 lower fuel consumption aircraft (787-8, 737-800 and E170), and retired all 10 MD90
aircraft introduced during the 1990s.
• We began performance improvement modifications on 777-200ER aircraft and decided to attach winglets(small attachments to wing tips that reduce drag) on our 767-300ER aircraft.

We are conducting “Eco Flights.”• We achieved annual reductions in CO2 emissions of approximately 38,000 tons, mainly through implementing
5 “Eco Flight” activities: engine out taxi, idle reverse, reduced flap, delayed flap and delayed gear.

We are endeavoring to reduce weight.

• We conducted an exhaustive weight reduction effort between FY2005 and FY2010, and have alreadycompleted work on items with significant benefits.
• We are maintaining ongoing efforts such as the introduction of lightweight cargo containers.

We are cutting CO2 emissions by washing engines andpursuing other methods of CO2 reduction.

•W e implemented engine water washing at intervals of 200 days to 300 days for the 777 aircraft (PW4000),
767 aircraft (CF6) and 737-800 aircraft (CFM56). Result: Annual CO2 emissions were reduced byapproximately 14,000 tons.
• We shortened APU (auxiliary power unit) usage time for 777 aircraft and 737-800 aircraft (annual reduction
in CO2 emissions: approximately 2,000 tons).

We work together with the associated ministries andaviation authorities such as air traffic control in various
countries to introduce leading methods for fuel efficientaviation, and will actively continue to do so in the future.

• We are adopting advanced flight operation methods.
• We have implemented CDO (Continuous Descent Operations) at San Francisco International Airport andKansai International Airport.
• We have been operating UPR (User Preferred Route) on flights to Hawaii, Australia and the West Coast of
North America (Los Angeles, San Francisco and Vancouver).
• Estimated annual reduction in CO2 emissions: around 3,000 tons.

We are collaborating in the research and development ofaviation biofuel made from inedible plants.

• We conducted a biofuel demonstration flight in January 2009 and have been exploring the possibilityof using biofuel on commercial flights by exchanging information with the IATA, ICAO, authorities,
manufacturers, research institutions, universities, etc.
• We are planning an active effort toward the full-scale introduction of biofuel by around 2020 despite
continuing concerns over its economic efficiency and sustainable production capability.

We promote energy saving activities in our ground facilities(offices, factories, etc.).

• We have consolidated facilities by rationalizing maintenance facilities, conducted various energy-saving
activities and upgraded to electricity-saving lighting in offices.

Action Plan 2 We actively promote social and environmental activities and environmental awareness activities.
Commitment

Status

By continuing to conduct environmental and social activities,
we are able to contribute to long-term conservation of theenvironment, and we strive to improve the environmental
awareness of children who will lead the next generation, as
well as all of society and our own employees.

•O ur flight crew took the initiative to derive and put into practice organizational solutions for environmental
problems in the area of flight operations. Captains have been offering environmental awareness seminars (SkyEco classes) for children (46 times a year).
•W e contributed to reducing CO2 emissions with cooperation from passengers by implementing the “Shades
Closed Exercise” and improving on-time performance (currently the world’s top).

• We have been participating in the “CONTRAIL Atmospheric Greenhouse Gases Observation Project byPassenger Aircraft” (see page 40).
We will continue to participate in the atmosphere observation• We have been participating in the “Siberian Forest Fire Reporting Project.” Since 2003, pilots have been
project and the forest fire reporting project using our aircraft.
reporting any fires detected during summer flights over Siberia to a research team led by Hokkaido University
in a cooperative research effort on early fire detection by satellites (103 fires were reported during 2012).

38

JAL REPORT 2013

Highlights

Messages from Management

Review of Operations

Each of Us Making JAL What It Is

CSR

Financial Section

Action Plan 3 We work toward the realization of a recycling-based society and for the preservation of the environment.
Commitment

StatusUltimately we are aiming for a disposal rate of less than 2%
for industrial waste from domestic worksites.

•T otal waste volume rose 47% year-on-year, mainly due to considerable increases in waste related tomaintenance (caused by facilities reorganization, the volume of maintenance such as aircraft repair, etc.)
However, as a result of recycling efforts, the final disposal rate was 0.9% for FY2012, thereby achieving ourtarget (less than 2%).

We work to reduce water usage.

• Water usage was reduced as smaller aircraft required less water for cleaning, overall cleaning decreased as aresult of a decrease in the number of engines and landing gears requiring maintenance, and wastewater was
reused (106,000 m3).

We work to reduce the amount of emissions of chemicals(governed by the PRTR Act).

• Use of PRTR substances decreased both in type and volume due to the introduction of maintenance materials
with lower impact on the human body and the environment.
• The total volume of chemicals handled fell 5% year-on-year to 58 tons.

We work to recycle uniforms and items used in aircraft• We actively recycled beverage cans, newspapers, in-flight magazines and plastic bottles. We are promoting
cabins such as in-flight magazines, newspapers, aluminum
comprehensive efforts to dispose of in-flight waste in collaboration with IATA and other airline companies.
cans, plastic bottles and cargo packing materials.
• Total amount of recycled waste in FY2012: 1,245 tons.

Action Plan 4 We work to conserve the environment around airports.
Commitment

StatusWe actively introduce low-noise aircraft and noise
abatement operational procedures, and respond to otherairport noise issues.

•W e actively practice “Reduction of Noise at Source” and “Noise Abatement Operational Procedures” asresponsibilities of airlines under the “Balanced Approach” recommended by the ICAO. JAL aircraft arecompliant with ICAO Chapter 4, the most stringent standard for noise.
•U nder the “Noise Abatement Operational Procedures,” we practice noise abatement procedures at takeoff and operate under more stringent rules when taking off from Tokyo International Airport (Haneda) andOsaka International Airport (Itami).
•A s for noise abatement procedures upon landing, we practice reduced flap, delayed flap and idle reverse.,
At San Francisco International Airport and Kansai International Airport., we also conduct CDO (continuous
descent operations) to reduce both noise and CO2 emissions significantly.
•W e received the “8th Annual YVR Fly Quiet Award” from the Vancouver Airport Authority for the third
consecutive year in recognition of our noise abatement operations.

We work to reduce NOx emissions from aircraft,
automobiles, etc.
(NOx, HC, CO and other aircraft engine emissions are• All JAL aircraft engines are compatible with the ICAO’s CAEP6 and CAEP8 standards (the applicablestrictly regulated by the ICAO. Similar restrictions havestandard differs depending on when a plane’s Certificate of Airworthiness was issued).
been established under Japan’s Civil Aeronautics Act. NOxemission restrictions are particularly stringent.)

Action Plan 5 We give due consideration to biodiversity.
Commitment

Status

We convey to customers and society at large the importance•W e formulated the “JAL Group Policy on Biodiversity” in recognition of the fact that the JAL Group’s airof biodiversity and follow the “JAL Group Policy ontransport business may indirectly impact biodiversity.
Biodiversity” in our business operations.
We take part in the “United Nations Decade of Biodiversity”
initiative. In addition, we promote activities that convey
the importance of protecting the natural beauty of Japan,
including cranes, etc.

• We painted the “United Nations Decade of Biodiversity” logo on our aircraft, sponsored a photo contest on
the theme of the Japanese red-crowned crane, contributed to the “Endemic Rabbit Trust” (JAL Endemic
Rabbit’s Forest) and served certified coffee on our flights in consideration of biodiversity.

Highlights

Green Activities with the Cooperation of Passengers – Shades Closed Exercise

Since 2009, the JAL Group has continued to implement and improve the practice of shutting thewindow shades of parked aircraft to prevent interior temperatures from rising during the hot period
between spring and autumn in an effort to reduce air conditioning and in turn lower energy consumption and CO2 emissions.
We ask passengers to cooperate by closing the shades before deplaning, since the longer the shades
are shut the more effective* the exercise will be.
As an operator of public transport used by many people, the JAL Group believes it has an importantrole to play in conducting green activities with the cooperation of passengers.
* At Haneda Airport, we can reduce the CO2 emissions of a Boeing 777 aircraft by more than 1,000 kilograms byswitching from air conditioning requiring an energy-consuming APU (auxiliary power unit) to ground-based power
units for 10 minutes.

JAL REPORT 201339

Four Key Areas

CO2 Emissions by JAL Group AircraftIn FY2012, CO2 emissions by JAL Group aircraft per unit transport volume (revenue-ton-kilometer) were reduced by 11.2%
compared to the FY2005 level. While total CO2 emissions increased by 530,000 tons from the previous fiscal year due toexpansion of our operations, CO2 emissions per unit transportvolume remained more or less flat due to the introduction of
new aircraft such as the Boeing 787 and to efficient flight operations and the efficient use of fuel achieved by regular cleaningof engines.

CONTRAIL Atmospheric Greenhouse Gases
Observation Project by Passenger Aircraft

The JAL Group began participating in an atmospheric greenhouse gases observation project 20 years ago as a means ofcontributing to society in a way that only airline companies arecapable of. The project was launched with research institutions in 1993 and JAL aircraft commenced observations. In
2005, the project was reorganized as CONTRAIL*, the world’s
first long-term observation project with automatic air sampling equipment on passenger aircraft, jointly undertaken by
Japan’s National Institute for Environmental Studies, the Meteorological Research Institute, JAMCO Corporation, the JAL
Foundation and Japan Airlines. We are currently conducting
research for measuring the atmospheric concentration of CO2
and monitoring long-term changes in the global environment
from our six Boeing 777-200ER aircraft, and a vast quantity of
3 million data points have already been gathered from morethan 7,000 flights. The project received the “Environment Minister’s Award” and "Environmental Excellence Award” under
the Environmental Awards for FY2013, sponsored by the
Hitachi Environment Foundation and others.

CO2 Emissions(10,000 tons)
2,500
2,000
1,500

100

1,687

96

CO2 Emissions
CO2 per Revenue-Ton-Kilometer (comparison with FY2005)

94

1,578 1,502

(%)

99
93

1,393

1,191

1,000

100

89

89

89

90

77
928

734

70

787

60

500
0

80

2005 2006 2007 2008 2009 2010 2011 20122020 (FY)
Target50

Activities for Preserving Biodiversity

Following the “International Year of Biodiversity” in 2010 and
COP10 held in Nagoya, Aichi Prefecture that same year, theJAL Group improved its understanding of the importance of
biodiversity and the rich diversity that sustains the air transportbusiness, and consequently formulated the “Biodiversity Policyof the JAL Group.” We have also pursued a number of activities to raise public awareness. We painted the “COP10” and“United Nations Decade on Biodiversity (UNDB)” logos on ouraircraft, provided information through in-flight video and magazines, and sponsored a photo contest on the theme of theJapanese red-crowned crane. This year we also contributed to
the Endemic Rabbit Trust, and along with our support for efforts under the UNDB, we continue to engage in activities forprotecting Japan’s natural beauty and communicating its value.
JAL Eco Jet “Nature” isdecorated with images ofendangered species.

* CONTRAIL: Comprehensive Observation Network for Trace gases by Airliner

The CONTRAIL project
logo is painted on JA707J
aircraft carrying theobservation equipment.
Logo mark depicting endangered species
Photo: Ask

Photo: Mamoru Tsuneda

We seek to communicate Japan’s natural beauty and the plight of endangered
animals to a broad public audience through activities such as our sponsorship ofa photo contest on the theme of the Japanese red-crowned crane and support
for the Association of National Trusts’ campaign to protect the natural habitat ofendemic rabbits on Amami Oshima island.

40

JAL REPORT 2013

Highlights

4

Messages from Management

Review of Operations

Each of Us Making JAL What It Is

CSR

Financial Section

Bridging Japan and the World
We will bridge Japan and the world as the “‘Wings of Japan”’ and as a network carrier that contributes to the revitalizationof Japanese industry and the regional economy while enhancing mutual understanding in the international community.

JAPAN PROJECT

Since May 2011, JAL has been undertaking the JAPAN PROJECT to revitalize regional communities by communicating the
splendors of Japan.
The JAPAN PROJECT involves collaborating with local governments and companies to attract tourists and publicize local
products. We use every tool at our disposal for this, including
in-flight magazines, onboard videos, in-flight meals and the JAL
Group website to introduce the appeal of each region and promote exchange. The project focuses on a single region eachmonth and reveals its attractive features from a variety of angles.
The JAL Group will steadfastly strive to spark demand for
tourism through our own business operations and by revitalizing
regional communities.

Tohoku Cotton Project

The Tohoku Cotton Project was launched in 2011 as a collaborative effort involving about 70 organizations, including agricultural corporations in the Tohoku region affected by the Great
East Japan Earthquake and companies affiliated with the apparel industry. The goal of this project is to help the agriculturalindustry recover from the damage caused by the tsunami andcreate new industries and jobs by planting and spinning cotton, developing commercial products and selling them througha cooperative effort.
As we studied biodiversity, the JAL Group also learned theimportance of living in harmony with nature. The Tohoku Cotton
Project addresses the challenge of restoring Tohoku’s abundantnature from the scars left behind by the earthquake, alongsidefishing and agricultural industries that had been living in harmony with nature only to be lost as well. JAL embraces withthis idea and extends its support through the voluntary participation of employees, such as planting the cotton, and throughthe commercialization and adoption of products as items that
customers can obtain in exchange for mileage.

Activities that meet society’s expectations• Community activation by promoting tourism• Visit Japan• Campaign for hosting the 2020 Olympics in Tokyo• Recovery support following the Great East Japan Earthquake• Promotion of cultural exchanges• Assistance with art transport• Joint programs with the JAL Foundation

Emergency Assistance After the Great East Japan Earthquake

After the Great East Japan Earthquake struck, we immediately set up an earthquake response headquarters headed by the president and concentrated all our resources into the Tohoku region to expand
our transport capacity to and from the affected region. By July 24, 2011, we had operated a total of
2,674 flights to the Tohoku region and used larger aircraft for 556 flights, transporting more than 200,000
people in total. At the site of the disaster in Sendai Airport, which had been isolated by the tsunami, JALstaff worked around the clock to ensure the safety of as many as 2,000 victims, including elderly citizens
who had sought refuge at the airport. In addition to these efforts, we provided free flights for 5,405 relief
workers and free transportation of approximately 91 tons (via international
flights) and approximately 15 tons (via domestic flights) of supplies, donatedapproximately 156 million yen in mileage through the cooperation of 12,875
customers to the Central Community Chest Organization of Japan, andhanded over approximately 4 million yen collected through service counter
donation boxes and approximately 18 million yen from our employees.

JAL REPORT 201341

Partnership with Business Associates
We work in concert with business associates, our valued partners who help keep JAL flying, in order to provide safe andcomfortable flights.

Recognizing that our flight operations, services and products
are made possible through the cooperation and support of ourbusiness associates, we strive to establish solid partnerships of
mutual trust, not only through fair and transparent procurement,
but by maintaining a sense of gratitude.

Fair and Transparent Procurement

When we select business associates, we take full consideration of their service and product quality, pricing and delivery
times, as well as overall reliability and ongoing CSR (corporatesocial responsibility) efforts.
Since August 2010, we have been centralizing procurement
operations in the Japan Airlines Purchasing Department. We
have sought to provide excellent opportunities for business associates in Japan and abroad and to consistently maintain fair
and transparent procurement practices.
Our goal for centralized procurement also includes cost reduction and standardization as well as higher efficiency in theoperational process of procurement.

Providing Safe and Comfortable Service toPassengers

To ensure the comfort of all passengers aboard our flights, we
are working with our business associates to nurture a culture inwhich the highest priority is placed on safety while also promoting thorough quality control to offer premier hospitality.

Promoting Procurement Activities with Due
Consideration of Corporate Social Responsibility

In accordance with the Basic CSR Policy of the JAL Group, we
are working with our business associates to promote procurement activities with due consideration of CSR, including legal
compliance, protection of the global environment, respect forhuman rights, proper labor practices, fair operating practices
and consumer issues.

Partnership with Business Associates

Masaki Saida

Executive Vice President
Executive Divisional Director,
Corporate Planning
Narita International Airport
Corporation (NAA)

Since our airport opened in 1978, Japan Airlines has consistently used it as a base station for international operations andhas established an extensive international air services network
connecting Narita with the rest of the world. JAL’s dramaticand successful business turnaround to start anew as a public
listed company is a most welcome event for our company aswell. We are proud of our association, and we sincerely hopeJAL’s Narita-based network will continue to expand.
JAL has contributed significantly to our Eco-Airport Master
Plan, an initiative for reducing environmental impact which
we are advancing in collaboration with airport-related companies. As part of JAL’s efforts, it has been successful in
reducing CO2 emissions by purchasing fuel-efficient aircraft
such as the 787 and by actively promoting the use of GPUs
(ground power units).
The relationship between airlines and airports is remarkably close. As good business partners, we should continue
to understand each other’s business objectives and initiatives
in order to work together for our mutual growth and development, which in turn will lead to a better society.

42

JAL REPORT 2013

Yuichi Katayama
Executive Director andExecutive Officer
Oriental Land Co., Ltd.

Tokyo Disney Resort is celebrating its 30th anniversary from
April of this year.
Japan Airlines has been an official sponsor since the park
opened and continues to bring us many guests from all overJapan every year. We have enjoyed a long-standing, valuable partnership with JAL.
Our guests’ “journey” begins before they arrive at ourpark, and we work alongside JAL’s outstanding service tocreate unforgettable memories for our guests.
“Happiness” is the theme of Tokyo Disney Resort’s 30th
anniversary.
On March 29, JAL began operating the “JAL HappinessExpress,” and it thrills me to imagine “Happiness” soaring
through Japanese skies.
We look forward to working side-by-side with JAL in apartnership that consistently brings “Happiness” to ourmany guests.

Highlights

Messages from Management

Review of Operations

Each of Us Making JAL What It Is

CSR

Financial Section

Corporate Governance
We have established and actively implement our Basic Corporate Governance Policy to enhance management transparency
and monitoring.

Our Basic Corporate Governance Policy

As of July 2012, the Board of Directors is composed ofseven members, five men and two women. We have also appointed two External Directors, Tatsuo Kainaka and Kimie Iwata. Kainaka offers a wealth of experience, accomplishments
and deep insight in the areas of corporate governance andlegal affairs based on extensive knowledge accumulated over
his long career in the judicial system. Iwata brings a wealth ofexperience, accomplishments and deep insight related to supporting the professional development of women and corporatesocial responsibility gained through her extensive experience
with government and corporate management. We believe thathaving both of them as External Directors provides significant
benefits to JAL Group management.
Directors receive legal guidance to ensure they are aware of
their formal duties, including the fiduciary duty of loyalty andthe due care of a prudent manager. Directors serve one-year
terms, confirming their role and accountability each fiscal year.

We have established the “JAL Philosophy” under the JAL Group
Corporate Policy as a set of company guidelines on proper conduct. The JAL Philosophy guides our efforts to increase corporate value and maintain accountability through a corporate
governance structure that produces high management transparency and robust monitoring while also facilitating rapid, focused decision making.

Corporate Governance Guidelines

The Board of Directors has established corporate governancestandards by adopting Corporate Governance Guidelines asa key set of rules to supplement the Companies Act, related
laws and regulations, and our own Articles of Incorporation. The
Board reviews the Corporate Governance Guidelines at least
once a year. Directors strive to realize our corporate policy byputting the JAL Philosophy into practice and reporting on the
progress of implementing the philosophy at Board meetings.
These Corporate Governance Guidelines have been madeavailable to the public via our website so that stakeholders—
including customers—can readily refer to and understand the
JAL Group’s corporate stance.

Board of Corporate Auditors

As a company with auditors, we are seeking to strengthen our
auditing system by appointing three External Audit and Supervisor Board Members out of a total of five auditors. External
auditors are appointed on the merits of their extensive knowledge of and experience in a wide range of fields. Together withthe other auditors, the external auditors work closely with theInternal Auditing Department and corporate auditors to ensure
sound management by conducting audits from a neutral andobjective standpoint.

http://www.jal.com/en/outline/corporate/governance.html
Corporate Governance Guidelines
Regulations of the Board of
Directors, etc.

Fundamental Policies on the Internal
Controls System

Regulations for Kessai and Administrative
Authority / Administrative Authority Criteria Table

Outline of JAL GroupInternal Controls

Board of Directors

Committees

The Chairman of the Board of Directors chairs meetings of theBoard to clearly separate management monitoring and business execution functions.

The JAL Group has established a Nominating Committee,
Compensation Committee, Personnel Committee and Officers
Disciplinary Committee to enhance management transparency.

General Meeting of Shareholders
Appointment/
Dismissal

Appointment/Dismissal
Auditing

Board of Directors
Instruction (Prior Deliberation)/
ReportDelegation of Authority
Executive
Committee
Appointment/Dismissal,
Instruction/Command
Instruction/Delegation of Authority

Recommendation

Group Earning
Announcement Session
Instruction/
Delegation of
Authority

Report Significant
IssuesCouncil for Safety
Enhancement
Operational Safety
Promotion
Committee

Executive Officers
Departments and Subsidiaries

Board of Corporate
Auditors
Collaboration

ReportOfficers Disciplinary Committee

Instruction/ReportManagement Liaison
Committee

Compensation Committee
Personnel Committee

ReportPresident

Nominating Committee

Appointment/
Dismissal

Financial Audit

Audit

Risk Management Committee
Financial Risk Committee
JAL Philosophy Committee
CSR Committee

Guidance/Advice

Accounting Auditor
Collaboration

Collaboration

Legal Advisors

Internal Audit

JAL REPORT 201343

Internal Controls System

Current Internal Controls System Environment
The JAL Group establishes the “Fundamental Policies on theInternal Controls System” according to the regulations of theCompanies Act and observes these laws in order to ensure thereliability of the financial reports as well as the effectiveness andvalidity of our operations. The board of directors’ meeting heldon March 28, 2012, decided the following “Fundamental Policies on the Internal Controls System.”
Fundamental Policies on the Internal Controls System
1. Regarding the system to ensure compliance with the Articles of Incorporation and the laws and regulations governing the execution of the duties ofthe director•	We established “Corporate Governance Guidelines” and set up a corporate
governance system that will demonstrate high management transparency andpromote a strong management monitoring function in order to ensure the proper
maintenance of the internal controls system.
•	We established “JAL Philosophy” as conduct guidelines of our company. The
directors are encouraged to abide by these practices.
•	The board of directors decides the “Fundamental Policies on the Internal Controls
System,” and the general affairs department promotes the maintenance of theinternal controls system.
•	The general affairs department supervises compliance operations and monitors
the operations situation and maintenance of related regulations.
•	We have set up an inspection system to ensure the duties of the directors are
executed in compliance with relevant laws and regulations.
2. Regarding the system related to the management and preservation of
information related to the execution of the director’s duties
We manage and properly preserve the information related to execution of duties
according to relevant laws and regulations and company rules.
3. Regarding other official regulations systems related to the management of
the risk of losses
In order to manage the risk of the entire group, we have established a “Council
for Safety Enhancement,” a “Risk Management Committee,” and a “Financial Risk
Committee” to prevent losses by consistently monitoring the appropriatenessof duties, establishing the “Outline of JAL Group Internal Controls,” alongside
managing the risks appropriately. In addition, we plan to minimize loss bycorresponding on all levels when a danger of loss does happen to occur.
4. Regarding the system to ensure the execution of the director’s duties iseffectively carried out•	We hold a monthly board of directors’ meeting and additionally, hold provisional
meetings when important decisions regarding group management policies
and plans need to be decided. In addition, to ensure the effective execution of
the directors’ duties, we have installed meeting bodies such as the “Executive
Committee” and “Earnings Announcements Sessions.”•	In accordance with company rules, we have segregated authority in order tomaintain effective execution of duties, and determined the division of duties,
authority of managerial posts and authority of duties.
5. Regarding the system to ensure employees execute their duties in compliance with relevant laws and regulations and the Articles of Incorporation.
•	We have established “JAL Philosophy” as conduct guidelines of our company
and encourage employees to put them to practice.
•	The general affairs department promotes the maintenance of the internal controls
system.
•	The general affairs department oversees operations related to compliance andmonitors the operations situation and maintenance of related official regulations.
•	We have set up an inspection system to ensure the employees execute theirduties in compliance with relevant laws and regulations.
6. Regarding the system that ensures business appropriateness in thecorporate group
We established “JAL Group Business Management Official Regulations.” Eachcompany in the group ensures that the system is used to effectively and justly
carry out management based on the “JAL Philosophy.” In addition, the “Outlineof JAL Group Internal Controls” is enacted and continuously monitors theappropriateness of duties.
7. Regarding matters related to the employees concerned in the event that
auditors request that employees be appointed to assist in their duties
We appoint employees (auditing staff) to establish an organization independent
from the directors to increase the effectiveness of the auditor’s inspection andperform auditing duties smoothly.
8. Regarding matters related to the independence of the aforementioned
employees from the directors
The auditing staff is appointed with the approval of the auditors and receives
instructions and orders from the auditors.
9. Regarding the systems for employees and others to report to the auditors•	By establishing a corporate governance system, we strengthen the managementmonitoring system of directors and employees by the auditors.

44

JAL REPORT 2013

•	We ensure the system and the opportunity for the director and employees toappropriately report to the auditors.
•	We request that auditors attend meetings of the board of directors and otherimportant meetings, and forward important circulars to the auditors. In addition,
we report the circumstances on the execution of duties and all important matterson company management and business operations to the auditors.
10. Regarding the other system to ensure the effectiveness of the board ofauditors and the auditors’ inspection•	We establish the system in accordance with the inspection plan devised eachyear by the auditors in order to effectively implement the inspection.
•	The directors, employees, the directors of each group and the auditing group all
exchange opinions with the auditor.
* “Employees” refers to the executive officers and trained staff.

Risk Management System

The JAL Group manages risks by dividing them into three categories: (1) operational risks associated with aviation safety, airnavigation safety and other issues related to air transportation;(2) corporate risks associated with management in general, excluding risks related to air transportation; and (3) strategic risks
associated with business management that may have a material impact on corporate revenue and expenditures.
With respect to aviation safety, we have established a Council for Safety Enhancement chaired by the president of Japan
Airlines Co., Ltd. and composed of Directors appointed by the
President and the Presidents of Group airline companies. We
have also established the Operational Safety Promotion Committee under the Council for Safety Enhancement, headed by
the General Manager of Corporate Safety & Security of Japan
Airlines Co., Ltd. Membership includes the Vice Presidents of
the Safety Management Departments and board members incharge of safety of Group airline companies. The Operational
Safety Promotion Committee monitors and evaluates the safety
management system based on the status of flight operations.
By formulating and evaluating the plans, policies and measures
on aviation safety and making overall adjustments and offering
recommendations, advice and guidance, this committee seeks
to maintain and strengthen collaboration between departments
and between Group airline companies on issues related to safety and enhance the level of safety.
To stabilize Group management by comprehensively managing risks other than those associated with aviation safety, which
includes safety management and air navigation management, wehave established the Risk Management Committee. Headed by
the Executive Officer of general affairs, this committee formulates
basic risk management guidelines, submits progress reports, andshares information on measures taken when risks are identified.
We have also established the Financial Risk Committee—
headed by the Executive Officer of finance and accounting—to
provide corporate management with an appropriate understanding of financial risks. The Financial Risk Committee regularly monitors the results of simulations on the financial condition of the company, estimates the potential impact of risks that
may materially and quantitatively affect corporate performance,and responds to risks as necessary in tandem with the Risk
Management Committee.

Highlights

Messages from Management

Review of Operations

Each of Us Making JAL What It Is

CSR

Financial Section

ESG Data

FY2011Governance
Executives

FY2012Unit

5

7

Persons

Female Directors*3

01

Persons

External Directors

22Persons45Persons2

3

Persons

Auditors*3
External Auditors
Executive Remuneration—

235

Directors Total—

172 *1Millions of yen
Millions of yen

Auditors Total

—

63 *2

Millions of yen

Human Resources
Consolidated Number of Employees*3

30,87530,882

Persons

Ground Jobs

23,10522,858Persons

Flight Crew

2,466

2,293

Persons

Cabin Crew

5,304

5,731

Persons

Average Age*3

—

38.0

Years

Ground Jobs

—

38.4

Years

Flight Crew

—

43.1

Years

Cabin Crew

—

34.9

Years

Ratio of Men*3

56.3

53.8

%

Ratio of Women*3

43.7

46.2

%

Managerial Staff*3

15.9

15.9

%

General Staff*3

84.1

84.1

%

Ratio of Staff with Disabilities*4

1.90

1.87

%

Ratio of Female Managers*3

13.1

14.3

%

Training Period per Person

—

64.5

Training Cost per Person—

352,357

Hours/Person

Childcare Leave Applicants

751

747

Persons

Nursing Care Leave Applicants

55

69

Persons

Ratio of Local Hires at Overseas Offices*3

90.7

92.3

%

Ratio of Locally Hired Managers at Overseas Offices*3

57.9

64.7

%

10,000 tons

Yen/Person

Environment
CO2 Emissions

734

787

CO2 Emissions/Revenue ton-km (comparison with FY2005)

88.8

88.8

%

NOx (LTO cycle)

5.66

6.08

1,000 tons

CO (LTO cycle)

3.51

3.76

1,000 tons

HC (LTO cycle)

0.63

0.64

1,000 tons

Electricity Use
Heat Use (crude oil equivalent)
Industrial Waste
Ratio of Final Disposal

140

134

Million kWh

53,20950,997

Kiloliters

2944

4327

Tons

1.9

0.9

%

Community Contribution
Donation of Mileage
Donation of Mileage by Customers—

15,132,500

Miles

155,625,000

15,167,500

Miles

Participation in Voluntary Activities (Japan Airlines Co., Ltd.)

409

444

Persons

Total Hours of Voluntary Activities (Japan Airlines Co., Ltd.)

1,698

1,491

Hours

*1 Includes the amount for one external director who retired as of the closing of the 63rd ordinary general meeting of shareholders held on June 20, 2012.
*2 Includes the amount for one auditor who retired as of the closing of the extraordinary general meeting of shareholders held on July 10, 2012.
*3 As of the closing date of the fiscal year.
*4 As of June 1 of the fiscal year that follows the current fiscal year.

JAL REPORT 201345

Third-Party Opinion

Iwao Taka

Professor of Economics,
Reitaku University

Business ethics is my field of expertise,so I have been quite interested in JAL forsome time now. Forgive me for saying so,
but before the bankruptcy, I felt no othercompany displayed a greater lack of integrity in its management than JAL. Its
executives and staff were of entirely different minds and it could hardly be calleda private enterprise. The company continued to falter until ultimately ending up
in bankruptcy, requiring its creditors andshareholders to make enormous sacrifices
and causing strong concern among customers and business associates as well as
the Japanese public.
JAL’s loss of integrity was due to threemalaises. First, the management teamwas steering the company without shouldering the responsibility. Politicians and asupervising agency had meddled with thecompany’s executive appointments, management plans and flight routes, leading
management to attach greater importanceto these people in high places than totheir own customers. While this may havemade JAL appear to have been a victim
of circumstances, private companies cannot use such an excuse. Those responsible for managing JAL should have beensteadfastly conducting customer-oriented
management, regardless of what they had
been told to do.
Second, although I would not say thisabout all JAL employees, many of themhad never given serious consideration to
the “customer first” concept. They were
only concerned with doing the job they
had been assigned and made no additional efforts, even when doing so would havebeen of service to customers. Employees

seemed somewhat arrogant in their belief
that JAL could not fail, even at this level ofwork quality.
Third, JAL was preoccupied with appearances and did not seek to provide an
accurate account of itself. When financial
results turned unfavorable, the company
frantically sought to dress up its revenues
for the period by repeatedly reporting nonoperating income, such as flight equipment purchase incentives (rebates). The
company’s original choice of a luxury hotelvenue for the press conference announcing its bankruptcy was just another symptom of its obsession with appearances.
I strongly believe that a company without integrity will inevitably collapse. No
matter how much money is injected withthe help of the government and financial
institutions, such a company cannot avoid
going under. JAL, however, successfully
relisted its shares after only two years andeight months after applying for protection
under the Corporate Rehabilitation Act.
While JAL’s resurgence was nothing shortof a miracle, I came away from reading thisreport with the impression that JAL had
clearly recovered integrity in its management.
First, the JAL management team has
clarified its responsibilities and embarked
on an earnest effort to manage the company with a customer focus. Former
Chairman Kazuo Inamori began rebuilding the company by transforming themindset of the management team in theface of in-house resistance. At the sametime, he poured his efforts into establishing the divisional profitability management
system to clarify responsibility. The results
are clearly visible in the report’s “Message
from the Management.” The first malaise
has completely disappeared.
Second, nearly all employees have now
embraced the customer first ethos as theirown personal creed and are generally
striving to put it into practice. The company is brimming with the spirit of seizing theinitiative rather than waiting for someone
else to take action.

The JAL Philosophy, which was createdby the employees, includes statements
such as “Each of us makes JAL what itis” and “Making the best baton pass,”
which have become a creed for many
employees. The personal testimonies that
constitute the section entitled “Each of Us
Making JAL What It Is,” convinced us thatthese words are genuine.
Third, JAL is trying to present its true
form to the public in the greatest extent
possible. While JAL had published CSR
reports prior to its bankruptcy, the content tended to be more in the style of a PR
magazine. This report has sought to breakwith that tendency and instead communicate a life-size picture of JAL as it is now.
This change is particularly evident in the“Employee Dialog” starting on page 25.
Having recovered its integrity, JAL is
now reborn. The efforts it has taken to
get here must have been truly extraordinary. I would like to express my sincere
respect to the executives and employees
who stayed on to complete this effort
while many of their peers were leaving thecompany. If I were to offer my advice tothe reborn JAL, it could be expressed in
the following words: “Praise often gives
way to arrogance.” In the event that arrogance does raise its head, I would likeeveryone to recall the hardships they haveendured over the course of the bankruptcy and subsequent process of revival. In
particular, I would encourage everyone torecall the honest motivation of Mr. Inamori,who, despite his advanced age, took on
the challenge of reviving JAL to make its
employees proud and who persevered
through tough times without recompense
to see the process through to completion.
As long as employees can return to thatstarting point and see themselves from alevelheaded standpoint, they will undoubtedly succeed in turning JAL into the strong
and caring company that people value.
Today JAL shares a common starting
point with everyone, which, I should emphasize, is now an invaluable asset thatany other enterprise can only envy.

Response to the Third-Party Opinion
Thank you very much for sharing your valuable thoughts on JAL Report 2013.
Having generated such deep concern among so many of our stakeholders by our bankruptcy, we were given a lastchance to revive the company. Taking that as our starting point, we are moving along the path toward a reborn JAL withthe support of so many people, including customers who have continued to take our flights, those who have provided
financial support, and Chairman Emeritus Inamori, who guided us sternly yet kindly with an altruistic spirit.
As you have pointed out, all of us at JAL share this starting point and believe we should never forget our sense ofgratitude to our stakeholders and the relentless efforts we have made over the past three years. We are resolved tofirmly maintain the integrity of our management by continuing to learn and practice the JAL Philosophy and by appropriately implementing the divisional profitability management system. We intend to continue building on our efforts tocontribute to society in various ways through our core business of air transport and become a company that is loved
and needed by everyone.

46

JAL REPORT 2013

Hiroyuki Hioka

Executive Officer,
General Affairs (CSR)
Japan Airlines Co., Ltd.

Highlights

Messages from Management

Review of Operations

Each of Us Making JAL What It Is

CSR

Financial Section

Financial Section
JAL REPORT 2013

JAL REPORT 201347

Management’s Discussion and Analysis
Economic Environment
During this consolidated fiscal year (April 1, 2012 to March
31, 2013), post-quake restoration demand continued to drive
the Japanese economy; however, the economic rebound
was blunted by a slowdown in the global economy. Since thechange of administration in Japan in December 2012, exports
have continued to slowly decline, while capital investments
and production resurged. Corporate earnings and employment have been showing signs of improvement.
Aviation demand in this period was generally robust despite
temporarily stagnating due to territorial issues. Other factors,
however, including the entry of Japanese low-cost carriers(LCCs) into the market, boosted supply. In addition to rising fuelprices, the Japanese yen weakened, triggering a rise in fuelcosts. As a result, the JAL Group finds itself in a tough operating
environment.

The State of the JAL Group
Under these circumstances, the JAL Group did its utmost to
provide customers with unparalleled service with a focus on
maintaining safe operations, and heightened the profit consciousness of employees under the practice of JAL Philosophy
and a divisional profitability management system (the Amoeba
Management System) that promoted autonomous management. These measures are intended to further improve management efficiency and ultimately achieve the managementtargets set out in the Mid-Term Management Plan announced
on February 15, 2012.
Overview of Consolidated Financial Results

Consolidated Business Performance
Operating revenues for FY2012 increased by 2.8% from theprevious year to 1,238.8 billion yen, mainly because of anincrease in passengers on both our domestic and international routes.
Operating expenses increased by 4.4% from the previous
year to 1,043.5 billion yen, due to product and service improvement costs, an increase in depreciation costs caused byshorter years of aircraft depreciation, a rise in fuel costs due
to increased supply, surging fuel prices and a weakened yen.
As a result, operating profit was 195.2 billion yen, with anoperating profit margin of 15.8%. The EBITDAR margin was
24.8% for FY2012.

FY2011
Operating Revenue
Air Transportation Segment
Operating Expense
Air Transportation Segment
Operating Profit
Air Transportation Segment
Operating Profit Margin (%)(JPY Bn)

FY2012% y/y12,04812,388+2.8%

10,811

11,061

+2.3%

9,998

10,435

+4.4%

8,932

9,349

+4.7%

2,049

1,952

−4.7%

1,879

1,711

−8.9%

17.0%

15.8%

−1.2ptOrdinary Income

1,976

1,858

−6.0%

Net Income

1,866

1,716

−8.0%

RPK*1 (Mn passenger km)

52,57857,049+8.5%

ASK*2 (Mn seat km)

78,56081,189+3.3%

EBITDA Margin (%)*3

23.8%

22.3%

−1.5ptEBITDAR Margin (%)*4

26.4%

24.8%

−1.6pt

11.4

11.5

+0.1

Unit Cost (JPY)*5*1 RPK: revenue-passenger-kilometer*2 ASK: available-seat-kilometer*3 EBITDA Margin = EBITDA ÷ operating revenue, EBITDA = operating profit +depreciation*4 EBITDAR Margin = EBITDAR ÷ operating revenue, EBITDAR = operating profit+ depreciation + aircraft leases*5 Unit Cost: air transportation segment operating cost (including fuel cost) ÷ask, on a six-company basis

48

JAL REPORT 2013

Highlights

Messages from Management

Review of Operations

Each of Us Making JAL What It Is

CSR

Financial Section

Analysis of FY2012 Results
ASK y/y: +3.3%
RPK y/y: +8.5%(JPY Bn)

Revenue + 34.0 billion yen

Operating Profit

Expenses + 43.7 billion yen

International
Cargo
Other
Revenue Fuel
Domestic
Operation
Passenger
Coupled
Cost
International
Revenue
Passenger
Coupled Other
Cost
−3.3
+11.9
+4.1
Cost
−13.4

−3.5 −0.5

204.9
+21.3

195.2

9.6

Owing to a year-on-year increase in revenue of 21.3 billion
yen from international flights and 4.1 billion yen from domestic flights due to a greater number of passengers, aggregate
revenue increased by 34.0 billion yen. As for expenses, fuelcosts increased due to unfavorable fuel prices and currency
markets, and increased supply. In addition, we saw rises in
product and service improvement costs, depreciation costs
due to shorter years of aircraft depreciation, and personnel
costs due to a rise in bonus levels.
As a result, operating profit declined by 9.6 billion yen fromthe previous year to 195.2 billion yen.

−26.1

billion yen(−4.7%)FY2011FY2012

International Passenger Operations (Operating Results)
Passenger Revenue (JPY Bn)

FY2011FY2012

% y/y

385.2

406.6

+5.5%

ASK (Mn seat km)

4,303.6

4,474.5+4.0%

RPK (Mn passenger km)

3,031.3

3,403.6+12.3%

Passengers (thousand people)

684.4

752.5

+9.9%

L/F (%)

7.04%

7.61%

+5.6pt

0.9

0.91

+1.5%

Unit Revenue (JPY)*1
Yield (JPY)*2

1.27

1.19

−6.0%

Revenue per Passenger (JPY)*3

5,629

5,404.1−4.0%*1 Unit Revenue = passenger revenue ÷ ASK*2 Yield = passenger revenue ÷ RPK*3 Revenue per Passenger = passenger revenue ÷ passengers

International Passenger Operations (Changes in Revenue)(JPY Bn)

21.3

billion yen(+5.5%)

406.6

International Passenger Operations – Operating
Results and Passenger Revenue
On international routes, ASK increased by 4.0% and RPK grewby 12.3% year-on-year, thereby increasing our load factors by
5.6 points year-on-year to 76.1%.
Meanwhile, leisure demand was robust in Japan and there
was a post-quake recovery in inbound passengers from overseas, which changed the passenger mix. As a result, our yield
declined by 6.0% and our revenue per passenger declined by
4.0% from the previous year, although passenger revenue increased by 5.5% to 406.6 billion yen.
Strong demand in long and middle haul routes such as
Europe, North America and Southeast Asia continued during
FY2012.
We inaugurated the Boston and San Diego routes andlaunched JAL SKY SUITE 777 for flights to London, which
contributed to raising the load factors and yield of our business class.

+28.1

385.2
−6.7

FY2011• Passenger mix• Other (Fuelsurcharges, FX
rate, etc.)• Recovery from previous year
• Strong demand in Europe,
North America and Southeast Asia
− Territorial issues

Revenue per
Passenger

Number of
Passengers

FY2012

JAL REPORT 201349

Domestic Passenger Operations – Operating
Results and Passenger Revenue
On domestic routes, ASK increased by 2.6% and RPK increased by 3.4% year-on-year, thereby increasing our load factor by 0.5 points to 63.1%.
We sought to stimulate demand by further discounting existing fares for customers purchasing tickets 55 days in advance of
departure, and the relative share of group customers increased.
As a result, our yield declined by 2.4% and our revenue perpassenger declined by 2.7% year-on-year. Passenger revenue,
however, increased by 0.9% to 485.2 billion yen.
In FY2012, we increased the number of flights with first classservice and introduced first class seats on Haneda-Okinawa
flights. We also increased the number of Class J seats to improve service. We resumed the Fukuoka-Hanamaki route andincreased the frequency of flights on the Haneda-Izumo route. In
addition, we introduced Sakitoku and Super Sakitoku discountfares for the first time during the New Year holidays, which wereused by a large number of passengers returning to and fromtheir hometowns and other holiday destinations.

Domestic Passenger Operations (Operating Results)
FY2011FY2012

481.1

485.2

+0.9%

ASK (Mn seat km)

3,552.3

3,644.3+2.6%

RPK (Mn passenger km)

2,226.4

2,301.2+3.4%

Passengers (thousand people)

2,896.5

3,002.0+3.6%

L/F (%)

6.27%

6.31%

+0.5ptUnit Revenue (JPY)

1.35

1.33

–1.7%

Yield (JPY)

2.16

2.11

–2.4%

Revenue per Passenger (JPY)

1,661

1,616.3–2.7%

Passenger Revenue (JPY Bn)

Domestic Passenger Operations (Changes in Revenue)

Fuel costs were pushed up by 5.8% due to unfavorable fuelprices and the yen exchange rate, as well as increased supply,
which also drove up navigational facility fees by 4.8%. Furthermore, regular maintenance work increased, leading to an overallrise in maintenance costs of 29.3%. The introduction of new
aircraft and shortened years of depreciation resulted in a 7.9%
increase in aircraft depreciation costs.
Personnel costs increased by 6.2% as we raised the bonus
levels from the previous year.
While other costs increased by 1.6% due mainly to productand service improvements, our administrative costs declined as
we managed to control an increase in expenses through cost
reductions in each division in accordance with the divisional
profitability management system.

4.1(JPY Bn)billion yen(+0.9%)

485.2

481.1
+16.5

−12.4

FY2011

Major Operating Expense Items% y/y• Passenger mix• Recovery from previous year
• Prompt supply adjustment

Revenue per
Passenger

Number of
Passengers

Breakdown of Operating Expenses

FY2012(JPY Bn)

FY2011FY2012

% y/y

Fuel

232.9

246.3

+5.8%

Landing Fees and Other Rent

71.6

75.1

+4.8%

Maintenance

23.5

30.4

+29.3%

Sales Commissions (Air Transport)

22.3

20.3

−8.9%

Aircraft Depreciation

55.6

60.0

+7.9%

Aircraft Leases

32.2

30.9

−4.1%

Personnel

213.6

226.7

+6.2%

Other

347.8

353.4

+1.6%

Total Operating Expenses

999.8

1,043.5+4.4%

Reference: ASK FY2012 y/y: +3.3%

Exchange Rates and Fuel PriceFY2011FY2012% y/ySingapore Kerosene (USD/bbl)

128.0

127.1

−0.7%

CIFJ (USD/bbl)

112.6

114.4

+1.6%

FX Rate: (JPY/USD)

78.8

82.4

+4.6%

Fuel/FX Sensitivity (Impact on Operating Profit without Hedge)
FY201250

JAL REPORT 2013

Crude Oil (Change in 1 USD/bbl)

20

FX (Change in 1 JPY/USD)

25(JPY Bn)

Highlights

Messages from Management

Financial Conditions(JPY Bn)

End of FY2011 End of FY2012

Difference

Total Assets

10,876

1,216.6+128.9Cash and Deposits

2,724

347.9

+75.5

Balance of Interest-bearing Debt*1

2,084

160.1

−48.3

Off-balance Sheet Lease Payments

2,294

207.1

−22.3

Shareholders’ Equity

3,885

565.0

+176.5

Shareholders’ Equity Ratio

35.7%

46.4%

+10.7pt

D/E Ratio (×)*2

0.5×

0.3×

−0.3×

Net D/E Ratio (×)*3

−0.2×

−0.3×

−0.2×

Review of Operations

Each of Us Making JAL What It Is

CSR

Financial Section

Financial Conditions
Repayment of long-term loans and lease obligations progressedcompared to the end of the previous year, and the balance ofinterest bearing debts decreased by 48.3 billion yen to 160.1
billion yen.
Our equity ratio improved by 10.7 points from the end of theprevious year to 46.4%.

Reference: D/E ratio including off-balance sheet lease payments: 0.7×, net D/E ratio: 0.0×

*1 Accounts payable – installment purchase included*2 D/E Ratio: (on-balance sheet interest-bearing debt) ÷ (shareholders’ equity)*3 Net D/E Ratio: (on-balance sheet interest-bearing debt – cash and cash
equivalents) ÷ (shareholders’ equity)

Cash Flows(JPY Bn)Net Income before Income Taxes andMinority Interests

FY2011FY2012Difference

199.9

190.4

−9.4

Depreciation

81.2

81.0

−0.2

Other

−24.4

−6.6

17.8

Cash Flow from Operating Activities

256.6

264.8

8.1

Capital Expenditure*1−98.6−121.8

−23.2

Other

36.1

−7.1

−43.2

Cash Flow from Investing Activities*2−62.4−129.0−66.5

Free Cash Flow*3

194.1

135.8

−58.3

Repayment of Interest-bearing Debt*4−300.2

−62.9

237.3

25.8

2.3

−23.5

Cash Flow from Financing Activities−274.4

−60.6

213.8

Total Cash Flow*5

−80.2

75.1

155.4

Other

EBITDA

286.1

276.2

−9.8

EBITDAR

318.4

307.1

−11.2

Cash Flows
Cash flows from operating activities were 264.8 billion yen.
Cash flow for investing activities was 129.0 billion yen due tothe purchase of new and leased aircraft, which resulted in 135.8
billion yen in free cash flow for FY2012.
Due to the decrease of long-term borrowings and leasing liabilities, net cash used in financing activities was 60.6 billion yen.
Consequently, cash flow in total was 75.1 billion yen.

*1 Expense due to purchases of fixed assets*2 Excludes deposits and withdrawals from deposit accounts*3 Cash Flow from Operating Activities + Cash Flow from Investing Activities*4 Repayment of Long-term Debt + Repayment of Lease Debt
*5 Cash Flow from Operating Activities + Cash Flow from Investing Activities +Cash Flow from Financing Activities

Number of Aircraft in Service (Consolidated)
End of FY2011
Owned Leased

Large

Total

Owned Leased

Total

Changes

Boeing 777-200

15

0

15

15

0

15

─

Boeing 777-200ER

11

0

11

11

0

11

─

Boeing 777-300

7

0

7

7

0

7

─

Boeing 777-300ER

13

0

13

13

0

13

─

Boeing 787-8

2

0

2

7

0

7

+5

17

0

17

16

0

16

−1

Boeing 767-300ER

14

18

32

14

18

32

─

MD90

13

0

13

2

0

2

−11

Boeing 737-400

16

2

18

14

2

16

−2

Boeing 737-800

9

32

41

18

31

49

+8

Embraer 170

10

0

10

12

0

12

+2

Medium Boeing 767-300

Small(Number of aircraft)
End of FY2012

Bombardier CRJ200

9

0

9

9

0

9

─

Regional Bombardier D8-400
Jet
SAAB340B

7

4

11

9

2

11

─

9

2

11

9

2

11

─

Bombardier D8-300

1

0

1

1

0

1

─

Bombardier D8-100

4

0

4

4

0

4

─

157

58

215

161

55

216

+1

Total

Number of Aircraft in Service
The change in the number of aircraft in service was as shownin the chart at left.

JAL REPORT 201351

Business Risks
Risks affecting investor decisions are discussed below. However, the following list does not cover all possible circumstances that may impact the
JAL Group, as unforeseen risks could arise. This section includes forwardlooking statements based on judgments as of June 20, 2013. The JAL
Group is exposed to these risks within its primary business operations ofscheduled and unscheduled air transport services.
a. Risks concerning changes in the international situation
The JAL Group transports international air passengers and air cargo
mainly to North America, Europe, Asia-Oceania, and China. Air transportdemand can significantly decline due to terrorist attacks, regional conflicts,
wars, and outbreaks and transmission of infectious diseases. The announcement of travel advisories recommending against travel to regions ofconflict or outbreaks and epidemics of infectious diseases, or widespreaddecisions to defer nonessential and non-urgent travel could have serious
negative impacts on demand for JAL Group flights that arrive in and departfrom those regions.
b. Risks concerning changes in the Japanese and global economy
The JAL Group’s international and domestic passenger operations significantly depend on the Japanese market. Therefore, economic trends in Japan and global economic conditions, including the European debt crisis,
or a decline in air travel demand from the customer base in Japan, natural
disasters, inclement weather, or other unexpected circumstances could
negatively impact the JAL Group’s business. Our international passenger
operations in particular are vulnerable to economic conditions.
c. Risks concerning our mid-term and annual plans
Although the JAL Group establishes mid-term and annual plans, various
internal and external factors pose a risk to the execution of these plans.
These plans are based on a number of assumptions and if they do notproceed as expected, our ability to achieve planned revenue targets andprofit goals could be negatively affected. The JAL Group’s mid-term andannual plans depend on effective accounting and tax systems, processing methods, and legal requirements at the time of compilation. If thesesystems, methods, and requirements are changed, financial forecasts announced in the plans could be affected.
d. Risks concerning our aircraft delivery plans
The JAL Group strives to build a fleet centered on new, fuel-efficient, small
to mid-sized aircraft for its air transport business, and has placed orders
with aircraft manufacturers such as Boeing. Any postponed delivery of
aircraft due to technical, financial, or other factors involving the aircraft
manufacturer could impact the JAL Group’s mid- to long-term business.
Several delays in delivery have already occurred due to technical problems with the Boeing 787, which we are steadily introducing into our fleet.
These factors may influence the Group’s single year financial results andmid- to long-term business plans.

g. Risks concerning competition
The JAL Group faces substantial and intensifying competition with respect
to routes, services, and fares in both domestic and international markets.
On domestic routes, we face tough competition with another major
Japanese airline, new low-cost carriers (LCCs), and the Shinkansen; competition with LCCs is particularly expected to intensify.
On international routes, competition with major Japanese and international airlines is growing increasingly fierce, which will be further intensified by the increase of departure and arrival slots at Haneda and Narita
airports.
We have established part-ownership of Jetstar Japan, an LCC established with Jetstar of Australia and another party as an affiliated company
under the equity method. To date, the impact of LCCs has been contained within our projections. If competition with Japanese and international LCCs intensifies, however, we will be compelled to reduce our fares.
In addition, if significant numbers of customers shift from JAL Group flights
to LCCs including Jetstar Japan, the Group’s LCC strategies as well as
our business operations could be negatively affected.
h. Risks concerning cost structure
The JAL Group maintains a high unit cost (cost per ASK) compared to
Asian airlines and LCCs, and our freedom to reduce costs in the face ofeconomic conditions is severely constrained by operating expenses thatare significantly determined by the costs of fuel, personnel, aircraft, andtaxes. A significant decline in demand or decrease in ticket prices could
negatively affect our business.
i. Risks concerning changes in jet fuel prices
The JAL Group’s business performance is significantly affected by fuelprice fluctuations. The Group’s fuel costs in FY2012 were approximately
250 billion yen, accounting for approximately 24% of consolidated operating expenses. While rising fuel prices since the summer of 2004 havenegatively impacted our business, severe competition in the airline industry has made it difficult to fully compensate for the higher fuel costs byincreasing fares or asking customers to pay a fuel surcharge. We conduct
a variety of hedging strategies using commodity derivatives of crude oil orjet fuel to minimize the risks posed by fluctuating fuel prices. Depending
on our hedging positions and associated factors, a sudden plummet in
the price of crude oil or jet fuel in a short period of time may not be immediately reflected in our business performance and may not contributeto improving business results.

e. Risks concerning departure and arrival slots
The JAL Group has positioned the increase of airport capacity at Haneda
and Narita airports as a major business opportunity. If the number of departure and arrival slots allocated to the JAL Group at these airports significantly differs from our expectations, our ability to achieve our management plan could be negatively affected.

j. Risks concerning fluctuations in foreign exchange rates
Since the JAL Group conducts extensive business in domestic and international markets, a portion of our revenue and expense transactions
is handled in foreign currencies. Jet fuel prices, which account for thelargest share of costs, are particularly susceptible to movements in the
U.S. dollar, and therefore volatility in U.S. dollar currency wields a stronger
impact on expenses than revenue. To reduce risks to profitability associated with currency volatility, foreign currency revenues are essentially applied to expenditures in the same currency. We also enter into forward
exchange contracts and currency options. If the exchange rate fluctuates
over a short period of time, yen appreciation against the dollar may not
be immediately reflected in the performance and may not contribute toimproving business results.

f. Risks concerning alliances
Developments have been underway in the airline business to form a global
alliance of several airlines or to create joint businesses with partner airlines
across national borders with the approval of antitrust immunity (ATI). The
JAL Group is a member of the global oneworld alliance, which includes
American Airlines (AA) and British Airways (BA). We have also entered intoa joint business agreement with AA for transpacific routes and with BA
for European routes. Our reliance on strategic partners and the oneworld
alliance may expose us to a variety of risks that could affect our alliancestrategies, such as changes in business conditions affecting our partners,
oneworld membership, and partnerships with the JAL Group.

k. Risks concerning disasters
Most passengers for JAL Group’s airlines use aircraft departing and arriving at Haneda and Narita airports and therefore these two airports are central to the Group’s air transport business. The Group’s key information system center for aircraft operations and reservations is located in the Tokyo
area, which is also home to the Operation Control Center that manages
the operations and schedules of aircraft worldwide. Our business operations could be significantly affected by interruptions to the operation of thisvital facility and closure of the Haneda and Narita airports due to a large
earthquake in the Tokyo area, fire, terrorist attack, or other disaster, or any
extended suspension of our information systems or operations functions.

52

JAL REPORT 2013

Highlights

Messages from Managementl. Risks concerning trust in airline safety
The JAL Group takes action every day to ensure the safe operations of ouraircraft. If we were to lose the trust of our customers due to an aircraft accident, a long time may be required to recover customer confidence in thesafety of our operations and regain public trust. If a safety-related incident
were to occur on a Group or code-share flight, this could cause a decline
in customer confidence and public trust in the safety or our operations
and negatively impact our business. An aircraft accident could require repairs to the damaged aircraft or the purchase of a new aircraft, or could
lead to loss in revenue as a result of a suspension of operations. In addition, injured passengers could file claims for compensation. Although theGroup complies with industry standards in the amount of liability insurance
it maintains to cover such costs and compensation claims, if an accident
were to cause damage in excess of this coverage or if a major loss wereto occur, our business could be negatively impacted.
m. Risks concerning legal regulations
The JAL Group’s business complies with international regulations and operates in conformance with national and regional laws, ordinances, andregulations. Significant revisions to these laws, ordinances, and regulations could increase the regulatory burden on the business and require
greater expenditures.
(a) Airworthiness directives
If technical problems were to seriously affect the safety of aircraft operations, the Minister of Land, Infrastructure, Transport and Tourism
may issue an airworthiness directive or require corrective action inaccordance with laws and ordinances, and operations of the aircraft
might not be approved until safety has been confirmed. Even if anairworthiness directive is not issued under laws and ordinances, thereis the possibility that we would have to voluntarily suspend operationof the aircraft under internal regulations or other applicable rules. Anyof these circumstances could disrupt operations of our aircraft, including the Boeing 787, which has been a priority addition to our fleet, andnegatively affect our business.
(b) L aws, ordinances, and regulations concerning the air transportbusiness
The JAL Group as an air transport operator conducts business in accordance with prevailing laws, ordinances, and regulations governing
the airline business. On international routes, we are required to conform to conventions such as bilateral aviation agreements and otherinternational rules. Furthermore, fares and fees in the air transportbusiness are subject to regulation under antitrust laws and other similar overseas laws and ordinances.
(c) Environmental regulations
Increased awareness of corporate social responsibility for the global
environment, including the prevention of global warming, has heightened environmental regulations controlling gas emissions, noise, andtoxic substances. An increase in global gas emission trading on theinternational aviation scene or a tightening of environmental regulations, such as fines for global warming gases, could negatively affectour business.
(d) Tax and fees
Taxes and fees in the airline business include such expenses as landing fees and navigation support facility fees. Landing fees at someJapanese airports are subject to governmental mitigation, but depending on the financial conditions and policies of specific transport administrations, the reinstatement of landing fees that had been reduced ora substantial increase in taxes could negatively affect our business.
n. Risks concerning litigation
The JAL Group is currently subject to various legal proceedings concerning its business operations, which could affect our business. Suits may be
filed in one or more of the following proceedings, which, depending on thespecific circumstances, could negatively affect our business if additional
expenditures or a reserve fund is required.
(a) Incidents concerning employment of former employees
In Japan, former employees filed a suit demanding confirmation of sta-

Review of Operations

Each of Us Making JAL What It Is

CSR

Financial Section

tus under their labor contracts. In March 2012, the plaintiff’s claims
were dismissed in the Tokyo District Court, but in April 2012 they appealed to the Tokyo High Court. Two other labor suits are still in litigation. In addition, several suits have been filed in Brazil and Taiwan
demanding confirmation of wages and allowances and status under
the labor contract.
(b) Incidents concerning cartels
The JAL Group filed a suit with European and South Korean courts
in January 2011 in regard to allegations of engaging in an air cargo
price cartel by antitrust authorities and objecting to orders to pay afine. A civil suit had been filed against several airlines including JAL byshippers claiming that they had suffered damages from an alleged air
cargo cartel. With regard to these incidents, a reserve fund to coverreasonably calculated future losses has been established.
o. Risks concerning our dependence on third parties
The JAL Group’s business to a certain extent depends on services by third
parties such as maintenance staff, airport staff, aviation security agents,
fuel attendants, baggage staff, and private security companies. In addition, we place orders with Boeing for the majority of new aircraft scheduled to be introduced into our fleet. Therefore, if Boeing cannot fulfill its
contract with JAL for financial or other reasons, we will be compelled tosignificantly change our fleet plan, which may affect our business in the
mid to long term.
p. Risks concerning IT (information systems)
The JAL Group depends on information systems for its business operations. Our information systems are vulnerable to hardware and software
problems as well as computer viruses that could result in the loss of important data or entail additional costs for repairs and thereby negatively affectour business. In addition, large-scale infrastructure problems, such as a
failure in the electric power system that supports our information systems,
could seriously disrupt our business.
q. Risks concerning financing
The JAL Group plans to renew part of its fleet by purchasing aircraft, refurbish cabin interiors and upgrade core systems, and may need to procure
funds from financial institutions or markets to fulfill capital requirements.
Our ability to procure funds may change depending on the condition offinancial markets and our credit rating. A decline in financial markets or ourcredit rating could make it difficult to procure funds, and we could suffer adecrease in cash on hand or increased financial costs.
r. Risks concerning handling of customer data
If the JAL Group experiences information leaks or unlawful access tocustomer data in its possession, the Group might be obliged to provide
compensation or be subjected to administrative action. If this were to happen, public trust in our business, systems, and brand could be damaged,
and we could lose the trust of the customers and markets, which could
negatively affect our operations, financial conditions, and business performance.
s. Risks concerning recruitment
We need to secure employees with specific qualifications, including national certifications and the skills legally required to operate aircraft, inorder to conduct our business operations. Considerable time, however,is required for staff to acquire the necessary certifications and skills. Any
delay in securing the necessary workforce beyond the time it is required
could affect our business and operations.
t. Risk concerning labor disputes
Many Group employees belong to labor unions. An extended labor dispute involving collective action by our employees could negatively affectour aircraft operations.

JAL REPORT 201353

Consolidated Balance Sheets
Japan Airlines Co., Ltd. and Consolidated Subsidiaries

Millions of yen

Thousands of U.S.
dollars (Note 4)

2013

2012

2013

¥ 347,986¥ 272,475$ 3,700,010

7

30

74

Notes and accounts receivable—trade (Note 7)

121,058

117,005

1,287,166

Flight equipment spare parts and supplies

22,27722,996

236,863

As of March 31

ASSETS
Current assets:
Cash and time deposits (Notes 5, 7 and 10)
Short-term investments in securities (Notes 5, 7, 8 and 10)

Deferred income taxes (Note 12)

1,055

1,336

11,217

Other

59,72755,174

635,055

(764)

(661)

(8,123)

Total current assets

551,348468,355

5,862,286

Investments in securities (Notes 6, 7, 8 and 10)55,82639,722593,577

Flight equipment (Note 10)385,267

369,502

4,096,406

Ground property and equipment (Note 10)

48,74551,223518,288

Advances on flight equipment and other purchases

70,425

58,105

748,803

Total tangible fixed assets

504,438

478,8315,363,508

Software40,99140,497435,842

Long-term loans receivable (Note 10)

13,01814,364

138,415

Deferred income taxes (Note 12)

4,354

3,972

46,294

Other (Note 10)

47,01142,286499,851

Allowance for doubtful accounts

Tangible fixed assets, net:

Allowance for doubtful accounts
Total fixed assets
Total assets

54

JAL REPORT 2013

(376)

(404)

(3,997)665,263

619,271

7,073,503¥1,216,612¥1,087,627$12,935,800

Highlights

Messages from Management

Review of Operations

Each of Us Making JAL What It Is

CSR

Financial Section

Millions of yen

Thousands of U.S.
dollars (Note 4)

2013

2012

2013

¥ 135,830¥ 125,185$1,444,231

828

561

8,803

Current portion of long-term loans payable (Notes 7 and 10)

9,767

10,197

103,849

Lease payable (Notes 7 and 10)

35,80135,997

380,659

Reserve for reconstruction on business

1,184

5,033

12,589Deferred income taxes (Note 12)

2,751

262

29,250126,990

121,237

1,350,239

313,154

298,475

3,329,654

Long-term loans payable (Notes 7 and 10)

34,51746,512367,006

Lease payable (Notes 7 and 10)

77,592

113,310825,007

Deferred income taxes (Note 12)

7,669

7,122

81,541

154,483

154,800

1,642,562

As of March 31

LIABILITIESCurrent liabilities:
Accounts payable—trade (Note 7)
Short-term borrowings (Notes 7 and 10)

Other
Total current liabilities
Non-current liabilities:

Accrued pension and severance costs (Note 11)
Reserve for reconstruction on businessReserve for loss on antitrust litigation

—

846

—

6,466

7,273

68,750Asset retirement obligations (Note 21)

4,271

3,166

45,412

Other

35,26842,258374,992

Total non-current liabilities

320,269

375,290

3,405,305

Total liabilities

633,423

673,766

6,734,960

Issued: 181,352,000 shares in 2013 and 2012

181,352

181,352

1,928,250

Capital surplus

183,043

189,901

1,946,230

Retained earnings

198,196

19,665

2,107,347

(122)

—

(1,297)562,469

390,919

5,980,531

Contingent liabilities (Note 19)
NET ASSETS (Note 13)
Stockholders’ equity:
Common stock:
Authorized: 350,000,000 shares in 2013 and 225,000,000 shares in 2012

Treasury stock, at cost: 31,950 shares in 2013
Total stockholders’ equity
Accumulated other comprehensive income
Net unrealized gains (losses) on other securities (Note 8)

2,353

(661)

25,018Deferred gains on hedges (Note 9)

6,603

5,343

70,207

Foreign currency translation adjustments(6,378)(7,077)(67,814)

Total accumulated other comprehensive income

2,578(2,395)27,410Minority interests

18,141

25,337

192,886

Total net assets
Total liabilities and net assets

583,189

413,861

6,200,839¥1,216,612¥1,087,627$12,935,800

The accompanying notes are an integral part of these consolidated financial statements.

JAL REPORT 201355

Consolidated Statements of Income andComprehensive Income
Japan Airlines Co., Ltd. and Consolidated Subsidiaries

Millions of yen

Thousands of U.S.
dollars (Note 4)

2013

2012

2013

Domestic¥ 485,214¥ 481,111$ 5,159,106

Total operating revenues

1,238,839

1,204,813

13,172,131

226,779
246,345
75,16930,43930,94181,004352,917
1,043,596
195,242

213,608
232,901
71,69623,54832,271
81,222
344,641
999,890
204,9222,619,298
799,245
323,646
328,984
861,286
3,752,440
11,096,182
2,075,938

813
563(3,182)
3,221(3,434)(2,188)(1,826)
49
—
8,674
(712)
—
—
(1,764)713
365(10,900)
3,257(2,648)1,073(2,066)
3,109
1,277
1,576
(974)
1,134
(1,282)(2,433)

8,644
5,986
(33,833)
34,247(36,512)(23,264)(19,415)520—
92,227(7,570)——(18,755)

Other
Total non-operating income (expense)
Income before income taxes and minority interests(1,472)(3,504)(4,764)
190,477

(547)
3,328
(5,017)
199,904(15,651)(37,256)(50,653)
2,025,273

Income taxes—current (Note 12)
Income taxes—deferred (Note 12)
Total income taxes
Income before minority interests
Minority interests

12,882
1,047
13,929176,547
4,875

12,046(3,716)
8,329
191,574
4,957

136,969
11,132
148,102
1,877,161
51,834

3,019
1,358
931

87
2,986
577

32,09914,439
9,898

Years ended March 31

Operating revenues:
Passenger:

International
Incidental and other revenues

Operating expenses:

Wages, salaries and benefits
Aircraft fuelLanding fees and other rent
Aircraft maintenanceAircraft rent
Depreciation and amortization
Other
Total operating expenses
Operating income
Non-operating income (expenses):
Interest income
Dividend income
Interest expense
Gain on sales of flight equipment
Loss on sales and disposal of flight equipment
Equity in earnings (losses) of affiliates
Exchange loss, net
Gain on sales of investments in securities
Gain on forgiveness of debts
Gain from compensation
Loss on sales and disposal of fixed assets (Note 15)
Gain on partial termination of defined benefit plan, net (Note 11)
Loss on switching to closed pension funds
Loss on impairment of fixed assets (Note 16)
Effect of change to the standard method of accounting for the projected benefit
obligation (Note 11)

Net income
Minority interests
Income before minority interests
Other comprehensive income (Note 14)
Net unrealized gains on other securities, net of taxes
Deferred gains on hedges, net of taxes
Foreign currency translation adjustments
Share of other comprehensive income of associates accounted for using the equity method

406,657
346,967

171,672
4,875
176,547

385,289
338,412

186,616
4,957
191,574

4,323,838
3,689,175

2,411,259

1,825,326
51,834
1,877,161

Total other comprehensive income
Comprehensive income

1
5,310¥ 181,857

25
3,676¥ 195,251

10
56,459$ 1,933,620

Comprehensive income attribute to
Owners of the parent
Minority interests¥ 176,646
5,211¥ 190,019
5,231$ 1,878,213
55,406

The accompanying notes are an integral part of these consolidated financial statements.

56

JAL REPORT 2013

Highlights

Messages from Management

Review of Operations

Each of Us Making JAL What It Is

CSR

Financial Section

Consolidated Statements of Changes in Net Assets
Japan Airlines Co., Ltd. and Consolidated Subsidiaries

As of March 31

Millions of yen

Thousands of U.S.
dollars (Note 4)

2013

2012

2013

¥181,352¥ 181,352$1,928,250

Stockholders’ equity
Common stock:
Balance at beginning of year
Changes during the fiscal year:
Total changes
Balance at end of year

—

—

—

181,352

181,352

1,928,250

189,901

189,9012,019,149(6,858)—(72,918)

Capital surplus:
Balance at beginning of year
Changes during the fiscal year:
Reserve for losses
Total changes
Balance at end of year

(6,858)—(72,918)

183,043

189,901

1,946,230

19,665(166,910)

209,090(Accumulated deficit) retained earnings:
Balance at beginning of year
Changes during the fiscal year:
Reserve for losses
Net income for the fiscal year
Increase (decrease) by merger
Total changes
Balance at end of year

6,858

—

72,918

171,672

186,616

1,825,326

—

(40)

—

178,530

186,576

1,898,245

198,196

19,665

2,107,347———

Treasury stock, at cost:
Balance at beginning of year
Changes during the fiscal year:
Purchases of treasury stock

(122)

—

(1,297)

Total changes

(122)

—

(1,297)(122)—(1,297)

390,919

204,343

4,156,501

Net income for the fiscal year

171,672

186,616

1,825,326

Purchases of treasury stock

(122)

—

(1,297)

—

(40)

—

Balance at end of year
Total stockholders’ equity:
Balance at beginning of year
Changes during the fiscal year:

Increase (decrease) by merger
Total changes
Balance at end of year

171,550

186,576

1,824,029¥562,469¥ 390,919$5,980,531

JAL REPORT 201357

Years ended March 31

Millions of yen

Thousands of U.S.
dollars (Note 4)

2012

2013

2013

Accumulated other comprehensive income
Net unrealized gains (losses) on other securities, net of taxes (Note 8):
Balance at beginning of year

¥

(661)

¥

(767)

$

(7,028)Changes during the fiscal year:
Changes other than to stockholders’ equity, net

3,014

105

32,046

Total changes

3,014

105

32,406

2,353

(661)

25,018

5,343

2,388

56,810Changes other than to stockholders’ equity, net

1,260

2,955

13,397

Total changes

1,260

2,955

13,397

6,603

5,343

70,207(7,077)(7,419)(75,247)

699

341

7,432

Balance at end of year
Deferred gains on hedges, net of taxes (Note 9):
Balance at beginning of year
Changes during the fiscal year:

Balance at end of year
Foreign currency translation adjustments:
Balance at beginning of year
Changes during the fiscal year:
Changes other than to stockholders’ equity, net

699

341

7,432

(6,378)(7,077)(67,814)(2,395)(5,798)(25,465)

Changes other than to stockholders’ equity, net

4,974

3,402

52,886

Total changes

4,974

3,402

52,886

2,578(2,395)27,41025,337

19,689269,399(7,196)

5,647(76,512)

Total changes
Balance at end of year
Total accumulated other comprehensive income
Balance at beginning of year
Changes during the fiscal year:

Balance at end of year
Minority interests
Balance at beginning of year
Changes during the fiscal year:
Changes other than to stockholders’ equity, net
Total changes
Balance at end of year

(7,196)

5,647(76,512)

18,141

25,337

192,886

413,861

218,234

4,400,435

171,672

186,616

1,825,326

—

(40)

—

(122)

—

(1,297)

Total net assets
Balance at beginning of year
Changes during the fiscal year:
Net income for the fiscal year
Increase (decrease) by merger
Purchases of treasury stock
Changes other than to stockholders’ equity, net
Total changes
Balance at end of year
The accompanying notes are an integral part of these consolidated financial statements.

58

JAL REPORT 2013

(2,222)

9,050(23,625)

169,328

195,626

1,800,404¥583,189¥413,861$6,200,839

Highlights

Messages from Management

Review of Operations

Each of Us Making JAL What It Is

CSR

Financial Section

Consolidated Statements of Cash Flows
Japan Airlines Co., Ltd. and Consolidated Subsidiaries

Years ended March 31

Millions of yen

Thousands of U.S.
dollars (Note 4)

2013

2012

2013

¥ 190,477¥ 199,904$ 2,025,273

81,004

81,222

861,286

3,089

2,520

32,844

Operating activities
Income before income taxes and minority interests

Adjustments to reconcile income before income taxes and minority interests to net
cash provided by operating activities:
Depreciation and amortization

Gain and loss on sales and disposal of fixed assets and loss on impairment of
fixed assets, net

(322)

(675)

(3,423)

Interest and dividend income(1,376)(1,079)(14,630)

Interest expense

3,182

10,90033,833

Exchange (gain) loss, net

2,299(1,323)24,444Equity in (earnings) losses of affiliates

2,188(1,073)23,264

Increase in notes and accounts receivable—trade(3,777)(5,496)(40,159)

Net reversal of accrued pension and severance costs

Decrease in flight equipment spare parts and supplies
Increase (decrease) in accounts payable—trade

718

3,172

7,634

10,405(6,093)

110,632

Other(3,366)(5,622)(35,789)

Subtotal

284,523

276,356

3,025,231

Interest and dividends received

1,631

1,730

17,341

Interest paid

(3,349)(11,234)(35,608)—(2,843)—

Income taxes paid

(17,950)(7,336)(190,855)

Net cash provided by operating activities

264,853

256,673

2,816,087

Purchases of time deposits(486,697)(276,021)(5,174,875)

Proceeds from maturity of time deposits

351,303191,280

3,735,279

Purchases of fixed assets(121,894)(98,628)(1,296,055)

Proceeds from sales of fixed assets

10,20028,735

108,452

Purchases of investments in securities(20,294)(3,093)(215,778)

430

5,717

4,572

—

1,360

—

Retirement payment

Investing activities

Proceeds from sales and maturity of investments in securities

Proceeds from purchase of subsidiaries resulting in change in scope of
consolidation (Note 19)
Proceeds from sales of consolidated subsidiaries resulting in changes in scopeof consolidation (Note 19)

—

—

254

Loans receivable made(295)

(1,933)(3,136)

Collection of loans receivable

1,791

1,916

(19,043)

Other

1,019

3,188

(10,834)(264,436)(147,221)(2,811,653)

Net cash used in investing activities
Financing activities

266

62

2,828

Proceeds from long-term loans

11,83625,203125,847

Repayment of long-term loans(26,599)(259,056)(282,817)

—

1,506

—

Dividends paid to minority interests(8,177)(194)(86,943)

Payments for lease payable(36,342)(41,210)(386,411)

Other(1,625)(770)(17,278)

Net cash used in financing activities(60,643)(274,460)(644,795)

Increase in short-term borrowings, net

Proceeds from minority interests

643

449

6,836

Net decrease in cash and cash equivalents(59,582)(164,559)(633,514)

Cash and cash equivalents at beginning of year

158,995

323,797

1,690,536—

Effect of exchange rate changes on cash and cash equivalents

Decrease in cash and cash equivalents resulting from exclusion of subsidiaries
from consolidation

—

(274)

Increase in cash and cash equivalents by merger—

31

Cash and cash equivalents at end of year (Note 5)¥ 99,413¥ 158,995—$ 1,057,022

The accompanying notes are an integral part of these consolidated financial statements.

JAL REPORT 201359

Notes to Consolidated Financial Statements
Japan Airlines Co., Ltd. and Consolidated Subsidiaries

1. BASIS OF PRESENTING FINANCIAL STATEMENTS
Japan Airlines Co., Ltd. (the “Company”) and its domestic consolidated subsidiaries maintain their accounting records andprepare their financial statements in accordance with accounting
principles generally accepted in Japan, which are different in certain respects as to the application and disclosure requirements ofInternational Financial Reporting Standards. The accompanying
consolidated financial statements have been compiled from theconsolidated financial statements filed with the Financial Services
Agency as required by the Financial Instruments and Exchange
Act of Japan and include certain additional financial information
for the convenience of readers outside Japan.
As permitted by the Financial Instruments and Exchange Act ofJapan, amounts of less than one million yen have been omitted. As
a result, the totals shown in the accompanying consolidated financial statements (both in yen and U.S. dollars) do not necessarily
agree with the sum of the individual amounts.
Certain amounts previously reported have been reclassified toconform to the current year’s classification.
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIESa. Principles of Consolidation and Accounting for Investments
in Unconsolidated Subsidiaries and Affiliates
The accompanying consolidated financial statements include theaccounts of the Company and all significant subsidiaries controlled
directly or indirectly by the Company. Companies over which theCompany exercises significant influence in terms of their operating
and financial policies have been included in the accompanying
consolidated financial statements on an equity basis.
The balance sheet date of 8 of the consolidated subsidiaries
is December 31, and for 1 consolidated subsidiary, it is the endof February. Any significant differences in intercompany accounts
and transactions arising from intervening intercompany transactions during the period between the balance sheet date of eachsubsidiary and the consolidated balance sheet date have beenadjusted, 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 the equity method are recorded as goodwill amortized by
the straight-line method over a period of 5 years.
All significant intercompany accounts and transactions andunrealized gain or loss on intercompany accounts and transactions are eliminated in consolidation.
b. Securities
Securities, except for investments in unconsolidated subsidiaries
and affiliates, are classified as trading securities, held-to-maturity
securities or other securities. Trading securities are carried at fairvalue. Held-to-maturity securities are carried at amortized cost.
Marketable securities classified as other securities are carried atfair value with any 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. Cost of securities
sold is determined principally by the moving-average method.
c. Inventories
Inventories are valued at the lower of cost and net realizable value
with cost determined by the moving-average method.

60

JAL REPORT 2013

d. Tangible Fixed Assets (excluding leased assets)
Tangible fixed assets, excluding leased assets, are stated at cost,
net of accumulated depreciation and accumulated impairment
losses, if any, except as indicated in the following paragraph.
Accumulated depreciation of tangible fixed assets at March 31,
2013 and 2012 amounted to ¥241,914 million ($2,572,185 thousand) and ¥182,650 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 as follows:
Flight equipment: from 12 to 27 years
Other: from 2 to 65 years
Effective from April 1, 2012, the Company has changed useful
lives of certain aircraft including spare parts to reviewed useful
lives based on the estimated future use. As a result of this change,
for the year ended March 31, 2013, operating income decreasedby ¥3,452 million ($36,703 thousand) and income before income
taxes and minority interests decreased by ¥3,192 million ($33,939
thousand) compared to the amounts that would have been reported if the previous methods had been applied consistently. The
effects of this change in specific segments are described in the
Segment Information section.
e. Software (excluding leased assets)
Computer software intended for internal use is amortized by thestraight-line method based on its estimated useful life which ranges principally from 5 to 7 years.
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 are depreciated by
the same method applied to assets arising from purchase transactions.
Leased assets under finance lease transactions that do nottransfer the ownership to the lessee are depreciated to a residual
value of zero by the straight-line method using the lease term as
the useful life.
As for certain consolidated subsidiaries, finance lease transactions that do not transfer the ownership of the leased assets to thelessee contracted prior to April 1, 2008, continue to be accounted
for by a method corresponding to that used for ordinary operatinglease transactions.
g. Allowance for Doubtful Accounts
General provision for doubtful accounts is provided by applying areserve percentage to receivables based on experience from pasttransactions. When considered necessary, specific reserves are
made based on the assessment of individual accounts.
h. Accrued Pension and Severance Costs
Accrued pension and severance costs are provided for defined
benefit pension and retirement benefits based on the projected
benefit obligation and the plan assets at the end of the fiscal year.
The unrecognized obligation at transition is being amortized by

Highlights

Messages from Management

the straight-line method principally over a period of 15 years.
Actuarial differences are amortized by the straight-line method
over a period ranging from 5 to 15 years, which is less than the
average remaining years of service of the active participants in theplans. Amortization is computed from the fiscal year subsequent to
the year in which the difference was recorded.
Past service cost is principally charged to income as incurred.
However, at certain subsidiaries, past service cost is being amortized by the straight-line method over a period which is less than
the average remaining years of service of the active participantsin the plans.
i. Reserve for Loss on Antitrust Litigation
Estimated future loss is accrued in order to provide for penalty andcompensation potentially arising from price cartel in cargo andpassenger flight.
j. Reserve for Reconstruction on BusinessReserve for reconstruction on business is made for the amount of
the estimated expenses to be incurred in connection with business reconstruction including removal of existing facilities under
the reorganization plan.
k. Foreign Currency Translation
Income and expenses in foreign currencies are translated at therates prevailing at the time of the transaction. Except as noted in l.
Derivatives and Hedge Accounting. Foreign currency receivables
and payables are translated into yen at the applicable year-end
foreign exchange rates and any gain or loss on translation is
included in current earnings.
Foreign currency translation adjustments arising from the translation of assets, liabilities, revenues and expenses of foreign
consolidated subsidiaries and affiliates accounted for by the equity
method into yen at the applicable exchange rates at the year end arepresented as foreign currency translation adjustments and minority
interests in the accompanying consolidated balance sheets.
l. Derivatives and Hedge Accounting
Derivatives positions are stated at fair value.
Gain or loss on derivatives designated as hedging instruments
is deferred until the gain or loss on the underlying hedged items
is recognized with any unrealized gain or loss reported as a separate component of net assets, net of taxes. Foreign currency
receivables and payables are translated at the applicable forward
foreign exchange rates if certain conditions are met.
m. Revenue Recognition
Passenger and cargo revenues are recognized when the transportation services are rendered.
n. 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. A valuation allowance is recorded toreduce deferred tax assets to their net realizable value if it is more
likely than not that some portion or all of the deferred tax asset will

Review of Operations

Each of Us Making JAL What It Is

CSR

Financial Section

not be realized.
The Company and certain domestic consolidated subsidiaries
adopted the Japanese consolidated corporate tax return system.
o. 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 POLICYThe Company and its consolidated domestic subsidiaries adopted“Accounting Standard for Accounting Changes and Error Corrections” (Accounting Standards Board of Japan (“ASBJ”) Statement
No. 24 issued on December 4, 2009) and “Guidance on Accounting Standard for Accounting Changes and Error Corrections”(ASBJ Guidance No. 24, issued on December 4, 2009) for accounting changes and corrections of prior period errors which are madefrom the fiscal year beginning on April 1, 2011.
There was no effect from this accounting change on the consolidated financial statements for the fiscal year ended March 31,
2012.
Effective from April 1, 2012, the Company’s certain domestic
subsidiaries and affiliates have changed their method of depreciation based on an amendment to the Corporation Tax Act of Japanfor tangible fixed assets acquired on or after April 1, 2012. The
effect of this change on the consolidated operating income andincome before income taxes and minority interests for the year
ended March 31, 2013 was immaterial.
Accounting Standards Issued but not yet Effective• Accounting Standard for Retirement Benefits (ASBJ Statement
No. 26, May 17, 2012)• Guidance on Accounting Standard for Retirement Benefits (ASBJ
Guidance No. 25, May 17, 2012)a. Summary
Under the amended rule, actuarial gains and losses and past
service costs that are yet to be recognized in profit or loss would
be recognized within the net asset section, after adjusting for tax
effects, and the deficit or surplus would be recognized as a liability or asset without any adjustments. For determining method of
attributing expected benefit to periods, the Standard now allows
to choose benefit formula basis, as well as straight-line basis.
Method for determination of discount rate has also been amended.
b. Effective dates
Effective for the end of annual periods ending on or after March 31,
2014. Amendments relating to determination of retirement benefit
obligations and current service costs are effective from the beginning of annual periods ending on or after March 31, 2015.
c. Effect of application of the standard
The Company and its consolidated domestic subsidiaries are
currently in the process of determining the effects of these newstandards on the consolidated financial statements.
4. U.S. DOLLAR AMOUNTS
Amounts in U.S. dollars are included solely for the convenienceof the reader. A rate of JPY 94.05 = USD 1.00, the approximate
exchange rate prevailing on March 31, 2013, has been used intranslation. The convenience translations should not be constructed as representations that the Japanese yen amounts have been,

JAL REPORT 201361

could have been, or could in the future be, converted into U.S.
dollars at this or any other rate of exchange.
5. CASH AND CASH EQUIVALENTS
The components of cash and cash equivalents in the accompanying consolidated statements of cash flows at March 31, 2013 and2012 were as follows:
Millions of yen
As of March 31

Thousands of
U.S. dollars

2013

2012

2013

Cash and time deposits¥ 347,986¥ 272,475$ 3,700,010

Time deposits with a maturity of more than threemonths(248,573)(113,509)(2,642,987)

—

30

—

¥ 99,413¥ 158,995$ 1,057,022

Short-term investments in securities with amaturity of three months or less
Cash and cash equivalents

6. INVESTMENTS IN SECURITIES OF NON-CONSOLIDATEDSUBSIDIARIES AND AFFILIATES
Investments in securities of non-consolidated subsidiaries andaffiliates which were included in “Investments in securities” in the
consolidated balance sheets at March 31, 2013 and 2012 amounted to ¥30,329 million ($322,477 thousand) and ¥29,223 million,
respectively.
7. FAIR VALUES OF FINANCIAL INSTRUMENTS
The JAL Group manages its financial instruments to raise funds,
principally for the purpose of flight equipment and facilities inaccordance with management plans for air transportation, utilizing loans from financial institutions, finance lease transactions, andderivatives. Funds from short-term payables 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 the risk on fluctuations of interest rates and foreign currency exchange rates, notfor the purpose of speculation.
With respect to trade receivables, the JAL Group exercises due
date management and outstanding balance management in accordance with internal policies. The JAL Group makes best efforts
to identify and mitigate risks of bad debts from major customers
with financial difficulties by periodically monitoring their creditworthiness. Short-term investments in securities and investments insecurities are composed of mainly the shares of companies withwhich the JAL Group has business relationships. The JAL Group
reviews the fair values of such financial instruments and the financial position of the issuers periodically in order to identify andmitigate risks of impairment. Most of accounts payable-trade isdue within one year. As for derivatives, the JAL Group believes
that the credit risks are extremely low, as it enters into derivativetransactions only with reputable financial institutions with a soundcredit profile.
In order to mitigate the risks of fluctuations in interest rates andforeign currency exchange rates on receivables and payables, theCompany utilizes derivatives. The Group utilizes forward foreign
currency exchange contracts to reduce the risk of foreign currency
exchange rate fluctuations for specific foreign currency denominated receivables and payables, mainly for overseas travel service
payables.

62

JAL REPORT 2013

The JAL Group also utilizes commodity derivatives in order tomitigate the risk of fluctuations in commodity prices of fuel andstabilize such fuel costs.
There are internal policies for derivative transactions which set
forth authorization levels and upper limits on transaction volumes
and the JAL Group enters into derivative transactions in accordance with such policies. Moreover, monthly meetings are heldwith the attendance of board members responsible for derivatives
to determine methods and ratios for minimizing risks as well as toreport and confirm results of derivative transactions.
The fair value of financial instruments is based on the quoted
market price, when it is available. When there is no market priceavailable, 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 difference as of March 31,
2013 and 2012 were as follows:
Millions of yen
As of March 31, 2013

Book value

Fair value

Differences(1) Cash and time deposits¥347,986¥347,986¥(2) Notes and accounts receivable—trade121,058

121,058—(i) Investments in securities of non-consolidated
subsidiaries and affiliates

13,35910,415(2,943)(ii) Other investment securities

19,74919,749—

Total

502,154499,211(2,943)

Assets—(3) Short-term investment securities andinvestment securities

Liabilities
135,830

135,830—(2) Short-term borrowings

828

828

—

(3) Long-term loans payable

44,28544,285—(4) Lease payable

113,394

113,394—

Total

294,338

294,338—

Derivatives*¥ 14,515¥ 14,939¥ 424(1) Accounts payable—trade* Derivatives assets and liabilities are stated on a net basis, and a net liability position is enclosed in parentheses.

Thousands of U.S. dollars
As of March 31, 2013

Book value

Fair value

Differences(1) Cash and time deposits$3,700,010$3,700,010(2) Notes and accounts receivable—trade

1,287,166

1,287,166—(i) Investments in securities of non-consolidated
subsidiaries and affiliates

142,041

110,738(31,291)(ii) Other investment securities

209,984

209,984—

5,339,223

5,307,931(31,291)

Assets$—(3) Short-term investment securities andinvestment securities

Total
Liabilities

1,444,231

1,444,231—(2) Short-term borrowings

8,803

8,803

—

(3) Long-term loans payable

470,866

470,866—

1,205,677

1,205,677

—

Total

3,129,590

3,129,590—

Derivatives*$ 154,322$ 158,841$ 4,508(1) Accounts payable—trade(4) Lease payable* Derivatives assets and liabilities are stated on a net basis, and a net liability position is enclosed in parentheses.

Highlights

Messages from Management

Millions of yen
As of March 31, 2012

Book value

Fair value

Differences(1) Cash and time deposits¥272,475¥272,475¥(2) Notes and accounts receivable—trade

117,005

117,005—(i) Investments in securities of non-consolidated
subsidiaries and affiliates

12,988

7,662(5,326)(ii) Other investment securities

5,746

5,746

—

408,215

402,889(5,326)

AssetsEach of Us Making JAL What It Is

CSR

Financial Section

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.

—(3) Short-term investment securities andinvestment securities

Total

Review of Operations

Liabilities(iii) R edemption schedule for monetary claims and securities
with maturity date subsequent to the consolidatedbalance sheet dateMillions of yen

As of March 31, 2013

Within one
year

More than
one year,within fiveyears

More than
five years,
within ten
years

More thanten years

125,185

125,185—

Cash and time deposits¥347,986

¥—

¥—

¥—

(2) Short-term borrowings

561

561

—

Notes and accounts receivable—trade121,058———(3) Long-term loans payable

56,70956,709—(4) Lease payable—

Short-term investment securities andinvestment securities
—

—

—

666

As of March 31, 2013

Within one
year

More than
one year,within fiveyears

More than
five years,
within ten
years

More thanten years

Cash and time deposits$3,700,010

$—

$—

$—

Notes and accounts receivable—trade

1,287,166

—

—

—

—

—

—

7,081

As of March 31, 2012

Within one
year

More than
one year,within fiveyears

More than
five years,
within ten
years

More thanten years

Cash and time deposits¥272,475

¥—

¥—

¥—

Notes and accounts receivable—trade

117,005———(1) Accounts payable—trade149,307

149,307

Total

331,764

331,764

Derivatives*¥ 13,793¥ 13,812—¥

Held-to-maturity securities

19* Derivatives assets and liabilities are stated on a net basis, and a net liability position is enclosed in parentheses.

(i) Methods of calculating the fair value of financial instruments,
including securities and derivatives transactions
Assets(1) Cash on hand and in banks and (2) Notes and accounts receivable—trade
The fair value equates to the book value due to the short-term
nature of these instruments.
(3) Short-term investment securities and Investment securities
The fair value of securities is determined based on the market price. These investment securities are described further in“Note 8. INVESTMENT SECURITIES”.
Liabilities(1) Accounts payable—trade and (2) Short-term borrowings
The fair value equates to the book value due to the short-term
nature of these instruments.
(3) Long-term loans payable and (4) Lease payable
The fair value of long-term loans payable and lease payable 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.
Derivatives
Derivatives are described further in “Note 9. DERIVATIVES ANDHEDGING ACTIVITIES”.
(ii) Financial instruments for which the fair value is extremely
difficult to measure

As of March 31
Investments in unconsolidated subsidiaries andaffiliates
Held-to-maturity securities
Other securities

Millions of yen

Thousands of
U.S. dollars

2013

2012

2013

¥16,970¥16,234$180,435

666

—

7,081

5,088

4,783

54,098

Thousands of U.S. dollars

Short-term investment securities andinvestment securities
Held-to-maturity securities

Millions of yen

Redemption schedule for short-term and long-term debt subsequent to the consolidated balance sheet date is described in “Note
10. SHORT-TERM BORROWINGS AND LONG-TERM DEBT”.
8. INVESTMENT SECURITIESNo trading securities were held at March 31, 2013 and 2012.
Securities classified as other securities are included in “Short-term
investments in securities” and “Investments in securities” in theaccompanying consolidated balance sheets.
The components of unrealized gain or loss on marketable securities classified as other securities at March 31, 2013 and 2012were summarized as follows:
Millions of yen
As of March 31, 2013
Unrealized gain:
Stocks
Unrealized loss:
Stocks
Total

Acquisition
costs

Carrying
value

Unrealized
gain (loss)¥15,799¥19,349¥3,54915,79919,349

3,549

610

400

(210)

610

400

(210)

¥16,410¥19,749¥3,339JAL REPORT 201363

lion, respectively, and the aggregate loss realized on those sales
totaled ¥0 million ($0 thousand) and ¥2 million, respectively.

Thousands of U.S. dollars
As of March 31, 2013

Acquisition
costs

Carrying
value

Unrealized
gain (loss)

Unrealized gain:
Stocks$167,985$205,730$37,735

167,985

205,730

37,735

6,485

4,253

(2,232)

6,485

4,253

(2,232)

Total$174,481$209,984$35,502

As of March 31, 2012

Acquisition
costs

Carrying
value

Unrealized
gain (loss)

¥ 272

¥ 416

¥ 143

272

416

143

6,071

5,330

(741)

6,071

5,330

(741)

¥6,344¥5,746¥(597)

Unrealized loss:
Stocks

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 purchase commitments, principally for flight equipment and foreign
accounts receivable and payable, and other items. The Company
also enters into a variety of options in its management of risk exposure related to the commodity 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
transactions are examined by other departments. Gain and loss onhedging instruments and the assessment of hedge effectiveness,
which is performed both at inception and on an ongoing basis,are reported at meetings of the related department managers ona timely 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 the open
derivatives positions at March 31, 2013 and 2012, which met thecriteria required for the application of hedge accounting are summarized as follows:

Millions of yen

Unrealized gain:
Stocks
Unrealized loss:
Stocks
Total

Proceeds from sales of securities classified as other securities forthe years ended March 31, 2013 and 2012 amounted to 130 million($1,382 thousand) and ¥1,570 million, respectively. For the years
ended March 31, 2013 and 2012 the aggregate gain realized on
those sales totaled ¥49 million ($520 thousand) and ¥210 mil-Millions of yen
As of March 31, 2013
Type of derivatives

Contract amounts
Major hedged items

Thousands of U.S. dollars
Contract amounts

Total

Maturing
after 1 year

Estimatefair value

Total

Maturing
after 1 year

Estimatefair value$ 78,479

Forward foreign currency exchange contracts:
Buy:
USD

Accounts payable—trade¥41,252¥15,757¥ 7,381$438,617$167,538

EUR

Accounts payable—trade

2,660

—

255

28,282—

2,711

Others

Accounts payable—trade

1,158

—

186

12,312—

1,977

Accounts payable—trade

168,373

8,151

7,466

1,790,249

86,666

79,383

Accounts payable—trade63,346

7,745(1,930)673,535

82,349(20,520)

Aircraft fuel99,17525,225919

1,054,492

268,208

9,771

Aircraft fuel135,944—236

1,445,443

—

2,509

3,965

Currencies options:
Buy:
Call option
Sell:
Put option
Commodity swap:
Received variable/pay fixed
Commodity options:
Buy

Method of hedge accounting: Special treatment (Note 2. l.)
Forward foreign currency exchange contracts:
Buy:
USD

Accounts payable—trade

2,572

—

373

27,347—

EUR

Accounts payable—trade

143

—

29

1,520

—

308

Others

Accounts payable—trade

94

—

21

999

—

223

¥14,939

Total

64

JAL REPORT 2013

$158,841

Highlights

Messages from Management

All derivative transactions were conducted as over-the-countertransactions. Fair value is estimated based on prices quoted byfinancial institutions and others.
Millions of yen
As of March 31, 2012
Type of derivatives

Contract amounts
Major hedged items

Total

Maturing
after 1 year

Estimatefair value

Forward foreign currency exchange contracts:
Buy:
USD

Accounts payable—trade¥ 81,790¥13,473¥ 3,050

EUR

Accounts payable—trade

1,643

—

79

Others

Accounts payable—trade

886

—

54

Currencies options:
Buy:
Call option

Accounts payable—trade113,825—

5,009

Aircraft fuel45,786

16,0633,202

Aircraft fuel112,598—

2,396

Commodity swap:
Received variable/
pay fixed
Commodity options:
Buy

Method of hedge accounting: Special treatment (Note 2. l.)
Forward foreign currency exchange contracts:
Buy:
USD

Accounts payable—trade

1,299

—

20

EUR

Accounts payable—trade

96

—

(2)

Others

Accounts payable—trade

140

—

Total

1
¥13,812All derivative transactions were conducted as over-the-countertransactions. Fair value is estimated based on prices quoted byfinancial institutions and others.
10. SHORT-TERM BORROWINGS AND LONG-TERM DEBT
The weighted-average interest rate for short-term borrowings outstanding at March 31, 2013 was 0.3%. Long-term debt at March
31, 2013 and 2012 consisted of the following:

Millions of yen

Thousands of
U.S. dollars

Weightedaverageinterest rates

2013

2012

2013

2013

Current portion of long-termloans payable¥ 9,767¥ 10,197$ 103,849

1.2%Long-term loans payable(excluding current portion)due 2014 to 2023

34,51746,512367,006

1.6%

Current portion of lease payable

35,80135,997

380,659

0.1%

Lease payable (excluding current
portion) due 2014 to 201977,592

113,310825,007

0.2%

1,637

1,881

17,4052.0%¥159,317¥207,898$1,693,960

As of March 31
Long-term loans:

Lease payable:

Other, due to 2013 to 2021
Total

Review of Operations

Each of Us Making JAL What It Is

CSR

Financial Section

The aggregate annual maturities of long-term debt within 5 years
subsequent to March 31, 2013 are summarized as follows:
Years ending March 31,

Millions of yen

Thousands of
U.S. dollars$ 487,081

2014¥45,8102015

36,941

392,780

2016

29,617

314,9062017

17,262

183,540

2018

9,582

101,8812019 and thereafter
Total

20,102

213,737¥159,317$1,693,960

Assets pledged as collateral at March 31, 2013 for long-term andshort-term debt of ¥45,112 million ($479,659 thousand) are flightequipment and others of ¥197,789 million ($2,103,019 thousand).
Assets pledged as collateral at March 31, 2012 for long-term andshort-term debt of ¥57,769 million are flight equipment and othersof ¥216,491 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 business purposes. The amounts
include security deposits paid to the banks regarding derivativetransactions.
The Company entered into loan commitment agreements
amounting to ¥50,000 million ($531,632 thousand) with threebanks. There were no loan payables outstanding at March 31,
2013 under these loan commitment agreements.
11. RETIREMENT BENEFIT PLANS
a. Outline of Current Retirement Benefit System
An employee whose employment is terminated is entitled, in mostcases, to pension annuity payments or to a lump-sum severance
payment determined by reference to the employee’s basic rate ofpay, 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 and lump-sum severance
indemnity plans. In certain cases, additional severance payments
may be provided.
As of March 31, 2013, the Company and 42 consolidated subsidiaries had adopted a lump-sum severance indemnity plan.
Additionally, there were 3 corporate pension funds, including theJapan 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 as other alternatives.
The JAL Group Pension Fund, which was established by certain
consolidated subsidiaries, introduced a cash-balance plan option.

JAL REPORT 201365

b. Retirement Benefit Obligation
The projected benefit obligation and the funded status of the plans
at March 31, 2013 and 2012 were summarized as follows:
Millions of yen

Thousands of
U.S. dollars

2013

2012

2013

¥(404,537)¥(401,518)$(4,301,297)

Plan assets

233,109

233,2882,478,654

Accrued pension and severance costs

154,483

154,800

1,642,562

Prepaid pension and severance costs(892)(1,059)(9,484)¥ (17,838)¥ (14,488)$ (189,665)

As of March 31
Projected benefit obligation

Net unrecognized amountThe net unrecognized amounts at March 31, 2013 and 2012 wereas follows:d. Basis for Calculation of Retirement Benefit Obligations
2013

2012

Straight-line method

Straight-line method

Discount rates for projected benefit obligation
at the end of year

1.0%–2.3%

1.7%–2.5%

Expected rates of return on plan assets

1.0%–2.5%

1.0%–2.5%

As of March 31
Periodic allocation of estimated retirement
benefits

12. INCOME TAX
The significant components of deferred tax assets and liabilities
and the related valuation allowances at March 31, 2013 and 2012were as follows:
Millions of yen

Thousands of
U.S. dollars

2013

2012

2013

¥ 53,681¥ 54,175$ 570,770

35,91348,988381,850

Deferred liability on aircraft andaircraft equipment

7,540

9,244

80,1704,816

Accounts payable—trade

8,692

8,123

92,418$(189,665)

Non-recurring depreciation

2,280

2,935

24,242

Reserve for loss on antitrust litigation

2,219

2,513

23,593

In computing the projected benefit obligation, small companies
are permitted to adopt certain simplified methods and certain subsidiaries have done so.

Asset retirement obligations

1,514

1,017

16,097

347,617392,2113,696,087

2013

As of March 31

Millions of yen

Thousands of
U.S. dollars

2012

2013

¥ (1,371)¥ (2,056)$ (14,577)

Actuarial differences(16,920)(12,933)(179,904)

Net unrecognized amounts

453¥(17,838)

501¥(14,488)c. Components of Net Periodic Retirement Benefit Expenses
The components of net periodic pension and severance costs
excluding the employees’ contributory portion for the years ended
March 31, 2013 and 2012 were as follows:
Millions of yen

Thousands of
U.S. dollars

2013

2012

2013

¥ 9,974¥ 9,969$106,049

Interest cost on projected benefit
obligation

8,312

8,371

88,378

Expected return on plan assets(3,526)(3,554)(37,490)

Amortization of unrecognized
severance benefit obligation
at transition

685

715

7,283

Amortization of actuarial differences

1,599

1,704

17,001

Amortization of past service costs

(24)

(80)

(255)

Subtotal

17,021

17,126

180,978

Other

1,574

1,603

16,735

Net periodic retirement benefit
expenses

18,59518,729197,713—(1,134)—Years ended March 31
Service cost

Loss (gain) on partial termination ofdefined benefit plan, net
Effect of changes to the standard
method of accounting for the
projected benefit obligation
Total

JAL REPORT 2013

Tax loss carryforwards
Other
Valuation allowance

8,524

10,561

90,632467,984

529,772

4,975,906(439,926)(490,497)(4,677,575)

28,05839,275

298,330

21,54329,085229,059

Deferred tax liabilities:
Leased assets
Undistributed earnings of consolidated
subsidiaries and affiliates

4,639

6,519

49,324

Deferred gain on hedging instruments

4,441

3,298

47,219Other
Net deferred tax assets (liabilities)

2,444

2,445

25,98633,06941,351

351,610¥ (5,011)¥ (2,075)

1,472

547

15,651¥20,067¥18,142$213,365$(53,280)

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, 2013 and 2012 were as
follows:
Years ended March 31

2013

2012

%
Statutory rate

36.7

%
39.7

0.4

(0.2)

Changes in valuation allowance(28.5)(34.6)

Undistributed earnings of consolidated subsidiaries andaffiliates

(1.0)

(0.0)

Equity in earnings/losses of affiliates

Special additional termination benefits paid, but not included indetermining the projected benefit obligation, were charged toincome when incurred. The amounts charged to income amounted
to ¥47 million for the year ended March 31, 2012. “Other” consistsof contributions to defined contribution plans and lump-sum payments of retirement benefits based on an early payment scheme.

66

Accrued pension and severance costs
Lease obligations

Unrecognized benefit obligation attransition
Past service costs

As of March 31
Deferred tax assets:

Tax rate change

—

(0.4)

Other

(0.3)

(0.3)

Effective tax rate

7.3

4.2

Income taxes in Japan applicable to the Company and its domestic
consolidated subsidiaries consist of corporation tax, inhabitants’taxes and enterprise tax. Income taxes of foreign consolidated
subsidiaries are based generally on the tax rates applicable intheir countries of incorporation.

Highlights

Messages from Management

Review of Operations

Each of Us Making JAL What It Is

CSR

Financial Section

Following the enactment on December 2, 2011 of the “Act for
Partial Revision of the Income Tax Act, etc. for the Purpose of Creating Taxation System Responding to Changes in Economic andSocial Structures” (Act No. 114 of 2011) and the “Act on Special
Measures for Securing Financial Resources Necessary to Implement Measures for Reconstruction following the Great East Japan
Earthquake” (Act No. 117 of 2011), the corporate tax rate will be
reduced and a special recovery tax will be imposed effective fromthe fiscal year beginning April 1, 2012.
In accordance with this reform, the effective statutory tax rates,
which are used to measure deferred tax assets and deferred tax
liabilities, will be reduced to 37.0% from 39.7% for temporary differences that are expected to be realized during April 1, 2012
through March 31, 2015, and to 34.6% for temporary differencesthat are expected to be realized on and after April 1, 2015.

The increase in common stock in treasury of 31 thousand shares
during the year ended March 31, 2013 resulted from the Company’s purchases of the equivalent of 31 thousand shares by affiliates
accounted for by the equity method.
The total number and changes in the total number of shares ofstock authorized and in issue for the year ended March 31, 2012were as follows:

13. NET ASSETSThe Companies Act of Japan (the “Act”), provides that an amountequal to at least 10% of the amount to be disbursed as distributionsof capital surplus (except for distributions from additional paid-in
capital) and retained earnings (except for distributions from thelegal reserve) be appropriated to additional paid-in capital and thelegal reserve, respectively, until the sum of additional paid-in capital and the legal reserve equals 25% of the capital stock account.
Such distributions can be made at any time by resolution of thestockholders, or by the Board of Directors if certain conditions aremet, but neither additional paid-in capital nor the legal reserve isavailable 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 sharesas additional paid-in capital, which is included in capital surplus.
The maximum amount that a company can distribute as dividends
is calculated based on its unconsolidated financial statements inaccordance with the Act.
At the annual stockholders’ meeting held on June 19, 2013,
the stockholders approved cash dividends amounting to ¥32,385
million ($344,338 thousand). Such appropriations have not been
accrued in the Consolidated Financial Statement as of March 31,
2013. Such appropriations are recognized in the period in which
they are approved by the stockholders. The total number andchanges in the total number of shares of stock authorized, in issue
and common stock in treasury for the year ended March 31, 2013
were as follows:

Total

Thousands of sharesYear ended March 31, 2012

225,000

225,000——

50,000——50,000275,000——

275,000

181,352——

181,352

181,352——

181,352

Total
Number of shares of stock in issue:

14. OTHER COMPREHENSIVE INCOME
Reclassification adjustments for each component of other comprehensive income including tax effect for the years ended March 31,
2013 and 2012 were as follows:

Years ended March 31

Millions ofyen

Thousands of
U.S. dollars

2012

2013

65

$ 44,540

2013

Net unrealized gains (losses) on other securities, netof taxes:
Unrealized holding gains arising during the period
Less: Reclassification adjustment included in net
income¥ 4,189

¥

—

—

—

Pre-tax amount

4,189

65

44,540Tax benefit/(expense)(1,169)21(12,429)Net Unrealized gains (losses) on securities, net

3,019

87

32,099Deferred gains (losses) during the period

3,824(3,066)40,659Less: Reclassification adjustment included in net
incomeDeferred gains (losses) on hedges, net of taxes:(1,691)

7,649(17,979)

Pre-tax amount

2,133

4,583

22,679Tax benefit/(expense)(775)(1,596)(8,240)Deferred gains (losses), net of taxes

1,358

2,986

14,4399,898

Foreign currency translation adjustments:
931

(76)

Less: Reclassification adjustment included in net
income—654—

Foreign currency translation adjustments

931

577

9,898

Translation adjustments arising during the period

Decrease

At March
31, 2013

Share of other comprehensive income of associates
accounted for by the equity method:

Common stock

225,000

125,000—

350,000

Preferred stock

50,000——50,000Share of other comprehensive income ofassociates accounted for by the equity method
arising during the period

275,000

125,000—

400,000

Total

At March
31, 2012

Preferred stock

Increase

Number of shares of stock authorized:

Decrease

Common stock

At April
1, 2012

Year ended March 31, 2013

Increase

Number of shares of stock authorized:

Common stockThousands of shares

At April
1, 2011

Total other comprehensive income

1

25

10

¥ 5,310¥ 3,676$ 56,459

Number of shares of stock in issue:
Common stockTotal

181,352——

181,352

181,352——

181,352

Number of shares of common stock intreasury:
Common stock
Total

—

31

—

31

—

31

—

31

JAL REPORT 201367

15. LOSS ON SALES AND DISPOSAL OF FIXED ASSETS
The main components of loss on sales and disposal of fixed assets
for the years ended March 31, 2013 and 2012 were as follows:

Years ended March 31

Millions of yen

Thousands of
U.S. dollars

2012

2013

2013

Loss on sales and disposal of fixed assets:

Year ended March 31, 2012

Millions of yen

Current assets¥ 755

Fixed assets

105

Current liabilities(105)

Minority interests(327)

Foreign currency translation adjustments

371

Gain on sales of investments in securities, net

102

Buildings and structures

¥216

¥651

$2,296

Proceeds from sales of shares of common stock

900

Land

130

105

1,382

Accounts receivable(13)

Machinery and vehicles

30

44

318

16. LOSS ON IMPAIRMENT OF FIXED ASSETS
Assets are attributed or allocated to cash generating units which
generated largely independent cash flows for calculating impairment losses. Assets to be sold and idle assets are written down totheir respective recoverable amounts.
The Company and its consolidated subsidiaries estimatedrecoverable amounts at the higher of fair value less costs to selland value in use. Fair value is based on reasonable estimates
made by the Company and its consolidated subsidiaries in accordance with the contract amounts of sales for the periods ended
March 31, 2013 and 2012, respectively.
Certain consolidated subsidiaries have recognized impairment
losses on the following groups of assets in the accompanying consolidated statement of income for the year ended March 31, 2013:
Assets utilized in the Company’s andconsolidated subsidiaries’ operations

Groups of assets

Locations

Assets to be soldMachinery and vehicles

Ota-ku, Tokyo

Idle assets

Flight equipment—

An impairment loss of ¥1,764 million ($18,755 thousand) was
recognized as an extraordinary loss in the accompanying consolidated statement of income for the year ended March 31, 2013. A
breakdown of the total loss on impairment of fixed assets was asfollows: ¥1,081 million ($11,493 thousand) on flight equipment,¥204 million ($2,169 thousand) on buildings and structures, and¥479 million ($5,093 thousand) on machinery.
Certain consolidated subsidiaries have recognized impairment
losses on the following groups of assets in the accompanying consolidated statement of income for the year ended March 31, 2012:
Assets utilized in the Company’s andconsolidated subsidiaries’ operations

Groups of assets

Locations

Assets to be soldLand, buildings and structures,
Machinery and vehicles

Tomisato-shi, Chiba
and other

Idle assets

Flight equipment—

An impairment loss of ¥2,433 million was recognized as an extraordinary loss in the accompanying consolidated statement of income
for the year ended March 31, 2012. A breakdown of the total loss
on impairment of fixed assets was as follows: ¥983 million on flightequipment, ¥758 million on buildings and structures, ¥458 million
on machinery, and ¥233 million on land.
17. SUPPLEMENTARY CASH FLOW INFORMATION
The assets and liabilities of subsidiaries excluded from consolidation following the sales of their shares of common stock during theyear ended March 31, 2012 were as follows:

68

JAL REPORT 2013

Charges on proceeds from sales of shares(39)

Cash and cash equivalents held by subsidiaries(592)

Net proceeds¥ 254

The assets and liabilities of a subsidiary included in consolidation
following the purchase of its shares during the year ended March
31, 2012 were as follows:Year ended March 31, 2012

Millions of yen

Current assets¥ 8,552

Fixed assets

4,498

Current liabilities(2,420)Non-current liabilities(2,412)

Minority interests(420)

Expenditure for purchase of shares of common stock

7,798

Gain on step acquisition(1,124)

Valuation by the equity method(2,372)

Cash and cash equivalents held by subsidiaries(5,660)Net proceeds¥ 1,360

18. LEASESAs Lessee
The following amounts represent the acquisition costs, accumulated depreciation and net book value of the leased assets at March
31, 2013 and 2012, and the related depreciation and interest
expense for the periods ended March 31, 2013 and 2012, which
would have been reflected in the accompanying consolidated balance sheets and the related consolidated statements of income if
finance lease accounting had been applied to the finance leases
currently accounted for as operating leases whose contracts wereentered into prior to April 1, 2008:
Millions of yen
Acquisition
cost

Less
accumulated
depreciation

Netbook value

Flight equipment

¥ 988

¥ 840

¥148

Machinery, equipment and vehicles

1,146

996

149

Other

407

317

90

Total

¥2,542¥2,154¥388

As of March 31, 2013

Thousands of U.S. dollars
Acquisition
cost

Less
accumulated
depreciation

Netbook value

Flight equipment$10,505$ 8,931$1,573

Machinery, equipment and vehicles

12,185

10,590

1,584

Other

4,327

3,370

956

Total

$27,028$22,902$4,125

As of March 31, 2013

Highlights

Messages from Management

Millions of yen

Review of Operations

Each of Us Making JAL What It Is

Acquisition
cost

Net
book value

Flight equipment

¥ 988

¥ 741

¥246

Machinery, equipment and vehicles

2,105

1,642

463

Other

636

439

197

Year ended March 31

Total¥3,730¥2,822¥907

Net income per share of common stock:

Millions of yen

Thousands of
U.S. dollars

Years ended March 31

2013

2012

2013

Lease expenses

¥518

¥739

$5,507

Depreciation equivalent

480

684

5,103

Interest equivalents

27

56

287

The present value of future rental expenses under finance leases
accounted for as operating leases outstanding at March 31, 2013
and 2012 were as follows:
Millions of yen

Thousands of
U.S. dollars

As of March 31

2013

2012

2013

Within 1 year

¥312

¥511

$3,317

Over 1 year

94

407

999

¥407

¥919

$4,327

Total

Depreciation equivalent is calculated by the straight-line methodon the assumption that the useful lives of the related assets are thesame as the lease term and the residual value is zero.
Interest expense equivalent is calculated on the assumption thatthe difference between aggregate lease rentals and the acquisition cost of leased assets is deemed to be the interest portion andis apportioned over the term of the lease by the interest method.
No impairment loss has been recognized on leased property
under finance leases accounted as operating leases for the year
ended March 31, 2013 and 2012.
Future rental expenses under operating leases outstanding at
March 31, 2013 and 2012 were as follows:
Millions of yen
As of March 31
Within 1 year

Thousands of
U.S. dollars

2013

2012

2013

¥ 36,498¥ 34,860$ 388,070

Over 1 year

170,276

193,7031,810,483

Total¥206,774¥228,563$2,198,553

19. CONTINGENT LIABILITIESAt March 31, 2013 and 2012, contingent liabilities for guarantees,
principally for employees, amounted to ¥341 million ($3,625 thousand) and ¥431 million, respectively.
20. AMOUNTS PER SHARE
Basic net income per share is computed based on the net income
available for distribution to or allocable to the stockholders of common stock and the weighted-average number of shares of common
stock outstanding during each year. Diluted net income per shareis computed based on the net income available for distribution to
the stockholders and the weighted-average number of shares ofcommon stock outstanding during each year after giving effect tothe potentially dilutive securities to be issued upon the conversion

Financial Sectionof convertible bonds. However, diluted net income per share had
not been presented for the years ended March 31, 2013 and 2012
since the Company had no equity instruments issued that had adilutive effect on earnings per share.

Lessaccumulated
depreciation

As of March 31, 2012

CSR

Yen

U.S. dollars

2013

2012

2013

Basic

¥946.71¥1,029.03$10.06

Diluted———The following table sets forth the computation of basic net income
per share of common stock and diluted net income per share ofcommon stock for the years ended March 31, 2013 and 2012:
Year ended March 31

Yen

U.S. dollars

2013

2012

2013

¥171,672¥186,616$1,825,326

Net income (allocable to) available forstockholders of common stock:
Net income
Appropriations for payment of preferred
dividend———¥171,672¥186,616$1,825,326

Thousands of shares
Years ended March 31
Weighted-average number of shares of common stock outstanding

2013

2012

181,335

181,352

Net assets per share are computed based on the net assets available for distribution to the stockholders of common stock and thenumber of shares of common stock outstanding at each balance
sheet date.
Yen
As of March 31
Net assets per share of common stock

U.S. dollars

2013

2012

2013

¥3,116.30¥2,142.37$33.13

21. ASSET RETIREMENT OBLIGATIONS
a. Asset retirement obligations recognized in the consolidated balance sheets at March 31, 2013 and 2012
The Company and its consolidated subsidiaries, in connection
with some buildings and land, have entered into real estate lease
contracts with terms ranging from 2 to 46 years and 1 to 45 years
for the years ended March 31, 2013 and 2012, respectively. Assetretirement obligations have been recognized in respect of the obligation of the Company and its consolidated subsidiaries to theowner of the buildings and land to remove the facilities from leased
real estate at the end of those contracts. The liabilities at March
31, 2013 and 2012 have been calculated with expected useful
lives ranging from 2 to 46 years and 1 to 45 years, respectively,
and discount rates ranging from 0.1% to 2.5% and 0.4% to 2.5%,
respectively.
The following table summarizes the changes in the aggregate
carrying amount of asset retirement obligations for the years ended March 31, 2013 and 2012:

JAL REPORT 201369

Millions of yen

Thousands of
U.S. dollars

2013

2012

2013

¥3,166¥3,189$33,662

Increase due to purchases of tangible fixed
assets—0—

Accretion due to the passage of time

60

59

637

Decrease due to settlement

(3)

(69)

(31)

1,047

—

11,132—(12)—¥4,271¥3,166$45,412

Years ended March 31
Balance at beginning of year

Changes in estimated obligations andaccretion
Other
Balance at end of yearb. Asset retirement obligations not recognized in the consolidatedbalance sheets as of March 31, 2013 and 2012
The Company and its consolidated subsidiaries have rented lots
and buildings from domestic service airports based on the permission of national property use and the real estate rental contract
about national property, and have obligation to remove the facilities from leased real estate. The enterprise of the Company and its
consolidated subsidiaries have a large role of public traffic, anddepend on the trend of the aviation administration of a country. For

this reason, the time of building withdrawal and leaving cannot be
determined only by discretion of the Company about the rented
airport related facilities. Moreover, since there is also no schedule of building withdrawal and leaving at present, asset retirement
obligations cannot be estimated rationally. Therefore, the asset
retirement obligations corresponding to the debt concerned is not
added up.
22. 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 Executive Committee 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 thesame as those described in the significant accounting policies inNote 2. Inter-group sales are recorded at the same conditions usedin transactions with third parties.

Millions of yen
Year ended March 31, 2013

Air transportation

Other

Total

¥ 984,692¥254,146¥1,238,839

121,456

150,685

272,142

Eliminations

Consolidated¥—¥1,238,839(272,142)—

Net sales
External
Intersegment
Total

1,106,148

404,832

1,510,981(272,142)

1,238,839

Operating income¥ 171,182¥ 24,896¥ 196,079

¥

(837)

¥ 195,242

Assets¥1,157,181¥206,509¥1,363,690¥(147,078)¥1,216,612

Depreciation¥

78,651¥ 2,423¥

81,074¥(70)¥

Impairment losses

¥

1,764

¥

—

¥

1,764

¥

—

¥

1,764

Investments in companies accounted for using the equity method

¥

1,410

¥ 21,330¥

22,740¥—¥22,740Capital expenditure¥ 122,635¥ 2,725¥ 125,361

¥

(679)

¥ 124,681

Air transportation

Other

Total

$10,469,877$2,702,243$13,172,131

1,291,398

1,602,179

2,893,588

81,004

Thousands of U.S. dollars
Year ended March 31, 2013

Eliminations

Consolidated—$13,172,131(2,893,588)—

Net sales
External
Intersegment

$

Total

11,761,275

4,304,433

16,065,720(2,893,588)

13,172,131

Operating income$ 1,820,116$ 264,710$ 2,084,837$(8,899)$ 2,075,938

Assets$12,303,891$2,195,736$14,499,627$(1,563,827)$12,935,800

Depreciation$

836,267$

25,762$862,030

$

(744)

$

Impairment losses$

18,755$—$18,755$—$18,755Investments in companies accounted for using the equity method$

14,992$ 226,794$

241,786$—$

241,786

Capital expenditure$ 1,303,934$$ 1,332,918$(7,219)70

JAL REPORT 2013

28,973

861,286$ 1,325,688

Highlights

Messages from Management

As described in “Note 2. d. Tangible Fixed Assets”, effective from
April 1, 2012, the Company has changed useful lives of certain aircrafts including spare parts to reviewed useful lives based on theestimated future use. As a result of this change, for the year ending

Review of Operations

Each of Us Making JAL What It Is

CSR

Financial Section

March 31, 2013, operating income of the air transportation segment decreased by ¥3,452 million ($36,703 thousand) comparedto the amounts that would have been reported if the previous methods had been applied consistently.
Millions of yen

Year ended March 31, 2012

Air transportation

Other

Total

¥ 958,710¥246,102¥1,204,813

122,443

124,665

247,108

Eliminations

Consolidated¥—¥1,204,813(247,108)—

Net sales
External
Intersegment
Total

1,081,154

370,767

1,451,922(247,108)

1,204,813

Operating income¥ 187,920¥ 17,334¥ 205,254

¥

(332)

¥ 204,922

Assets¥1,006,025¥197,408¥1,203,434¥(115,806)¥1,087,627

Depreciation¥

78,514¥ 2,740¥

81,254¥(31)¥

Impairment losses

¥

2,433

¥

—

¥

2,433

¥

—

¥

2,433

Investments in companies accounted for using the equity method

¥

1,633

¥ 20,566¥

22,199¥—¥22,199

Capital expenditure¥

97,003¥¥

97,956¥—¥

97,956

Information by Geographical Area
Operating revenues from overseas operations, which include international passenger and cargo services of domestic consolidated
airline subsidiaries rendered during the years ended March 31,
2013 and 2012, export sales of domestic consolidated subsidiaries, and sales of consolidated subsidiaries outside Japan, for theyears ended March 31, 2013 and 2012 were as follows:952

Thousands of U.S. dollars
Year ended March 31,
2013

Air
transportation

Other

Total

Amortization during the
year

$ —

$ 8,888$ 8,888$ —$ 8,888

Unamortized balance—

31,94031,940—31,940Year ended March 31,
2012

Air
transportation

Other

Total

¥ —

¥ 422

¥ 422

¥ —

¥ 422

—

2,299

2,299

—

2,299

Millions of yen
2013

2012

2013

Asia and Oceania¥222,244¥220,694$2,363,040

Amortization during theyear

North America

156,046

143,442

1,659,181

Unamortized balance

Europe90,571

89,699963,009

Total¥468,861¥453,835$4,985,231

Information about amortization and unamortized balances of
goodwill by segment for the years ended March 31, 2013 and 2012were as follows:

Eliminations Consolidated

Millions of yen

Thousands of
U.S. dollars

Years ended March 31

81,222Eliminations Consolidated

23. RELATED PARTY INFORMATION
There are no material transactions that need to be presented forthe years ended March 31, 2013 and 2012.

Millions of yen
Year ended March 31,
2013

Air
transportation

Other

Total

Amortization during the
year

¥ —

¥ 836

¥ 836

¥ —

¥ 836

Unamortized balance

—

3,004

3,004

—

3,004

Eliminations Consolidated

JAL REPORT 201371

Independent Auditor’s Report
To the Board of Directors of Japan Airlines Co., Ltd.:We have audited the accompanying consolidated financial statements of Japan Airlines Co., Ltd. and its consolidated subsidiaries, which
comprise the consolidated balance sheets as at March 31, 2013 and 2012, and the consolidated statements of income and comprehensive
income, statements of changes in net assets and statements of cash flows for the years then ended, and a summary of significant accounting
policies and other explanatory information.
Management’s Responsibility for the Consolidated Financial Statements
Management is responsible for the preparation and fair presentation of these consolidated financial statements in accordance with accounting principles generally accepted in Japan, and for such internal control as management determines is necessary to enable the preparationof consolidated financial statements that are free from material misstatements, whether due to fraud or error.
Auditor’s Responsibility
Our responsibility is to express an opinion on these consolidated financial statements based on our audits. We conducted our audits in accordance with auditing standards generally accepted in Japan. Those standards require that we comply with ethical requirements and plan andperform the audit to obtain reasonable assurance about whether the consolidated financial statements are free from material misstatement.
An audit involves performing procedures to obtain audit evidence about the amounts and disclosures in the consolidated financial statements. The procedures selected depend on our judgement, including the assessment of the risks of material misstatement of the consolidated
financial statements, whether due to fraud or error. In making those risk assessments, we consider internal control relevant to the entity’s
preparation and fair presentation of the consolidated financial statements in order to design audit procedures that are appropriate in thecircumstances, while the objective of the financial statement audit is not for the purpose of expressing an opinion on the effectiveness ofthe entity’s internal control. An audit also includes evaluating the appropriateness of accounting policies used and the reasonableness ofaccounting estimates made by management, as well as evaluating the overall presentation of the consolidated financial statements.
We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our audit opinion.
OpinionIn our opinion, the consolidated financial statements present fairly, in all material respects, the financial position of Japan Airlines Co., Ltd.
and its consolidated subsidiaries as at March 31, 2013 and 2012, and their financial performance and cash flows for the years then endedin accordance with accounting principles generally accepted in Japan.
Convenience Translation
The U.S. dollar amounts in the accompanying consolidated financial statements with respect to the year ended March 31, 2013 are presented
solely for convenience. Our audit also included the translation of yen amounts into U.S. dollar amounts and, in our opinion, such translation
has been made on the basis described in Note 4 to the consolidated financial statements.

KPMG AZSA LLC
June 20, 2013
Tokyo, Japan72

JAL REPORT 2013

Highlights

Messages from Management

Review of Operations

Each of Us Making JAL What It Is

CSR

Financial Section

Consolidated Subsidiaries
Number of Group Companies
Business Segment

Number of Subsidiaries

Consolidated Subsidiaries

Affiliated Companies

5

1

96

54

61

12

101

59

62

13

Air Transport Business

5

Other
Group Total
Company Name

Paid-in Capital (Millions of yen)

Air Transport Business (Air Transport Business)
JAPAN TRANSOCEAN AIR CO., LTD.
JAL EXPRESS CO., LTD.
JAPAN AIR COMMUTER CO., LTD.
J-AIR CO., LTD.
RYUKYU AIR COMMUTER CO., LTD.

Equity Method Affiliates

1

Ratio of Voting Rights

Direct (%)

Indirect (%)

Total (%)

4,537
2,500
300
200
396

72.8
100.0
60.0
100.0
—

—
—
—
—
74.5

72.8
100.0
60.0
100.0
74.5

Other (Airport Passenger Handling )JAL SKY CO., LTD.
JALSKY OSAKA CO., LTD.
JALSKY KYUSHU CO., LTD.
JALSKY SAPPORO CO., LTD.
JALSKY NAHA CO., LTD.
JTA SOUTHERN SKY SERVICE CO., LTD.
JALSKY KANAZAWA CO., LTD.
JALSKY SENDAI CO., LTD.

100
30
30
30
30
20
10
10

100.0
100.0
100.0
100.0
51.0
—
100.0
100.0

—
—
—
—
49.0
100.0
—
—

100.0
100.0
100.0
100.0
100.0
100.0
100.0
100.0

Other (Ground Handling)
JAL GROUND SERVICE CO., LTD.
JAL GROUND SERVICE TOKYO CO., LTD.
JAL GROUND SERVICE OSAKA CO., LTD.
JAL GROUND SERVICE KYUSHU CO., LTD.
JAL GROUND SERVICE SAPPORO CO., LTD.
OKINAWA AIRPORT SERVICE CO., LTD.

474
20
10
10
10
33

99.8
—
—
—
—
70.6

0.2
100.0
100.0
100.0
97.7
29.4

100.0
100.0
100.0
100.0
97.7
100.0

Other (Maintenance)
JAL AIRTECH CO., LTD.
JAL ENGINEERING CO., LTD.
JAL SIMULATOR ENGINEERING CO., LTD.
JAL MAINTENANCE SERVICE CO., LTD.

315
80
10
10

66.6
100.0
100.0
100.0

3.4
—
—
—

70.0
100.0
100.0
100.0

Other (Cargo)
JAL KANSAI AIRCARGO SYSTEM CO., LTD.
JAL CARGO SERVICE CO., LTD.
JAL CARGO HANDLING CO., LTD.
JAL CARGO SERVICE KYUSHU CO., LTD.

123
50
50
20

69.2
100.0
—
40.0

—
—
100.0
40.0

69.2
100.0
100.0
80.0

Other (Airline-Related Business)
JAL ROYAL CATERING CO., LTD.
OKINAWA FUELING FACILITIES CO., LTD.
JAL ABC, INC.

2,000
100
100

51.0
40.0
51.0

—
20.0
—

51.0
60.0
51.0

Other (Passenger Sales)
JALPAK CO., LTD.*JAL SALES CO., LTD.
JAL NAVIA CO., LTD.
JAL MILEAGE BANK CO., LTD.
JAL JTA SALES CO., LTD.

80
460
50
40
30

96.4
100.0
100.0
100.0
16.7

1.2
—
—
—
83.3

97.7
100.0
100.0
100.0
100.0

Other (Other)JAL INFORMATION TECHNOLOGY CO., LTD.
AXESS INTERNATIONAL NETWORK, INC.
JAL AEROPARTS CO., LTD.
JALCARD, INC.
JAL FACILITIES CO., LTD.
JAL BRAND COMMUNICATIONS CO., LTD.
JTA INFORMATION & COMMUNICATION CO., LTD.
JAL SUNLIGHT CO., LTD.
OFFICIAL FILING CO., LTD.

702
700
490
360
180
100
50
20
10

100.0
100.0
100.0
50.6
85.0
100.0
—
100.0
50.0

—
—
—
—
—
—
100.0
—
4.0

100.0
100.0
100.0
50.6
85.0
100.0
100.0
100.0
54.0

Other (Airport-Related Services)
JAL HAWAII, INC.

USD 1,000

100

—

100.0

100.0

Other (Cargo)
JUPITER GLOBAL LTD.

HKD 1,000

1,960

46.4

4.6

51.0

Other (Passenger Sales)
JAL PASSENGER SERVICES AMERICA INC.
JALPAK INTERNATIONAL HAWAII, INC.
JALPAK INTERNATIONAL (CHINA) CO., LTD.
JALPAK INTERNATIONAL (EUROPE) B.V.
JALPAK INTERNATIONAL (FRANCE) S.A.S.
JALPAK INTERNATIONAL (GERMANY) GMBH
EURO-CREATIVE TOURS (U.K.) LTD.
JALPAK INTERNATIONAL ASIA PTE. LTD.
JAL SATELLITE TRAVEL CO., LTD.

USD 1,000
USD 1,000
USD 1,000
EUR 1,000
EUR 1,000
EUR 1,000
GBP 1,000
SGD 1,000
HKD 1,000

205
1,000
600
1,600
160
102
100
146
750

—
—
—
—
—
—
—
—
—

100.0
100.0
100.0
100.0
100.0
100.0
100.0
100.0
100.0

100.0
100.0
100.0
100.0
100.0
100.0
100.0
100.0
100.0

Other (Other)
PACIFIC INVESTMENT HOLDINGS CORP.
JLC INSURANCE CO., LTD.
PACIFIC BUSINESS BASE, INC.
JAPAN AIRLINES MANAGEMENT CORP.

USD 1,000
USD 1,000
USD
USD

59,701
2,000
400
93

100.0
100.0
100.0
—

—
—
—
100.0

100.0
100.0
100.0
100.0

* Operating revenue (excluding operating revenue between consolidated subsidiaries) of JALPAK CO., LTD. accounts for over 10% of consolidated operating revenue.

JAL REPORT 201373

JAL Group Route Network

International Routes
As of July 1, 2013

BelfastManchester
Glasgow
Edinburgh
Aberdeen
Newcastle

Brussels
Amsterdam
Gothenburg
Helsinki
Stockholm
Copenhagen
Hamburg

Oslo

Warsaw
BerlinLondonFrankfurt
PragueViennaDusseldorf

Khabarovsk

Moscow

Shenyang

MunichStuttgart
ZurichMilan
Bologna Istanbul

Paris
Basel
Lyon
Geneva

Seoul

Japan

Vladivostok

DalianYantai
Beijing

AthensLisbonRome

Xi’an
Kunming

Nice
Marseille

NanjingChengduChongqing

Toulouse

Dubai

Barcelona
Madrid

Wuhan

Busan
Jeju
Shanghai

Guangzhou

Delhi

ShenzhenMumbaiJohannesburg

Tianjin
Qingdao

Chiang Rai
Chiang Mai

Hanoi

Hyderabad
ChennaiBangalore
BangkokKoh Samui
Colombo
Ho Chi Minh City
PhuketMale
Langkawi
PenangKuantan
Kuala Lumpur
Singapore
Jakarta
SorabayaDenpasar

ManilaTaipei
Kaohsiung

Guam

Hong Kong
Kota Kinabalu

Kuching
CairnsBrisbane• The routes above include codeshare flights (as of July 1, 2013).
• To highlight the cities on JAL’s route network, continents on the map above havebeen expanded and may appear deformed or distorted.

Perth

SydneyMelbourne

74

JAL REPORT 2013

Gold CoastHighlights

Messages from Management

Review of Operations

Each of Us Making JAL What It Is

CSR

Financial Section

Yellowknife
ToledoWhitehorse

Edmonton

Minneapolis

Grand Rapids
Kalamazoo
Milwaukee

Cleveland
Detroit
Buffalo
TorontoOttawaRochesterMontreal
Burlington

MadisonCalgary

Kelowna
VancouverSalt Lake City

Reno

Sacramento
San Francisco
San Jose

FresnoSanta Barbara
Los Angeles
San Diego

Phoenix

TucsonSyracuse
Columbus

Winnipeg

PortlandPittsburgh
BostonHartford
New York
ChicagoPhiladelphia
Harrisburg
Omaha
PeoriaBaltimore
DaytonDes Moines
Washington
Bloomington
Lexington
Richmond
Kansas City
Louisville
Norfolk
St. Louis
Knoxville
Oklahoma City
Nashville
DenverIndianapolis
MemphisWichita
Cincinnati
Tulsa
Evansville Huntsville
Las Vegas
Raleigh/Durham
FayettevilleJacksonville
Dallas New Orleans
Charlotte
AlbuquerqueAtlanta
El PasoOrlandoHoustonTampa
West Palm Beach
AustinSan Antonio
Fort Lauderdale
Monterrey
Miami
CancunHonolulu
Guadalajara

Fort Myers
Sarasota

Mexico CitySan JuanBirmingham

PapeeteLima

Sao Paulo
Rio de Janeiro
Santiago

JAL REPORT 201375

JAL Group Route Network

Domestic Routes
As of July 1, 2013

• Routes between the following cities (airports) are codeshare flights
with Fuji Dream Airlines Co., Ltd. (FDA): Shizuoka-Sapporo (New
Chitose), Shizuoka-Fukuoka, Matsumoto-Sapporo (New Chitose),
Matsumoto-Fukuoka, Nagoya (Komaki)-Fukuoka, Nagoya(Komaki)-Niigata, Nagoya (Komaki)-Kochi, Nagoya (Komaki)Kumamoto, and Niigata-Fukuoka.
FDA aircraft and crews are used for flights on these routes.

RishiriMemanbetsu
Asahikawa• Routes between the following cities (airports) are codeshare flights
with Hokkaido Air System Co., Ltd. (HAC): Sapporo (Okadama)Rishiri, Sapporo (Okadama)-Hakodate, Sapporo (Okadama)Misawa, and Hakodate-Okushiri.
HAC aircraft and crews are used for flights on these routes.

Kushiro (Tancho Kushiro)

Sapporo (Okadama)
Sapporo (New Chitose)

Obihiro (Tokachi Obihiro)

Hakodate

Okushiri

Aomori
MisawaTajima(Konotori Tajima)
Akita

Hanamaki (Iwate Hanamaki)

Yamagata
Niigata

Komatsu
Izumo(Izumo Enmusubi)

Oki
Okayama

Hiroshima

Yamaguchi Ube

Fukuoka

Kitakyushu

Takamatsu

Matsuyama

Oita

NagasakiSendaiMatsumotoTokyo(Shinshu Matsumoto) (Narita)

Tokyo(Haneda)Shizuoka(Mt. Fuji Shizuoka)
Nagoya (Komaki)

Kumamoto (Aso Kumamoto)

MiyazakiKagoshima

Nagoya (Chubu)
Osaka (Itami)
Osaka (Kansai)
Nanki Shirahama

Tanegashima
Yakushima

Amami-Oshima
Kikai

Tokunoshima(Tokunoshima Kodakara)
Yoron

Okinoerabu
Kita-Daito

Kumejima
Okinawa(Naha)Tarama Miyako
Yonaguni

Ishigaki(New Ishigaki)

76

JAL REPORT 2013

Minami-Daito

Kochi(Kochi Ryoma)

Tokushima (Tokushima Awaodori)

Highlights

Messages from Management

Review of Operations

Each of Us Making JAL What It Is

CSR

Financial Section

Shareholder Information(As of March 31, 2013)

Fiscal Year

From April 1 through March 31 of thefollowing year

General Meeting of Shareholders
Record Date

Aggregate Number of Shares Issuable

400,000,000 shares*

Within 3 months after March 31

Aggregate Number of Shares Issued andOutstanding (Common Stock)

181,352,000 shares

March 31

Number of Shareholders

99,616

Stock Listing

Tokyo Stock Exchange (First Section)

Record Date for Dividend Payment March 31
Trading Unit

100 shares

Repurchase of Odd-lot Shares• Location of Handling Office
Mitsubishi UFJ Trust and Banking Corporation,
	Stock Transfer Agency Division 4-5,
Marunouchi 1-chome, Chiyoda-ku, Tokyo• Administrator of
Shareholder Registry:	Mitsubishi UFJ Trust and Banking Corporation
4-5, Marunouchi 1-chome, Chiyoda-ku, Tokyo• Intermediary Offices—• Negotiating Commission
Free of charge
Method of Public Notice
The Company will publish notices electronically. If by accident or other unavoidable
circumstance the Company is unable to publish a public notice electronically, it will
publish the notice in the Nihon Keizai Shimbun, issued in the Tokyo area.
Restrictions on the Entry or Recording of Foreign Entities in the Shareholder
Registry, Payment of Dividends

In relation to Article 120-2 of the Civil Aeronautics Act, the Company has included the following
provisions in its Articles of Incorporation.
Article 12 In the event that complying with a request by any of the entities listed below to enter or record their name and address in the Company’s shareholder registry would
result in the total voting rights held by the below entities to exceed one third of theCompany’s voting rights, the Company shall refuse to enter or record the name oraddress in the shareholder registry.
(1) Non-Japanese nationals(2) Foreign public organizations and similar establishments in foreign states(3) Juridical persons and other organizations established in accordance with foreign laws
2.	With respect to shareholders notified by the Book Entry Transfer Institution under the
Law Concerning Book-Entry Transfer of Corporate Bonds, Shares, etc., Article 1511 or Article 151-8, in the event that entering or recording the entire shareholdings ofentities listed above would result in the total voting rights held by these entities to
exceed one third of the Company’s voting rights, the Company shall enter or record
a portion of the shares in the shareholder registry in accordance with proceduresfor entering and recording information in the shareholder registry as designated by
the Ministry of Land, Infrastructure, Transport and Tourism in order to ensure thatthe total voting rights held by the above entities does not exceed one third of theCompany’s voting rights.
(Payment of Dividends)
Article 45	Dividend payments will be made to the following entities:(1) Shareholders or registered pledgees whose shares have been entered or recorded in the final shareholder register as of March 31 of the relevant year;(2) A mong the shareholders notified by the Book Entry Transfer Institution as ofMarch 31 each year under the Law Concerning Book-Entry Transfer of Corporate Bonds, Shares, etc., Article 151-1, a shareholder or relevant pledgee
designated in the above notification whose shares, in part or in their entirety,
were not entered or recorded in the shareholder registry in accordance with theprovision in Article 12-2 of the Company’s Articles of Incorporation.
(Supplementary Provision)
Article 1	The revised Article 45 (Payment of Dividends) shall be applied starting with year-end
dividends for FY2013 (ending March 31, 2014) and shall not be applied to year-end
dividends for FY2012 and the preceding fiscal years.

* Includes common stock (350,000,000 shares) and Class 1 to Class 4 preferred stock(12,500,000 shares each).

(As of March 31, 2013)

Breakdown of Shareholders

Japanese financial
institutions
25.00%

Individuals and others
24.90%

Japanese securities
companies
9.86%
Foreign companies
and institutions
31.33%

Other Japanesecompanies
8.90%

Notes:
1. The ratios shown above represent the proportion to total shares issued and outstanding.
2. Figures for “Individuals and others” include 10,900,020 shares the Company refused to enteror record in the shareholder registry (shares adjusted for foreign ownership) under the Civil
Aeronautics Act and Articles of Incorporation.

Stock Price and Trading Volume(Yen)

Stock price (left axis)

6,000(Millions of shares)

Trading volume

110

5,000

100

4,000

80

3,000

60

2,000

40

1,000

20

0

Sept.
2012

Oct.
2012

Nov.
2012

Dec.
2012

Jan.
2013

Major Shareholders (As of March 31, 2013)

Feb.
2013

Mar.
2013

Apr.
2013

May
2013

0

(As of March 31, 2013)

Number of Shares Held

Ratio of Shareholding (%)

The Master Trust Bank of Japan, Ltd. (trust account)

10,141,000

5.59Japan Trustee Services Bank, Ltd. (trust account)

9,374,200

5.16

Japan Trustee Services Bank, Ltd. (trust account 9)6,808,600

3.75

State Street Bank and Trust Co. (Standing proxy: The Hongkong and Shanghai Banking Corporation Limited, Tokyo Branch)

5,023,900

2.77

SMBC Nikko Securities Inc.

4,319,100

2.38

MSCO Customer Securities (Standing proxy: Morgan Stanley MUFG Securities Co., Ltd.)4,187,400

2.30

Mizuho Securities Co., Ltd.

3,843,300

2.11

Kyocera Corp.

3,819,200

2.10

Goldman, Sachs & Co., REG (Standing proxy: Goldman Sachs Securities Japan)

2,733,600

1.50

Morgan Stanley & Co., LLC. (Standing proxy: Morgan Stanley MUFG Securities Co., Ltd.)2,726,300

1.50

Disclaimer
Unless specifically dealing with matters of historical fact, the plans, forecasts and strategies described in this document represent estimates of future results based on the information available at thetime of writing, but are inherently subject to risks and uncertainties. These risks and uncertainties may result in divergence between actual results and the forecasts and estimates contained herein.
Risks and uncertainties include but are not limited to market risks, rising fuel costs, changes in the exchange rate between the Japanese yen and the US dollar and other currencies, acts of terrorism and war, contagion, and other risks inherent in the airline business. Information contained herein regarding companies, etc., other than JAL and members of the JAL Group is quoted from public
sources, etc., but we have not verified and do not guarantee the accuracy or appropriateness of this information. All copyrights and other rights with respect to this document belong to Japan Airlines
Co., Ltd.

JAL REPORT 201377

Executive Officers

Members of the Board of Directors
External Director

Tatsuo KAINAKA

Director, Senior Managing
Executive Officer

Junko OKAWA

Director, Senior Managing
Executive Officer

Hirohide KAMIKAWA

Representative Director, Chairman

Masaru ONISHI

78

JAL REPORT 2013

Director, Senior Managing
Executive Officer

Nobuhiro SATO

Representative Director, President

Yoshiharu UEKI

External Director

Kimie IWATA

Highlights

Messages from Management

Review of Operations

Each of Us Making JAL What It Is

CSR

Financial Section

Members of the Board of Directors

Masaru ONISHI

Chairman of the Board of Directors, Safety General Manager

Yoshiharu UEKI

Chairman of the Board of Managing Executive Officers, Chairman of the Council for Safety
Enhancement, Chairman of the JAL Philosophy Committee, Chairman of the CSR Committee

Director, Senior Managing Executive
Officer

Hirohide KAMIKAWA

General Manager, Managing Division Passenger Sales, Domestic Passenger Sales
President of JAL Sales

Director, Senior Managing Executive
Officer

Nobuhiro SATO

Engineering & Maintenance, President of JAL Engineering

Director, Senior Managing Executive
Officer

Junko OKAWA

Cabin Attendants

External Director

Tatsuo KAINAKA

Representative Director, Chairman
Representative Director, President

External Director

Kimie IWATA

Auditors
Audit & Supervisory Board Member
Audit & Supervisory Board Member
External Audit & Supervisory Board
MemberHisao TAGUCHI

Yasushi SUZUKA
Eiji KATAYAMA

External Audit & Supervisory Board
MemberHiroyuki KUMASAKA

External Audit & Supervisory Board
MemberShinji HATTA

Executive Officers
Senior Managing Executive Officer

Tadashi FUJITA

Deputy General Manager, Managing Division Passenger Sales, International Passenger Sales,
Web Sales, Senior Vice President, Eastern Japan

Senior Managing Executive Officer

Hideki KIKUYAMAManaging Division Route Marketing

Norikazu SAITO

Finance & Accounting

Toshinori SHIN

Flight Operations

Nobuyoshi GONDO

Corporate Safety & Security

Tsuyoshi YAMAMURA

Cargo & Mail

Akira YONEZAWAManaging Division Route Marketing (International Route Marketing)Kiyoshi ISHIZEKIIT Planning

Hiroyuki HIOKA

General Affairs

Shinichiro SHIMIZU

Human Resources

Manabu SATO

President of Japan Transocean Air

Tetsuya ONUKI

President of J-AIR

Takahiro KATO

Senior Vice President, Western Japan

Munemitsu ERIKAWA

Senior Vice President, China, Vice President and Regional Manager, Beijing, District SalesManager, BeijingManaging Executive Officer
Managing Executive Officer
Managing Executive Officer
Managing Executive Officer
Managing Executive Officer
Managing Executive Officer
Executive Officer
Executive Officer
Executive Officer
Executive Officer
Executive Officer
Executive Officer
Executive Officer
Executive Officer
Executive Officer
Executive Officer
Executive Officer
Executive Officer
Executive Officer
Executive Officer
Executive Officer
Executive Officer
Executive Officer
Executive Officer

Shigemi KURUSU

Group Companies Support

Toshiaki NORITA

Corporate Planning, Business Creation Strategy

Makoto YONEYAMA

Corporate Control

Tsutomu ANDOManaging Division Route Marketing (International Relations and Alliances)

Kiyoshi MARUKAWA

Airport Operations

Toshiki OKA

Purchasing

Jun KATOManaging Division Route Marketing (Marketing & Branding)Tadao NISHIOManaging Division Route Marketing (Domestic Route Marketing)

Hidetsugu UEDA

Human Resources, in charge of Education, Vice President, Human Resources Management

Ryuzo TOYOSHIMA

President of JAL EXPRESS

Arata YASUJIMA

President of Japan Air Commuter

Toshio SHINOHARA

President of JAL Sky, Vice President, Haneda Airport

JAL REPORT 201379

Japan Airlines Co., Ltd.
Finance Department and CSR Group, General Affairs Department
Nomura Real Estate Bldg., 2-4-11 Higashi-Shinagawa,Shinagawa-ku, Tokyo 140-8637, Japan
TEL: +81-3-5460-3068 (Finance Department) +81-3-5460-6837 (General Affairs Department)
Corporate Website:www.jal.com
Corporate Information: http://www.jal.com/en/outline/corporate/
CSR Information:
http://www.jal.com/en/csr/
Investor Relations:
http://www.jal.com/ja/investor/

English Version