F LY I N T O T O M O R R O W
JA L R EPORT 2017
Fiscal year ended March 2017

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

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

JAL PHILOSOPHYThe JAL Group will:

PART 1 In Order to Lead a Wonderful Life

Pursue the material and intellectual
growth of all our employees;

CHAPTERCHAPTERCHAPTER2 Have the Right Attitude
Base Criteria for Decision-Making on“Doing What Is Right as a Human Being”
Have a Beautiful Mind
Be Humble and Honest
Always Be Cheerful and Positive
A Small Good Is Like a Great Evil, While aGreat Good May Appear MercilessWrestle in the Center of the Ring
Grasp Matters Simply
Possess Opposing Extremes

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

CHAPTER

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

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

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

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

Deliver unparalleled service to ourto the betterment of society.

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

CHAPTER

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

4 Ability Will Improve
Ability Will Improve
CHAPTER

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

JAL REPORT 201701

The JAL Group’s Growth Story

CONTENTSThe JAL Group’s Growth Story

03

JAL Group History . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .  04
Financial and Non-financial Highlights . . . . . . . . . . . . . . . . . . . . . . . . .  08

Management Strategies Designed to Create Value

13

Message from the President . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .  14
Message from the CFO . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .  20
Outline of JAL Group Medium Term Management Plan
for Fiscal Years 2017-2020 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .  24
JAL Group Value Creation Cycle . . . . . . . . . . . . . . . . . . . . . . . . . . . . .  28
Human Resources Strategy . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .  37

Performance and Strategies by Business

43

At a Glance . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .  44
International Passenger Operations . . . . . . . . . . . . . . . . . . . . . . . . . . .  46
Domestic Passenger Operations . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .  48
Other Businesses. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .  51

Editorial PolicyGroup Companies. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .  52

This JAL Report 2017 is an integrated report on
JAL’s financial performance and CSR activities,

A Business Base that Supports Value Creation

53

JAL Group CSR . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .  54
Compliance / Risk Management. . . . . . . . . . . . . . . . . . . . . . . . . . . . . .  66
Corporate Governance . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .  68
Our External Directors Discuss JAL . . . . . . . . . . . . . . . . . . . . . . . . . . . .  72
Board of Directors and Officers . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .  76

based on various guidelines, to provide a deeper
understanding of such matters as the JAL
Group’s corporate value and growth potential.
Period covered by the report
Primarily April 2016 to March 2017 (fiscal 2016)
Scope of the report
The JAL Group

Directors . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .  76
Audit & Supervisory Board of Members . . . . . . . . . . . . . . . . . . . . .  79

Date of publication

Executive Officers. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .  80

September 2017

Financial / Data Section

81

Financial Data – Six-year Summary. . . . . . . . . . . . . . . . . . . . . . . . . . . .  82
Evaluation and Analysis of Financial Conditions . . . . . . . . . . . . . . . . . .  84

The JAL Group supports society’s
progress and development throughits business activities by increasing
corporate value through the provisionof the highest level of services tocustomers. In this section, we lookback at JAL’s history and review
progress under the previous Medium
Term Management Plan.

JAL corporate website
www.jal.com/en/

Offering a comprehensive insight into JAL’s

JAL Group History . . . . . . . . . . . . . . . . .  04

business approach and activities, as well as
investor and CSR information.

Financial and Non-financial Highlights. . .  08

Consolidated Financial Statements . . . . . . . . . . . . . . . . . . . . . . . . . . .  98
Consolidated Subsidiaries . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .  121ESG Data . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .  122International Route Map . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .  124Domestic Route Map. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .  126Glossary . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .  127Data on Incidents . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .  128Stock Information / Corporate Information. . . . . . . . . . . . . . . . . . . . . .  129

02

JAL REPORT 2017

JAL REPORT 201703

Ⅱ

The JAL Group’s Growth Story

Ⅲ

Management Strategies
Designed to Create Value

Ⅳ

Performance and Strategies
by BusinessⅤ

A Business Base that Supports
Value Creation

Financial / Data Section

JAL GROUP HISTORY

Since its establishment, the JAL Group has developed its business to meet the needs ofthe times. Following its bankruptcy in 2010, when the Group was given the opportunity
to restructure, it has been progressing steadily, focused on the goals of delivering unparalleled service to its customers and contributing to the betterment of society.
Going forward, the JAL Group is committed to continuing to create new values
under the company slogan— FLY INTO TOMORROW—as it seeks to become theworld’s most preferred and valued airline group.
K
●

C
●

A
●

1970

1951

Lists on first sections of anumber of stock exchanges

Establishment of Japan Airlines

H
●

G
●

1987
Completes privatization

N
●

2010
Files for reorganization
proceedings under the
Corporate Reorganization Act

1992
Establishes Service
Committee

Publishes Medium Term
Management Plan

M
●

E
●

2012

1983

B
●

2002
Business integration of Japan
Airlines and Japan Air System

D
●

1954
Launches first international route,Tokyo=San Francisco

Relists on First Section ofTokyo Stock Exchange

I●

Sets world record forinternational scheduled air
traffic data

Head Office Building at the time ofestablishment

January 19, 2010 Press ConferenceJ●

Holds full privatization kick-off ceremony

1970

L
●

2007

Introduces jumbo jet

2011

Joins oneworld alliance

Concludes corporate
reorganization proceedings
under the Corporate
Reorganization Act

F
●

1985
Japan Airlines flight 123
accident

Operates first international flight(February 2,1954, Haneda to San Francisco)Business integration press conference

March 1, 2007 oneworld Governing
Board meeting

JAL’s second Boeing 747 lands at Haneda

A
●

C
●

E
●

G
●

H
●

J
●

K
●

M
●

March 31, 1951: Japan Airlines Co., Ltd.
and four other Japanese companies
apply for an airline company license.
Subsequently, they unite into a single
company, Japan Airlines, with Aiichiro
Fujiyama as the shareholders’representative. Company registration iscompleted on August 1 of the same
year, marking the birth of Japan Airlines
Co., Ltd., the first Japanese-owned
private-sector airline company of the
post-war period.

February 2, 1970: Japan Airlines stock
is listed on the first sections of Tokyo,
Osaka, and Nagoya stock exchanges,
respectively.

According to 1983 internationalscheduled air traffic data (total of
passengers, cargo and mail) issued by
the International Air Transport
Association (IATA), Japan Airlinesachieves a 5.6% year-on-year increasein air traffic to 4,559 million ton/kilometers, making it first of the then126 IATA member airlines. (In theprevious year it came second to Pan
American World Airways.)

November 18, 1987: JAL is launched
as a fully fledged private-sector
enterprise following the completion of
the amendments to the Articles ofIncorporation and other procedures
necessary for complete privatization at
an extraordinary general meeting ofshareholders held the previous day.
While regulations restricting the issueof new shares, the appointment of
directors, and other matters are lifted,
this also means the loss ofgovernment funding and assistance.
Subsequently, all government-heldstocks are sold off in December 1987.

To mark the United Nations Decadeof Disabled Persons (1983–1992),
initiatives to make air travel fully
accessible are expanded to thecompany level from the previous
departmental level.

April 1, 2007: With the aim of further
expanding its network, Japan Airlines
becomes an official member of
oneworld, one of the three major
global airline alliances. This makes it
possible for JAL to offer greater added
value in convenience and comfort toits customers through e-ticket links,
improved mileage programs, sharedairport lounges, and code-share
flights, among others.

January 19, 2010: Japan Airlines files
an application for support from theEnterprise Turnaround Initiative
Corporation of Japan (ETIC), and ETIC
decides to support its restructuring.
On the same day, Japan Airlines files
petitions for commencement ofreorganization proceedings under the
Corporate Reorganization Act with theTokyo District Court, and the Court
enters an order commencing theproceedings.

September 19, 2012: Japan Airlines isrelisted on the Tokyo Stock Exchange.
After the bankruptcy of January 19,
2010, its business was scaled down to
60% due to the withdrawal of
unprofitable routes and othermeasures. In addition, the number ofGroup companies was halved, staff
numbers were reduced by 40%
resulting in a 20% decline inpersonnel costs, and company
pensions were reduced by up to 53%.
A new Corporate Policy is established,
the JAL Philosophy is adopted, and theamoeba management system is
introduced. As a result, operating
income for fiscal year 2011 reaches
204.9 billion yen, enabling JAL to
repay the financial support from ETIC
in full.

B●

February 2, 1954: Japan Airlinesachieves its much awaited
breakthrough into the international
market with the launch of theTokyo=San Francisco route. At the time,
the service consists of two flights aweek with First Class service only. Only
five of the 21 passengers on the firstflight are fare-paying passengers.

04

2017

JAL REPORT 2017

D●

July 1, 1970: JAL’s first commercial
flight operated with the Boeing
747 (jumbo jet) departs from Tokyo
International Airport bound for
Honolulu, carrying 320 passengers,
three flight crew members, and 18
cabin attendants, as well as 6.4
tons of baggage, 1.3 tons of cargo,
and 11 kg of mail. From then on,
Japan Airlines enters the age ofmass transport.

F●

August 12, 1985: Japan Airlines flight
123 crashes into the ridges of Mount
Osutaka, causing the loss of 520
precious lives. In the face of the pain
and grief of the bereaved families andthe resulting public mistrust overairline safety, Japan Airlines pledges
to ensure that such an accident will
never recur.

I●

Japan Airlines and Japan Air System
decide to integrate their businesses.
The decision reflects their ambition to
become a world top-class airline
playing the central role in Japan’s airtransport business of the 21st
century. It is also motivated by the
belief that it is important to respondto societal needs for the maintenanceand expansion of air transport
services by building a strong businessfoundation and corporate structurethat can withstand intense global
competition.

L●

March 28, 2011: Fourteen months
after the commencement of corporate
reorganization proceedings under the
Corporate Reorganization Act, theCourt decides to conclude proceedings
and allow Japan Airlines to transformto a joint stock company from acompany under reorganization.

JAL REPORT 201705

Ⅱ

The JAL Group’s Growth Story

Management Strategies
Designed to Create Value

Ⅲ

Ⅳ

Performance and Strategies
by BusinessⅤ

A Business Base that Supports
Value Creation

Financial / Data Section

JAL GROUP HISTORY

Overview of Fiscal Years 2012–2016 JAL Group Medium Term Management Plan

2.

JAL will provide unparalleled service to deliver arefreshing and inspiring travel experience tocustomers. Our goal is to become number one incustomer satisfaction by fiscal year 2016.

3.

JAL aims to establish sufficient levels of profitability
and financial stability to absorb the impact of
economic fluctuations and risk factors by achieving
an operating margin of 10% or above for fiveconsecutive years and an equity ratio of 50% orabove by fiscal year 2016.

Key initiatives (five categories)

Maintaining flight safety(FY)

Indicators

2012

2013

2014

2015

2016

strive to build an advanced Safety Management System and1 case0 case2 cases

1 case1 caseensure that all employees can respond with sufficient knowl-

0 casesedge and awareness. To support these aims, JAL has accumulat-

Aircraft accidents
Serious incidents

2 cases

Irregular operations

69 cases 75 cases 70 cases 73 cases 66 cases

Customer injuries

23 cases 11 cases 12 cases 12 cases

Irregularities due
to human error

54 cases 62 cases 65 cases 63 cases 48 cases

1 cases

0 cases

3 cases

8 casessafety systems to maintain safety. Aiming to be the leading
company for safety in the transport sector, we not only deploy

Repeat Intention rate / Recommendation Intention rate

One of the management targets of the JAL Group Medium Term

(FY)

2012

2013

2014

2015

2016

International flights
1st

1st

1st

1st

Route network

Recommendation
Intention rate

2

2

1

2

1

nd

nd

st

nd

st

Domestic flights
Repeat Intention rate

6th

6th

3rd

5th

3rd

Recommendation
Intention rate

3rd

2nd

3rd

3rd

3rd

Safety awareness education
Culture of refining manuals
Culture of reporting

Original initiative of
the JAL group

Enhancing employee skills and knowledge
Safety Leaders
SMS education(Safety knowledge training)
Normal Line Operations Monitoring

Initiatives based on
global standards

Expansion of risk assessment
Safety Performance Monitoring

continuously refining JAL Group-specific initiatives.

Delivering unparalleled service

3rd

Human resources managementa safety culture, nurturing safety professionals, and evolving

2. Becoming number one in customer satisfaction

Repeat Intention rate

Group management

ed multiple safety layers by pursuing three initiatives: cultivating

cutting-edge systems that lead the aviation industry, but are also
For further information, please refer to P.128 Data on Incidents.

Safety initiatives

Products and services

To maintain flight safety, the foundation of the JAL Group, we

Humanresources

We are aware that flight safety is the foundationand social responsibility of the JAL Group.
JAL maintains the highest standards of safety
in the transport sector.

1. Flight safety

System1.

CultureAchievement of management targets
Management Targets(Three Targets)

As for domestic flights, JAL ranked third in both indicators.

Management Plan for Fiscal Years 2012-2016 was to become

However, Group-wide value creation initiatives bore fruit andnumber one for Repeat Intention and recommendation Intention

consequently, we improved our score in not only the two key

in both international flights and domestic long-distance flights

indicators but also all JCSI survey items. Among the measuresin the Japanese Customer Satisfaction Index (JCSI) survey.

contributing to this accomplishment were the expansion of

JCSI survey results released in November 2016 showed thatroutes offering JAL SKY NEXT services and an in-flight Internet

JAL had successfully ranked number one in both indicators forservice for free campaign, which were part of our initiatives tointernational flights. This was attributable to the expansion of

offer a refreshing and inspiring travel experience.

routes operated with JAL SKY SUITE-configured aircraft, in-flight

We plan to publish the results of surveys covering themeals created in collaboration with famous chefs and restau-

period from August 2016 to July 2017 in the fall of 2017.

rants, and other product and service enhancement initiatives.

The JAL Group is firmly committed to putting in united efforts
to become the world’s most preferred and valued airline group.

Surviving future competition(three areas for differentiation)
Enhancement of the JAL Brand
As a full-service carrier, we will maintain safety andprovide customers with unparalleled services toenhance the JAL Brand.

Route network, Products and services
Rather than simply products expansion of businessscale, we will build a network of highly convenientroutes and provide products and services that leadthe competition in order to become the preferred
airline group of customers worldwide.

3. Operating margin of 10% or above for fiveconsecutive years / Equity ratio of 50% orabove by fiscal year 2016
Operating margin

Equity ratio

(%)
25.0

(%)
60.0

20.0
15.0
10.0

Cost competitivenessWe will continuously strive to improve cost efficiency,
maintain and enhance cost competitiveness toreinforce our resilience to risks, and build a businessfoundation for sustainable growth.

06

JAL REPORT 2017

56.2
55.0

15.8

15.7
12.7 13.4

13.2

51.5
50.0

45.0

0

Under the amoeba management system, the JAL Group aims to

Drawing on the lessons learned from our bankruptcy, weachieve high profitability through the conscious commitment of

established financial targets aimed at maintaining high profit-

each employee to ‘maximize revenues and minimize expenses.’ability and building a financial foundation resilient to economic

At the same time, we strive to increase corporate value by

fluctuations and event risks. These targets — an operating

establishing systems to flexibly respond to changes in themargin of 10% or above for five consecutive years and an

business environment.

equity ratio of 50% or above by fiscal year 2016— wereachieved through the united efforts of the JAL Group.

TargetAt least 50%

TargetAt least 10%

5.0

52.7

53.4

Achievement of financial targets

46.4

40.0

2012 2013 2014 2015 2016 (FY)2012 2013 2014 2015 2016 (FY)JAL REPORT 201707

Ⅱ

The JAL Group’s Growth Story

Ⅲ

Management Strategies
Designed to Create Value

Ⅳ

Performance and Strategies
by BusinessⅤ

A Business Base that Supports
Value Creation

Financial / Data Section

FINANCIAL AND NON-FINANCIAL HIGHLIGHTS

Financial Data

Operating revenue

Profit attributable to owners of parent(Billions of yen)(Billions of yen)

-3.6%

-5.9%

1,288.9 billion
vs. fiscal 2015¥

1,336.6 1,288.9

2015

2016

174.4

Consolidated operating
revenue declined 3.6%
year on year to 1,288.9
billion yen, reflecting
a drop in fuel surcharge
revenue and a negative
impact from the stronger
yen on international routes
and falling passenger unit
revenue on domestic routes
amid price competition
with other carriers.

(FY)

vs. fiscal 2015

164.1

2015

2016

Shareholders’equityOperating income /Operating margin(Billions of yen / %)OperatingincomeOperatingmargin-18.6% -2.4%
vs. fiscal 2015

170.3 billion / 13.2%

¥

209.1
170.3
15.7

2015

13.2

2016

(FY)

Operating income (Billions of yen)
Operating margin (%)

08

JAL REPORT 2017

Operating income fell
18.6% year on year to170.3 billion yen, reflecting
increases in maintenancecosts and personnel costs
for strategic workforce
investment to strengthen
the foundation for theGroup’s future growth.
The operating margin
was 13.2%, exceeding
our target of 10%.

¥ 253.1 billion

Cash flow from operating activities(FY)

Non-operating profit
declined due to a drop in
gain on sales of aircraft,
but the company recorded
deferred income tax of
31.6 billion yen under a
new tax effect accounting
policy. As a result, profit
attributable to owners ofparent totaled 164.1
billion yen, down 5.9%
year on year.

Equity ratio

972.0 56.2%

vs. fiscal 2015¥
billion

As of March 31, 2017, total assets stood at 1,728.7 billion yen, up
149.8 billion yen year on year, liabilities totaled 725.3 billion yen,
up 17.0 billion, and net assets totaled 1,003.3 billion yen, up 132.8
billion yen. As a result, shareholders’ equity was 972.0 billion yen
and equity ratio increased 2.8 percentage points to 56.2%.

Interest-bearing
debt

Free cash flow*2¥ 37.5 billion

FY 2016ROE+2.8pt¥- 215.5 billion

Cash flow from investing activities*1

18.1%

ROA

10.3%

Air transport
Unit cost* 7
revenues per ASK*5*6

¥

13.3

¥

9.4

After adjusting net profit before income tax toreflect 162.7 billion yen in non-cash items such as
depreciation, and to reconcile operating accounts
receivable and payable, and other items, operating
activities provided net cash of 253.1 billion yen.
Investing activities used net cash of 215.5 billion
yen, mainly for the purchase of fixed assets.
As a result, free cash flow was 37.5 billion yen.

EBITDA* 3

EBITDA margin* 4

266.1 20.6%¥
billion
Net profit per
share

¥

Dividend per
share

456.56 ¥ 94.00

Debt-to-equity
ratio

116.0 0.1 times¥
billion*1 Excludes fixed deposit account deposits and withdrawals*2 Free cash flows= Operating cash flows + Investment cash flows*3 EBITDA= Operating income / Depreciation expense*4 EBITDA margin= EBITDA / Operating revenue*5 ASK (Available Seat Kilometers): A unit of passenger transport capacity: Total number of seats × Distance flown (km).
*6 Air transport revenue per ASK: (Air transport revenue – fuel surcharge) / ASK*7 Unit cost: Consolidated air transport costs (excluding fuel costs) / ASKInterest-bearing debt totaled 116.0 billion yen at the end of fiscal
year 2016, up 23.4 billion yen year on year.

JAL REPORT 201709

Ⅱ

The JAL Group’s Growth Story

Ⅲ

Management Strategies
Designed to Create Value

Ⅳ

Performance and Strategies
by BusinessⅤ

A Business Base that Supports
Value Creation

Financial / Data Section

FINANCIAL AND NON-FINANCIAL HIGHLIGHTS

Non-financial Data
(As of March 31, 2017)

Number of groupcompanies

Number of employees

137

11,449companies

peopleTraffic results

32.57

Domestic
passengers

Number of countries, regions and destinations served by the JAL Group(including code-share flights)
Europe /Middle East

U.S.A. /Canada8

million passengers

81

Consolidated employees+

32,753 people

56 affiliated companies(including 13 accounted forby the equity method)

International
passengers

8.39

million passengers

Australia /Guam / Tahiti

344

Countries/Regions where we fly to54

countries/
regions where
we fly toInternational flights

Large aircraft 777

Medium-sizedaircraft 787/767
Small aircraft 737

Regional jet

Average fleet age

40
70
64
56
9.5

230

Domestic and International routes total

JAL REPORT 2017

Repeatintention
rate

1st
3rd

Recommendation
intention rate

Domestic flights

aircraftaircraft99.7%

aircraftaircraft

On-time arrival rate
Domestic and International routes total

aircraft

Repeatintention
rate

91.6

%

Recommendation
intention rate

Customer injuries

8 cases

1st 846people
3rd 16.3%

Irregularities due to human error

48 cases

84.6%

Electric power
consumption

113

millionkWh(including airports
in Japan)Number/ratio of
women in management positions

CO 2 emissions per revenue ton kilometervs. fiscal 2005

years

TOTAL

10

Operational rate2

Airports

Repeat intention rate /Recommendation intention rate
Number of group aircraft

13
Southeast
Asia / India

Hawaii81 subsidiaries(including 52 consolidated
subsidiaries)

East Asia

5* Only JAL Group direct flights shown on the map

Aircraft accidents /Serious incidents

1case

Aircraftaccidents

Seriousincidents

0 cases* For details of aircraft accidents and serious incidents,
please refer to P.128: Data on Incidents.

Irregular operations

66 cases

Volume of industrial waste

3,436 tons

Heat consumption (crude oil equivalent)

Water consumption

44,936 Kiloliters426

thousandm3

JAL REPORT 201711

FINANCIAL AND NON-FINANCIAL HIGHLIGHTSManagement Strategies Designed
to Create Value
Awards and Recognition
Best Economy Class Airline Seat
Skytrax 2017 World Airline Awards
JAL was ranked first for Best Economy Class Airline
Seat in the Skytrax 2017 World Airline Awards. This
marks the third time JAL has received a World Airline
Award, following awards for the Best Business Class
Airline Seat in 2013 and a previous award for the Best
Economy Class Airline Seat in 2015.

Best Airline for On-time Performancein the Asia-Pacific Region
2016
8th A nn u al

FlightStats 2016 Airline On-time Performance
Service Awards
FlightStats, Inc. ranked JAL first for on-time performancein the mainline and network categories for Asia-Pacificmajor airlines, based on flights on domestic and international routes between January and December 2016.

JAL Selected as a Company that Helps Cancer
Patients Balance Treatment and Work Commitments
Top Award in the Tokyo Work Circle Project
The Tokyo Metropolitan Government has recognized our
initiatives to support employee health through our healthpromotion program, JAL Wellness 2016, as well as ourefforts to create more flexible working practices withvarious holiday leave schemes. This is the first time JAL
has received this award.

Basic Achievement Grand Prize for Diversity
and Inclusion
2017 J-Win Diversity Award
JAL received the Basic Achievement Grand Prize from theJapan Women’s Innovative Network, recognizing JAL asa leading company in promoting diversity and inclusion.

Selected as a Telework Pioneer 100 Company by
the Ministry of Internal Affairs and Communications
JAL Selected as a Leading Company
in Employee Health Management
Health & Productivity Stock
JAL was selected as a Health & Productivity Stock in 2017
for the third consecutive year by the Ministry of Economy,
Trade and Industry and the Tokyo Stock Exchange, which
recognized our management commitment and strategic
initiatives in employee health management.
* “Health management” is a registered trademark of NPO
Workshop for the Management of Health on Company and
Employee.

JAL Selected as a Company that Empowers
Female Employees
Nadeshiko Brand Enterprise
JAL was selected for inclusion in the Nadeshiko Brand
list of enterprises for the third consecutive year by the
Ministry of Economy, Trade and Industry and the Tokyo
Stock Exchange. Companies on the list are recognized
for initiatives in diversity management.

JAL Selected as a Competitive IT Strategy
Company for the Second Consecutive Year
Competitive IT Strategy Company Stock Selection
JAL was selected as a Competitive IT Strategy Company
in 2017 for the second consecutive year by the Ministryof Economy, Trade and Industry and the Tokyo Stock
Exchange, which recognized our use of advanced IT to
increase corporate value and improve profitability.

12

JAL REPORT 2017

Chairman’s Prize in the 17th Telework Promotion Awards
JAL received certification under the Law for Measures to
Support the Development of the Next Generation in June2008 in recognition of our efforts to nurture future
generations. JAL received the Chairman’s Award in the
17th Telework Promotion Awards, the first time an airline
has won this award.

Certified as a Gold Company
in the Pride Rating System
Japan’s First Rating System for Corporate LGBT Programs
JAL received a Gold ranking in the Pride rating system,
established by Work with Pride, an LGBT volunteer group.

In fiscal year 2017, the JAL Groupinitiated the JAL Group Medium Term
Management Plan for Fiscal Years
2017 – 2020, under the key words“Challenge, Leading to Growth.”
In this section, we outline the plan’s
initiatives and explain the JAL
Group’s value creation cycle.

JAL Granted “Kurumin” Certification
for Nurturing Future Generations
4th Action Plan Currently Being Implemented
Since June 2008, JAL has been certified with the “Kurumin” mark as a company that supports future generations.

Message from the President. . . . . . . . . .  14

JAL Secures Top Place in Best Free Attraction
Ranking 2016

Outline of JAL Group Medium Term
Management Plan for Fiscal Years
2017-2020. . . . . . . . . . . . . . . . . . . . .  24

JAL Factory Tours – SKY MUSEUM
JAL Factory Tours – SKY MUSEUM, the flagship component of the JAL SORAIKU educational program, came top
in the Best Free Attractions Ranking 2016 by TripAdvisor,
the world’s largest travel website.

Message from the CFO . . . . . . . . . . . . .  20

JAL Group Value Creation Cycle. . . . . . .  28
Human Resources Strategy. . . . . . . . . . .  37

JAL REPORT 201713

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The JAL Group’s Growth Story

Ⅲ

Management Strategies
Designed to Create Value

Performance and Strategies
by BusinessⅣ

A Business Base that Supports
Value Creation

Ⅴ

Financial / Data Section

MESSAGE FROM THE PRESIDENTThe JAL Vision and our new Medium Term Management Plan were established torealize the JAL Group Corporate Policy. We aspire to be an airline that not only
achieves corporate growth but also contributes value to society.

01

The JAL Group embraced the challenge of the last five years
by working with a strong team spirit toward its goals.

When we formulated our previous medium term management plan— the JAL Group Medium Term
Management Plan for Fiscal Years 2012-2016— our two goals were to regain the trust of society
through sincere responses to the 2010 bankruptcy and to build a solid financial base by establishinga high profitability structure to promote sustainable growth. To reach these goals, we establishedtargets in three areas: safety, customer satisfaction, and finance. Specifically, they were zeroaircraft accidents and zero serious incidents; number one in customer satisfaction by fiscal year
2016; and an operating margin of 10% or above for five consecutive years and an equity ratio of

Yoshiharu Ueki
Representative Director,
President

50% or above by fiscal year 2016. In spite of these challenging goals, every JAL Group staff
member worked determinedly over the five-year period to accomplish and fulfill the plan.
The JAL Philosophy and the amoeba management system, both introduced after our bankruptcy,
generated a dramatic change in the awareness and behavior of JAL Group executives andemployees. All JAL Group employees now put in joint efforts each day to realize the JAL Group
Corporate Policy: deliver unparalleled service to customers, increase corporate value, and contributeto the betterment of society. As a result, we were able to achieve our financial targets, thought tobe the most challenging of the three, of an operating margin of 10% or above for five consecutive
years and an equity ratio of 50% or above by fiscal year 2016. I believe that this has enabled us tocreate a firm foundation to enter a new growth phase. Regarding our safety target, one aircraft
accident occurred in fiscal year 2016, and consequently we were not able to achieve the targetedzero record for five years. As for customer satisfaction, we reached our target for international
flights, but fell short of our target for domestic flights. We take these results seriously and willcontinue to push forward determinedly to reach our customer satisfaction target.
It is regrettable that we did not fully achieve all the targets set out in the previous Medium Term
Management Plan. It is significant, however, that all JAL Group employees worked in unison to
fulfill our yearly rolling plans, updated by reviewing the progress made each year and the directionof our policy under the five-year plan. I think we can compare finishing the plan to crossing thefinish line of a marathon. By implementing the JAL Philosophy and the amoeba management
system over the past five years, the JAL Group has laid a solid business foundation, and establisheda high-profitability structure and a strong financial base. I believe that this strategy has enabled us
to regain the trust of all stakeholders and fulfill their expectations for sustainable growth.

For an outline of the previous Medium Term Management Plan, please refer to P.06-07:
Summary of Overview of Fiscal Years 2012-2016 JAL Group Medium Term Management Plan.
For details of aircraft accidents and serious incidents, please refer to P.128: Data on Incidents.

14

JAL REPORT 2017

JAL REPORT 201715

Ⅰ

The JAL Group’s Growth Story

02

Ⅲ

Management Strategies
Designed to Create Value

Performance and Strategies
by BusinessⅣ

A Business Base that Supports
Value Creation

Ⅴ

Financial / Data Section

The JAL Vision— our first step toward implementing
the JAL Group Corporate Policy

The JAL Group regards the 2020 Olympic and Paralympic Games in Tokyo as a major turning point,
when an expansion of flight slots at Tokyo metropolitan airports is expected. Bearing this in mind,
we established a new JAL Group Medium Term Management Plan for Fiscal Years 2017-2020
under the key phrase “Challenge, Leading to Growth.”
If I were to compare the JAL Group when we initiated the previous medium term management
plan to an aircraft in flight, I would say we were in the phase of having taken off and climbing
through thick clouds and poor visibility. Now that we have finished the previous plan, I would say
the aircraft has finished climbing and is in the cruising phase of the flight. Having reached thispoint and begun considering what is most important for the next phase, we have concluded that
we should steadfastly implement our Corporate Policy and gain public recognition as a company
that makes valuable contributions to society. We therefore established the JAL Vision to indicate
what kind of company we aspire to be in ten years’ time through the process of implementing the
Corporate Policy.
The JAL Vision, which outlines our ideal future profile, expresses our wish to bring happinessto customers worldwide including Japan, and to communities and society as well as individual
customers. It also encapsulates our determination to become an airline that meets a broad rangeof societal needs. To realize these ambitions, we envisage transforming JAL into a true global
airline that is one step ahead of its competitors in value creation, and thereby ensuring sustainablegrowth. The new Medium Term Management Plan translates this vision into concrete measures sothat we may realize it.

03

New Medium Term Management Plan:
To realize the JAL Vision

The new Medium Term Management Plan identifies two growth drivers for the JAL Group to
concentrate on, under the key words “JAL Focus.”
The first growth driver is to refine our full-service carrier business. We aim to achieve steady
growth by positioning it as the core business domain of JAL and by maximizing its strengths. As
part of active investments in “hard” services, we will proceed with expanding international routes
operated with JAL SKY SUITE-configured aircraft, while on domestic routes, we will deploy the

JAL VisionCorporate Policy

To customers worldwide,
From region to society

A350 for the first time in fiscal year 2019.
As for our route network, we will steadily expand routes, primarily international routes, to

JAL Vision

further improve customer convenience. We launched the route between Haneda and New York in

Medium Term Management Plan

April 2017, and will open routes between Narita and Melbourne and between Narita and Kona in
September this year.
In addition to these improvements in “hard” services and routes, we will further refine our

To realize the JAL Group Corporate Policy and become

spirit of hospitality, which is the JAL Group’s greatest strength, to deliver the finest service and a“the world’s most preferred and valued airline,”
everyone at JAL will put in joint efforts to ensure flight safety and to:pleasant travel experience at all customer touch points before, during, and after the flight.
The second growth driver is the expansion of our business domains. As well as further
expanding our airline-related businesses such as providing services relating to airport handling and

1

16

JAL REPORT 2017

Transform JAL
into a true
global airline

×2

Create new values
one step ahead of
our competitors＝ 3

Continuesustainablegrowthaircraft maintenance, and in the travel agency and credit card sectors, we will devote our energy toentering new business domains, and meet the challenge of creating and cultivating new revenue
sources. We target a revenue increase of 10% and 30% in our core business domain and new
business domains, respectively, in fiscal year 2020 compared to fiscal year 2016.

JAL REPORT 201717

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The JAL Group’s Growth Story

Ⅲ

Management Strategies
Designed to Create Value

Performance and Strategies
by BusinessⅣ

Ⅴ

A Business Base that Supports
Value Creation

Financial / Data Section

Environmental initiatives
Under the key phrase “Living in Harmony with the Planet,” we are taking steps to reduce CO2
emissions, industrial waste, and electric power consumption. We particularly believe that reducing
fuel consumption contributes significantly to reducing impacts on the environment. We therefore
enforce various measures, including renewing our fleet with state-of-the art aircraft, which have
improved mileage performance, applying optimal flight courses and flying techniques, and reducing
aircraft weight through optimal onboard loads. Since 1993, we have been participating in the
CONTRAIL Project by conducting atmospheric observations using our aircraft. This project hasreceived an array of awards such as the Environment Excellence Award, the Minister of theEnvironment Prize, and the Special Global Environment Prize. It is a valuable asset of ours that wehave been engaged in these activities since the days when environmental issues did not draw suchstrong public attention. Going forward, we remain committed to conducting environment-conscious
business operations.

Social initiatives
Our social initiatives focus on nurturing the next generation through JAL SORAIKU and otherrelated projects, and on contributing to communities through support for disaster recovery, regional
revitalization, and support to developing countries. Regarding regional revitalization, the JAPANPROJECT, launched in May 2011, promotes for instance attractive regional tourist destinations andAs with the previous plan, the new Medium Term Management Plan sets management targets
in the three areas of safety, customer satisfaction, and finance. To reach our safety target, which
was not achieved in the previous plan as mentioned above, we will further accumulate safety
layers to achieve zero aircraft accidents and zero serious incidents. Regarding customer satisfaction,
we aspire to provide unparalleled service to deliver a refreshing and inspiring travel experience toevery customer, and thereby become the preferred airline in each global region. As for finance,
we set a new management target of achieving a 9% or above return on invested capital (ROIC)*
by fiscal year 2020, in addition to the target of 10% or above operating margin. We will continuously
strive to maintain an equity ratio of approximately 60%.
To reach these management targets, the new Medium Term Management Plan sets out
concrete initiatives under five headings: Safety; Network & Products; Divisional Profitability Management; Human Resources; and Innovation. By tackling these areas, we believe that we will be

local products through our in-flight magazines, in-flight meals, and other JAL Group media. In
fiscal year 2015, the project further evolved into the JAL NEW-JAPAN PROJECT, in which we
collaborate with regional communities to promote revitalization of industries and economies.
Through this project, we assist in attracting domestic and inbound demand, and continue supporting regions across Japan.

Corporate governance initiatives
With regard to corporate governance, we are working to further improve our corporate governancesystem, compliance, risk management, and related activities, which form the business base of
corporate activities. As a corporation that supports public infrastructure, we recognize the importanceof establishing a business continuity plan in the event of a natural disaster, major fire, terrorist
attack, or other emergency situations, and are reinforcing relevant activities.

able to progress steadily step by step to achieve sustainable growth for the JAL Group.
* Return on invested capital (ROIC) (%) = Operating profit (excluding tax) / fixed assets (including future rental
expenses under operating leases)* For an outline of the new Medium Term Management Plan, please refer to P.24-27: Outline of JAL Group
Medium Term Management Plan for Fiscal Years 2017-2020.

05

Closing words

The JAL Group was given the opportunity to rebuild the company after the 2010 bankruptcy
through the support of all stakeholders. Having pulled through the five-year period up to the04

Initiatives Relating to the Environment, Society,and Corporate Governance

The JAL Group recognizes that a company that seeks to contribute value to society as well as

end of fiscal year 2016, we are once again ready to take off on a renewed path toward growth.
To ensure JAL remains one of the world’s most preferred and valued airlines, we will maintain thehighest standards of flight safety and draw on the strengths of everybody in the JAL Group to
meet the high expectations of our stakeholders. I hope we can count on your continued supportand understanding as we move into a new phase of growth.”

corporate growth and profits will gain trust from society. Therefore, we believe that initiatives
relating to the environment, society, and corporate governance are essential.

Yoshiharu Ueki
Representative Director, President

18

JAL REPORT 2017

JAL REPORT 2017

19

Ⅰ

Ⅲ

The JAL Group’s Growth Story

Management Strategies
Designed to Create Value

Ⅳ

Performance and Strategies
by BusinessⅤ

A Business Base that Supports
Value Creation

Financial / Data Section

MESSAGE FROM THE CFO

Financial strategy under the JAL Group Medium Term Management Plan for Fiscal Years 2017-2020

Financial Policy
The financial policy of the new Medium Term Management Plan is to realize an increase in corporate value in a way that combines profitability with stability by building on the solid financial
foundation and business management system which we have established so far and by maintaining
the potential for sustainable growth.
Our profitability targets are to achieve an operating profit margin of 10% or above each fiscal
year and return on invested capital (ROIC)* of 9% or above by fiscal year 2020. Management of

Norikazu Saito

individual investment projects will continue to be based on net present value (NPV) as we have

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

done up till now. Going forward, the key performance indicator applied to company-wide investment will be ROIC, which indicates the efficiency of return on fixed assets (including future rental
expenses under operating leases). Unlike return on equity (ROE), which measures the efficiency ofreturn on shareholders’ equity, this will enable us as the finance department to monitor theeffective use of invested capital as a whole.
Regarding stability, in view of future risks which need to be considered given the particularnature of the aviation business, we will continue to maintain an equity ratio of approximately 60%
and an improvement in our credit rating.
As for growth potential, we envisage that increased expenditures in the initial stage of theplan, which are allocated to advance investment for sustainable growth, will be balanced byrevenue-increasing measures and cost control measures, leading to higher revenues and profits inthe later stages. In fiscal year 2016, the increase in expenses was mainly attributable to a review ofPromoting active investments for growth and effective use of business resources
while raising business management awareness across the JAL Groupthe salary system and higher base salaries as key human resource investments in order to solidify
our foundation for future growth.
In fiscal year 2017, the increase in expenses will mainly be attributable to investments in IT
system upgrades and rising aircraft maintenance costs.
Regarding IT systems, we are updating our passenger service system for the first time in fifty
years. The new system, which will go live in November 2017, is expected to produce enhanced

Review of the JAL Group Medium Term Management Plan for Fiscal Years 2012-2016

For detailed information on revenue management, please refer to P.127: Glossary
Looking back over the JAL Group Medium Term Management Plan for Fiscal Years 2012-2016,
we can point to success in meeting both of our financial targets: an operating profit marginof 10% or above for five consecutive years and an equity ratio of 50% or above by fiscal year

Steps to growth

2016. Major contributing factors were firstly the change in the awareness of all employees

2012 - 20162017 - 2020

achieved by sharing the principles set out in the JAL Philosophy, and secondly a profit-

Previous Medium Term Management Plan

New Medium Term Management Plan

Establishing a High Profitability Structure
to Enter a New Growth Phase

Challenge, Leading to Growthconscious approach to business activities through the introduction of the business management
techniques of the amoeba management system. In concrete terms, each organization visualizes

Theme

2021～

FutureConcept

its profitability status each month for reporting at the Group Earnings Report Session. Thismeasure has resulted in frank discussions, leading to higher profit consciousness. Additionally,

Realize steady growthconsistent implementation of the PDCA cycle, with feedback from monthly business results,
enables timely adjustment of performance targets. In this way, we have established a system

Growth of a certain scale

Revenuesthat enables each organization to react flexibly to changes in the business environment. That is

Establish capacity to meet market growth
Create and develop new revenue sources

the reason for our success in realizing a high profitability business structure.

ProfitInvestment for the future (fleet, innovation, etc.)
Investment in human resources

Cost

IT updates and increased maintenance costs

Enhance improvement
Combining high quality and cost competitiveness20

JAL REPORT 2017

JAL REPORT 2017

21

Ⅰ

Ⅲ

The JAL Group’s Growth Story

Management Strategies
Designed to Create Value

Performance and Strategies
by BusinessⅣ

A Business Base that Supports
Value Creation

Ⅴ

Financial / Data Section

MESSAGE FROM THE CFO

online functions that will contribute to advanced revenue management and greater customer
convenience. It should also generate revenue increases through a more flexible fare system.
Additionally, it will help reduce system maintenance and management costs and enable us toswitch to variable costs linked to customer demand, which together with other benefits willcontribute to greater cost efficiency at the entire company level. As fiscal year 2017 will include
the period of transition to the new system, relevant increases in depreciation expenses, training
needs for system cutover, and other demands will result in a front-loaded increase in costs in the
short term, but I believe the benefit to build an IT platform to serve as the basis for sustainablegrowth will justify our medium-term investments.
As for maintenance costs, we expect an increase in engine maintenance costs, notably for 787
aircraft, with particular increases in fiscal years 2016 and 2017. However, our aim is to reduce overall
maintenance costs for fiscal year 2020— three years from now — to fiscal year 2017 levels by increasing
maintenance cost efficiency through effective use of information technology among other things.
As a consequence of these capital expenditures required for long-term growth, a reduction in
profits is forecast for fiscal year 2017. However, from fiscal year 2018, we aim to establish asustainable trend of higher profits on higher revenues.
* Return on invested capital (ROIC) (%) = operating income (excluding tax)/fixed assets (including future rental expenses underoperating leases)

Response to Risks
Among short-term risks are the impact of fluctuations in fuel markets and exchange rates.
On international routes, a fuel surcharge is applied and fuel price and foreign exchange rate risk

Allocation of Cash Flows

are to some extent reduced. On domestic routes, however, there is no fuel surcharge, and measures to reduce fuel cost and exchange rate risk are carried out through derivative transactions.

With financial stability required as an absolute precondition and with the aim of achieving sustain-

The effectiveness of the fuel surcharge and derivative transactions in limiting risks from market

able growth in the medium to long term, allocation of cash flows is carried out focusing on threefluctuation varies when viewed on a year-by-year basis due to time lag effects. Viewed on aareas: investment for growth, shareholder return, and financial soundness. Our investment plan for

medium-term basis, however, risks are largely neutralized.

the three years from fiscal year 2018 to fiscal year 2020 foresees a yearly average of approximately

The implementation and management of derivative transactions is carried out by the relevant

220 billion yen. Going forward, we plan to increase the proportion allocated to investment for

department subject to approval by the financial controller in accordance with Corporate Manage-

growth so that this growth can drive an increase in operating cash flows. Additionally, we continue

ment Risk Regulations, which govern the maximum amount of the transaction, and corporate

to view shareholder return as one of our main management priorities. With continuous payment ofregulations which specify the authority for transactions. A monthly meeting is held attended by thea stable dividend as the basis of our policy in this area, we decided to raise the dividend payout

relevant executive director to report on the performance of derivatives, identify the current scale ofratio to 30% from fiscal year 2017. Additionally, to increase outlets for shareholder return, werisks, decide the hedge method and hedge ratio, and verify the content of transactions.

will introduce an interim dividend. It is also our policy to give flexible consideration to share buy

For detailed information, please refer to P.93: 10. Fuel and Exchange Rate Hedging in
Evaluation and Analysis of Financial Conditions

backs and additional shareholder return options depending on the economic environment andfinancial conditions.
Allocation of cash flows

Future Capital Investment (image)
RegularInvestment

To our shareholders and investors

Growth investment

The JAL Group believes that growth means realizing an appropriate scale of capacity growth under

Regular investment

Fleet renewal,
etc.

FY2016FY2017FY2018～FY2020
Three-year average(Billions of yen)

OperatingCash Flows

GrowthInvestment

Total

233.4

221.0

Fleet

181.5

174.0

(Group earning
capacity)

Cash flow
increase

Other

51.9

47.0

Total approximately
220 billion yen
a yearthe new Medium Term Management Plan to continuously generate increases in revenues andprofits on the condition of achieving high profitability and financial stability. Going forward, in
addition to investments in existing businesses, we will embrace the challenge of developing new
businesses in a spirit of healthy risk-taking. Making optimal use of assets we have invested in andmonitoring the effectiveness of investments with ROIC, we will promote ‘muscular management.’
In addition to generating growth-based cash flows and maintaining a strong financial foundation,
we will actively implement shareholder return. As a result, we will improve capital efficiency,

Return to
Shareholders

monitoring ROE against a target level of 10% or above. To implement these strategies, it is important that all JAL Group employees act with a challenging spirit rooted in profit consciousness. As

Maintaining
Financial
Soundness

22

JAL REPORT 2017

Retained earnings/repayment of borrowings
Maintain equity ratio of around 60%
to protect against risks

Chief Finance Officer, I will also continue to exercise firm control of our finances.
Improve credit rating withtarget of single A flat
JAL REPORT 2017

23

Ⅰ

Ⅲ

The JAL Group’s Growth Story

Management Strategies
Designed to Create Value

Ⅳ

Performance and Strategies
by BusinessⅤ

A Business Base that Supports
Value Creation

Financial / Data Section

OUTLINE OF JAL GROUP MEDIUM TERM MANAGEMENT PLAN
FOR FISCAL YEARS 2017-2020
We regard the year 2020, the year of the Olympic and Paralympic Games in Tokyo,
as a major turning point in realizing the JAL Vision, as capacity expansion of flightslots is expected at Tokyo metropolitan airports. To coincide with this significant
year, we established the new JAL Group Medium Term Management Plan for Fiscal
Years 2017-2020 under the key words “Challenge, Leading to Growth.”

2 KEY DRIVERS FOR GROWTH

JAL Focus

Top out
2 key drivers for growth

5 key initiatives

3 management targets

JAL Focus

JAL Action

J A L Ta r g e t

Top out

Safety• Increase competitiveness by adapting
to changes in overseas and domestic
markets and the business environment• Pursue safety and high-quality services
through advanced technology

SafetySafetyMeanwhile, we will adapt to global changes as well as makeour core business, and aim for steady growth. To realize this, weinvestments to refine safety and services so that we become thewill strive to maximize profit by adapting quickly, in terms ofcustomers’ choice of airline.

Serious incidents: zero

Networks &Products

Customer Satisfaction

ComfortRealize the world’s highest level ofcustomer satisfaction

Innovation

Finance

Profitability

Return on Invested Capital (ROIC*)

Human Resources

Divisional Profitability
Managementof 9% or above by fiscal year 2020
* An indicator that measures how much profit isgenerated in relation to the funds invested byan enterprise in its business activity
Return on
Invested =Capital(ROIC) (%)

StretchWiden the range of business domains

Operating margin of 10% or above• Create and develop businesses
outside the full-service carrierbusiness leveraging our strengths• Develop new businesses that
contribute to increasing inbounddemand and regional revitalization

environment, while retaining the strengths we have built so far.

ue to work on refining our full-service carrier business, which isrevenues and expenses, to changes in the market and businessAircraft accidents: zeroStretchWiden the range ofbusiness domains

Under the new Medium Term Management Plan, we will contin-

After making the necessary preparations, we will expand ouragency and credit card business sectors. Furthermore, we willbusiness domains by creating and developing new revenue

strive to create and develop new businesses that optimize JAL’s

sources leveraging our strengths. In domains outside theexpertise and other advantages, while carefully investigating

full-service carrier business, we will work to increase revenues infeasibility and monitoring growth. In this way, we will widen the

our airline-related businesses such as providing services for

scope of growth into the future.

airport handling and aircraft maintenance and in the travel

operating profit(excluding tax)
fixed assets(including future rental expenses
under operating leases)

Fiscal year 2016
revenue

123

Total

115

By fiscal year 2020, weplan to increase
capacity by 23% oninternational routes andby 5% on domestic
routes compared tofiscal year 2016, givinga total increase of 15%.
* ASK: Available SeatKilometers

24

JAL REPORT 2017

Domestic
Passengers

105

2020

(FY)

Top out
Refine the full-service
carrier business

Domestic
Passengers

Cargo and Mail
Cargo and Mail

StretchDomestic

103
102
101

2017

International
Passengers

International
Passengers
Core BusinessDomainInternationalCore BusinessDomain(%)

2016

Fiscal year 2020
revenue

Maximize revenues by adapting tochanges in the market and businessenvironment while continuing to
draw on our accumulated strengths

ASK*

100

JAL Focus

Airline-related
businesses

Widen the range ofbusiness domains
Increase revenues in airline-related
businesses while creating anddeveloping new revenue sources thatleverage our strengths

Marketcreation10%
increase

New BusinessDomainRefine the full-service
carrier business

Refine the full-service carrier business30%
increase

Airline-related
businesses

New Field

JAL REPORT 2017

25

Ⅰ

Ⅲ

The JAL Group’s Growth Story

Management Strategies
Designed to Create Value

Ⅳ

Performance and Strategies
by BusinessⅤ

A Business Base that Supports
Value Creation

Financial / Data Section

OUTLINE OF JAL GROUP MEDIUM TERM MANAGEMENT PLAN FOR FISCAL YEARS
2017-2020

JAL Action

5 KEY INITIATIVES

SafetyWe will maintain our safety targets of zero aircraft accidents*and zero serious incidents.* Under the new Medium Term
Management Plan, we aim to establish a stable record of zeroincidents by introducing a new approach, for instance rollingout a range of initiatives to evolve our safety management
system to proactively prevent accidents through multi-layered
defenses, evolving our security management system to protect

customers from terrorist threats, and generating a culture thatgives top priority to safety and ensures that lessons learned
from accidents are passed on.

For detailed information, please refer to P.30:
Safety Charter.

Customer Satisfaction

Maintaining awareness that ensuring flight safety is the foundation and social responsibility of the JAL Group, we will accumulate multiple safety layers as the leading company for safety inthe transport sector. Consequently, we will be able to maintainflight safety and reach our target of zero aircraft accidents andzero serious incidents.

We will provide customers with unparalleled service to delivera refreshing and inspiring travel experience with the aim ofrealizing the world’s highest level of customer satisfaction by
fiscal year 2020.
* Using Net Promoter Score (NPS), a numerical indicator of customer loyalty, we will
work to improve customers’ willingness to recommend JAL to others.

Financemodel on main routes and new aircraft such as the Embraer 190
and the ATR42-600 on regional routes, expanding routes
offering in-flight Wi-Fi service, and increasing aircraft fitted withhigh-quality seats. We will also take steps to expand our network services to outlying islands and Hokkaido.
For detailed information, please refer to P.46-47:
International Passenger Operations; and P.48-49:
Domestic Passenger Operations.

Divisional Profitability Management
We will maximize revenues and minimize expenses through strict
cost control, reduction of fixed costs by shifting to variable costs,
and other measures. In parallel, we will promote “muscular management,” which increases the ability to generate cash by making
efficient use of management resources. Meanwhile, we will takeadvantage of “management by all,” involving speedy implementa-

Safety* For an explanation of terms, please refer to P.110.

Network & Products
On international routes, our growth strategy is to continuously
offer a network and product lineup to cater to customer needs,
and implement promotional measures for international customers. As part of this strategy, we will increase fully flat seats in
Business Class and increase aircraft fitted with New Spacious
Economy seats that offer more legroom.
On domestic routes, we will realize stable growth bydelivering high-value services and stimulating new air travel
demand. Initiatives include introducing the latest A350 aircraft

3 MANAGEMENT TARGETS

J A L Ta r g e ttion of the PDCA cycle and harnessing the creative talents of all
employees, to consolidate the strengths of each employee, andthereby increase effectiveness in reaching our targets.

We aim for sustainable growth by undertaking proactive
investments for future growth and making effective use ofmanagement resources, and at the same time maintaining boththe high profitability and the strong financial stability that we

Profitability

have built so far. To reach these goals, we set the financial
targets of an operating margin of 10% or above and return on
invested capital (ROIC)* of 9% or above by fiscal year 2020.
* For an explanation of terms, please refer to P.24.

Stability

Growth potential• Continue to pursue profitability• Strong awareness of return on
resources and assets• Equity ratio: maintain at an
appropriate level• Improve credit rating• By controlling cost increases, we willachieve a turnaround to increased
revenues and profits from fiscal year 2018

Operating margin: 10% or above

Equity ratio: maintain at
approximately 60%

Operating revenue

(%)

(%)

(Billions of yen)

13.2

For detailed information, please refer to P.32:
Amoeba Management System.

60.0
57.5

10.6

1,339.0

1,288.9

56.2

Human Resources
To allow diverse human resources to express themselves individually, we will maintain a work environment that improves
productivity, and pursue initiatives to develop global humanresources and promote diversity. Additionally, by nurturingleaders who accelerate change on their own initiative andencourage staff to work as a professional team, we aim to makethe JAL Group an entity filled with energy for value creation andhuman resources who can translate ideas into reality.

For detailed information, please refer to P.38-42:
Human Resources Strategy.

2016

2017

(FY)
2020 （年度）

Return on invested capital (ROIC):
9% or above by fiscal year 2020

2016

2017

Credit rating

JAL REPORT 201720172020 (FY)(Billions of yen)

10.7

170.3

Single A flat

Innovation

26

2016

Operating income

(%)

8.1

We will embrace the challenge of innovation by improving andchanging existing businesses through the use of IT and othertools, contributing to regional communities and society, anddeveloping new revenue sources. To address the issues of inbounddemand and regional revitalization, we will strive to improve trans-(FY)2020 （年度）

142.0

A minusport infrastructure to meet the growth in inbound demand andenforce measures to promote tourism to regional Japan. We will
also collaborate with regional communities through projects suchas the JAL-NEW JAPAN PROJECT and contribute to developing
regional economies and reversing population decline.

2016

2017

(FY)
2020 （年度）

2016

2017

(FY)
2020 （年度）

2016

2017

2020 (FY)

Return on equity (ROE): maintain at
10% or above
JAL REPORT 2017

27

Ⅰ

Ⅲ

The JAL Group’s Growth Story

JAL GROUP VALUE CREATION CYCLEManagement Strategies
Designed to Create Value

Ⅳ

Performance and Strategies
by BusinessⅤ

A Business Base that Supports
Value Creation

Financial / Data Section

The JAL Group’s initiatives for value creation are guided by the JAL Corporate
Policy and the JAL Vision. We maintain an awareness of social issues when using
the Group’s assets to develop our business. By enhancing the JAL Brand, weenhance corporate assets and create social value.

Corporate Policy
JAL VISION

INPUT
Capital■Human capital
Human resources

SOURCE OF
CORPORATE VALUES■ Safety Charter

P.30
Intellectual capital
Operational know-how,brand and fleet management■

Natural capital■ Natural resources

VALUE

VALUE

Value Created

Value Delivered

Social Value■■ Safety

P.33■ The Amoeba

Management System
P.32

Human capital
Global human resources
Creation of innovative
human resourcesIntellectual capital■ Productivity andefficiency improvement■ JAL Philosophy

P.31

SocialIssuesOUTPUT■ On-time
performance

P.34■

Natural capital
Environmental impact control
and protection■

Social capital
Expansion of international anddomestic route network■ Comfort

Individual
fulfillment

Community
revitalization

P.35
Social capital
Route network■■ Human resources

P.37

Production capital■ Aircraft, ground facilities■ Convenience

P.36

Coexistencewith the global
environment■ Financial foundation

P.81■

Production capital
New aircraft, improved seats■ Corporate governance■28

JAL REPORT 2017

Financial capital
Financial foundation

P.68

Financial capitalHigh profitability,
generation of cash flows■

JAL REPORT 2017

29

Ⅰ

Ⅲ

The JAL Group’s Growth Story

Management Strategies
Designed to Create Value

Ⅳ

Performance and Strategies
by BusinessⅤ

A Business Base that Supports
Value Creation

Financial / Data Section

SOURCE OF CORPORATE VALUESSAFETY CHARTER

SOURCE OF CORPORATE VALUES
Flight safety is the foundation and social responsibilityof the JAL Group. To fulfill this responsibility, JAL established the Safety Charter. All JAL Group employees carrya safety card imprinted with the Safety Charter, on
which they base their conduct at work each day.

and appropriate action is taken to ensure that factors threaten-

Safety Promotion Centering safety are dealt with before they develop into real dangers.
On August 12, 1985, JAL flight 123 crashed on the ridges oftive safety management.

Mount Osutaka, and 520 precious lives were lost. To reaffirm
the importance of flight safety and to instill the lessons learned

Practicing the JAL Philosophy More Intensively

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

Safety in flight operations is the very foundation and social

All members of the JAL Group use this facility as the

The annual JAL Philosophy Presentation Meeting marks its
seventh session in 2017. It is greeted enthusiastically each year

responsibility of the JAL Group. To carry out our mission of

The JAL Group established the Safety Advisory Group in August“foundation of safety” and the starting point for providing

as employees share their thoughts on the JAL Philosophy andassuring safety, the management will exert its strong resolve and2005 to receive advice from an objective perspective following

society with safe, reliable operations. Every employee is continu-

examples of how they have applied it. The presentations by

an operational improvement order issued by the Ministry ofously reminded that precious lives are entrusted to us in ourcolleagues performing a wide range of roles are enlightening

Land, Infrastructure, Transport and Tourism. The Safety Advisory

work. The Safety Promotion Center is open to anyone interested

and instructive, and serve as a good opportunity to reflect onGroup is a panel of five experts from outside the JAL Group who

in aviation safety.

how to practice the JAL Philosophy in one’s duty.

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 each and every flight.

have extensive knowledge and experience in areas such as

In order to carry out our mission, we will;• Perform our duties in compliance with regulations, faithfully
following the basics.

In fiscal year 2016, the Center received 17,497 visitors

human factors, analysis of failures and imperfections, organiza-

from inside and outside the Group, bringing the cumulative

tional management and culture, and safety. The panel is chaired

total since fiscal year 2006 to 196,689.

by Mr. Kunio Yanagida, a non-fiction writer.

• Be sure to make checks, without relying on assumptions.

• Respond to problems and issues quickly and precisely.

The members of the Safety Advisory Group hold annual follow-up• Maintain a constant awareness of issues, and make necessary

meetings with management. The progress of the JAL Group’sreforms without hesitation.

safety measures is examined, and the members offer advice as
they consider appropriate.

Safety Management System

Safety Advisory Group members

The JAL Philosophy was adopted as a statement of theawareness, values, and attitude to be shared by everyone involved in JAL products and services. Making it
the common basis for decision-making in the JAL
Group helps build a sense of unity, which supports ourcommitted efforts to deliver unparalleled service tocustomers, increase corporate value, and contribute to
the betterment of society.

Mr. Kunio Yanagida (Chair)Non-fiction writer, critic

Prof. Yotaro Hatamura

Professor, Kogakuin University, Professor Emeritus,
University of Tokyo / Areas of expertise: nano-micro
machining, production processing, medical support
engineering, failure science, study of danger, creative
design theory

About the JAL Philosophy

Prof. Shinichi Kamata

Professor Emeritus, National Defense Academy of Japan /Areas of expertise: organizational theory, businessadministration

We adhere to the JAL Philosophy as the shared mindset, values,

a detailed report on any event, however trivial it may appear,

Prof. Shigeru Hagathat occurs on the frontline of day-to-day flight operations.

Professor, Rikkyo University / Areas of expertise: traffic
psychology, industrial psychology, human engineering

vices. As JAL Group employees deepen their personal understand-Prof. Akinori Komatsubara

Professor, Waseda University / Area of expertise: humanlife engineering

To maintain the highest safety standards and attain further
improvement, the JAL Group has established a safety management system (SMS), which it strives to continuously improve andstrengthen. Under the system, JAL employees, who are equippedwith strong safety awareness, are trained for example to makeRisk factors are then systematically identified and evaluated,

and attitude of every person engaged in JAL products and ser-to provide customers with unparalleled service, increase corporate value, and contribute to the betterment of society.

At the 6th JAL Philosophy Presentation Meetinging of the JAL Philosophy and employ it as a common basis for
decision-making in everyday operations, it becomes a uniting force

Overview of the approach to instilling the JAL Philosophy

enabling them to advance together toward the ambitious goal of

Safety Management System

Executives /General Managers“becoming the world’s most preferred and valued airline group.”

J-AIR

JAL
Chairperson

PresidentGroup Council for Safety Enhancement

General Manager of Safety
Group Safety andSecurity Officer

Committee chairperson

Group Operational Safety
Promotion Committee

Councilmembers

JTA

JAC

RAC

HAC

President

President

President

President

President

GeneralManagerof Safety

GeneralManagerof Safety

GeneralManagerof Safety

GeneralManagerof Safety

GeneralManagerof Safety

Committee Director
members responsible
for safety

Director
responsible
for safety

Director
responsible
for safety

Director
responsible
for safety

Director
responsible
for safety

To deepen understanding, we conduct JAL Philosophy
Education seminars for all JAL Group staff and executives in Japanand overseas regions. The JAL Group spans a wide range of job

Executive Officer ofEngineering &Maintenance

Executive Officer ofCabin Attendants

General Managementof Flight Operations
Safety Promotion

General Manager ofEngineering &Maintenance

General Manager ofCabin Safety
Promotion

Executive Officer of
Airport Operations

Executive Officer ofCargo & Mail

General Manager ofOperations

General posts

Leader Education Follow-up Workshop
JAL Philosophy Educationtable, regardless of seniority, position, or department, which helps
to generate an atmosphere of mutual understanding.

Independent JAL Philosophy penetration activities
in departments and Group companies

JAL Philosophy Education instructors are selected fromto Engineering & Maintenance, Airports, and Sales.
They hold seminars in the Tokyo region and also travel to other

General Manager of
Airport PlanningManagers

Leader Workshops
JAL Philosophy
Educationcategories, but all participants in these seminars sit at the same

various divisions, from Flight Operations and Cabin Attendants

Executive Officer of
Flight Operations

JAL REPORT 2017

The JAL Group will continue to nurture human resources
the JAL Philosophy. This will enable every JAL Group employee

Follow-up meetings with management

ensure transparency.

The departments and Group companies have started
instituting their own approaches to instilling the JAL Philosophy.
through diverse activities that promote the wider application of• Relay information thoroughly, promptly and accurately, and30

States, Europe, Asia-Oceania, and China are given by local
instructors using multilingual materials.

We will continue to implement and enhance this kind of preven-

Safety Advisory Group

Safety Charter

JAL PHILOSOPHY

Penetration
activities

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

regions of Japan, adapting the teaching materials to the specificneeds of the participants. Education seminars in the United
JAL REPORT 2017

31

Ⅰ

Ⅲ

The JAL Group’s Growth Story

Ⅳ

Performance and Strategies
by Business

A Business Base that Supports
Value Creation

Ⅴ

Financial / Data Section

VALUE CREATEDSOURCE OF CORPORATE VALUESSOURCE OF CORPORATE VALUES
Under the amoeba management system, corporate
management is not the responsibility of top management alone; all employees are involved. Organizations
are divided into the smallest possible units, and theresults of activities conducted by each unit arepresented in an easily understandable manner. The
system thus encourages participation in managementby every employee, that is, “management by all.”We aim to achieve sound and flexible corporate
management by consolidating individual strengths
in a style of management that encourages full
staff participation.

Management Strategies
Designed to Create Value

THE AMOEBAMANAGEMENT SYSTEMSAFETYOUTPUT

Future Initiatives

OUTPUT

Up till now, we focused on embedding the amoeba management system, but to ensure future growth, we will accelerate

The JAL Group Corporate Policy commits us to providing customers with unparalleledservice. Unparalleled service means delivering the world’s highest levels of safety, on-time
performance, comfort, and convenience. Of these, absolute priority must be given to

Safetydivisional profitability, which is one of the five key initiatives

guaranteeing safety, which is the foundation of the JAL Group. Flight safety relies on each
employee sharing clear values and possessing an awareness of their responsibility as

selected for specific action under the JAL Action Plan in the new

On-time performance

Medium Term Management Plan.

ComfortComprehensive profitability management

Convenience

We will pursue initiatives to improve hourly profitability and unit

members of the JAL Group. By ensuring that all departments cultivate a safety culture,and continuously accumulating safety layers, we will maintain flight safety and inspire
customers to put their confidence in the JAL Group. On this foundation, we seek todeliver improved on-time performance, comfort, and convenience, and thus offer customers a safe and comfortable flight.

profitability within each Group department and company. We

Unparalleled Service

will also rigorously enforce cost control in response to changes
in the market environment and fluctuations in revenues tooptimize the balance sheet and improve risk resilience.

Outline of the Amoeba Management System
and How the “Management Cycle” Works

Participatory management

Safety targets

To bring together individual strengths and thereby increase

With awareness that flight safety is the foundation and social responsibility of the JAL Group, the JAL Group maintains flight

The introduction of the amoeba management system has clarified

practical effectiveness in reaching our targets, we will visualize

safety by accumulating safety layers as the leading company for safety in the transport sector.

the roles and responsibilities of each organization and made it

management data to make it easier to understand, and encourage

possible to identify the revenue and costs of each unit in such a

all employees to display creativity and initiative to reach our

way that staff can see the results of their own efforts. As eachtargets. We will also devote our energy to nurture leaders withdepartment can pinpoint its achievements clearly through reve-

managerial competencies to motivate employees.

Maintaining flight safety (numerical targets)
Aircraft accidents: zero
■ Serious incidents: zero■

* Target of ‘zero’ each fiscal year.

nue and costs, staff feel a sense of responsibility for the figures,and feel more motivated and creative in their work attitude.
Under the amoeba management system, every unit pre-* Specific measures will be implemented to meet the action targets.

Effective use of management resources
We will work to implement “muscular management” by improving

pares an annual plan for revenues and costs (Master Plan) andprofitability within each Group department and company,

implements a monthly management cycle (PDCA cycle) toundertaking effective investments, improving asset utilization,accomplish the annual plan. The monthly management cycle

optimizing inventories, and implementing other measures torequires each unit to prepare a forecast of its revenues and costs

increase return on invested capital (ROIC).

at the start of each month based on the current environment
and to set out an action plan. After business results for themonth are released, the difference between the target andresult is calculated and reasons for the difference are clarified.
The findings are utilized to prepare targets for the following
month. Thus, in addition to the annual plan prepared at the

Before and after introduction of the amoeba management system
BeforeToday

Fiscal year budget preparedat start of fiscal year

Preparation of a Master
Plan at start of fiscal year,
followed by monthly targets

start of each fiscal year, monthly targets are also set, whichkind enables all employees to participate in management.
After passing through a checking stage by relevant departments, the results and numerical forecasts of each department
are presented to senior management by the relevant divisional
managers and affiliated company presidents at the Group

Comparison of fiscal year
budget adopted at start offiscal year with results→ Since comparison is madewhile changes occur in theeconomic and businessenvironments, budget
analysis cannot be applied.

A target, or monthly
achievement target, isprepared each month andcompared with the results.

→ Results analysis based on
anticipated environmental
changes is applied in
preparation of targets
for the following month.

Earnings Announcement Session. The session is attended byaround 120 participants, including the President, all directors,presidents of major affiliated companies, and observers, whojoin in earnest discussions on JAL Group management with thecommon aim of realizing the Corporate Policy.

32

JAL REPORT 2017

Maintaining Flight Safety

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

Maintaining flight safety, which is the foundation of the JAL
Group, we continuously strive to realize zero aircraft accidents
and zero serious incidents. In addition to efforts to prevent
recurrence of similar accidents, we are working to proactively
prevent them by detecting precursors to aircraft accidents andserious incidents.

④ Introduce new security risk management
We will strengthen coordination with partner institutions, collectand evaluate security data, and facilitate rapid response to strengthen security systems. We will also establish adequate detection,
monitoring, and preventive systems to deal with the increasingly
sophisticated and complex external threats to data security.
⑤ Cultivate security awareness among all staff
We will improve awareness and knowledge of security among all

Accumulating Safety Layers

staff so that even the smallest signs are not overlooked but responded to appropriately.

facilitates prompt response to changes in the environment.
Operating a stage-by-stage monthly management cycle of thisAccumulating safety layers (action targets)
Evolve the safety management system to the world’s highest standard■ Evolve the security management system to the world’s highest standard■ Ensure that the lessons learned from past accidents are passed on■

Because the budget is anallocation, it is generally
believed it should be usedin full.

The Master Plan is preparedindependently with the aimof maximizing revenues andminimizing expenses.

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

Ensure that the lessons learned from past accidents are passed on① Introduce an integrated safety database⑥ Implement safety awareness education based on the PIP principle

Integrating and analyzing safety data will make it possible to detect

We will ensure that lessons learned from past accidents are passed

precursors to serious malfunctions and take preventive action.

on and will provide education on safety awareness based on “the② Introduce human factor analysis
This analysis method takes into account organizational, cultural,and other indirect factors to prevent human error.
③ Conduct risk management of flight crew fatigue

PIP Principle”* (derived from “place, item and people”) that
captures the essence of the issues.
⑦ Conduct emergency evacuation training
We will provide training in how to respond to an emergency

We will undertake scientific and statistical management of thesituation so that all Group employees know how to assist cabin

degree of fatigue among flight crews.

attendants and customers in the event of an emergency.
* Advocated by Prot. Yotaro Hatamura of the Safety Advisory Group as vital forunderstanding the true nature of safety issues.

JAL REPORT 2017

33

Ⅰ

Ⅲ

The JAL Group’s Growth Story

Management Strategies
Designed to Create Value

Ⅳ

Performance and Strategies
by Business

A Business Base that Supports
Value Creation

Ⅴ

Financial / Data Section

VALUE CREATEDOUTPUT
On-Time Performance – An Important Factor of
JAL Service

ON-TIME PERFORMANCECOMFORTA Refreshing and Inspiring Travel Experience

Specific initiatives
To further improve on-time performance, the JAL Group aims

Delivering comfort that exceeds the customers’ expectations means not only comfort in “hard” and “soft” services, but

for improvement on a daily basis by giving serious consideration

To deliver not only safety and on-time performance, but also

also the personal touch of JAL Group employees, who are

The JAL Group has declared delivering unparalleled service toto not only relevant measures within each department, but alsohigh levels of convenience and comfort, the JAL Group believes

dedicated to customer care.

customers as part of its Corporate Policy. Maintaining on-time

proposed measures and revisions that cross departmental

that adopting the customer perspective is extremely important.

Underpinning the JAL Group’s human services is the JAL

performance, which means valuing the customers’ precious timeboundaries. As a result, the US-based FlightStats, Inc. which

We ensure the ability to deliver unparalleled service by combin-

Philosophy, which outlines the awareness, values, and mindset

with top priority on safety, is an essential factor in the basic

analyzes the on-time arrival rates and other data of airlines,

ing advanced “hard” and “soft” systems with staff dedication

to be shared by all employees. Not only staff in departments

service quality of a public transport operator, and forms a proudnamed JAL the most punctual major Asia-Pacific airline in theto customer care.

that have direct contact with customers, such as Reservations,part of our mission.

period from January to December 2016. The award applies to

The times presented in our flight schedule are productdescriptions and represent a promise to customers and society.

Airports, Cabin Attendants, and Flight Operations, but all

both the mainline category and network category, and is basedSpecific initiatives

employees, including Maintenance, Cargo, Ground Handling,on combined figures for domestic and international flights.

We have launched various services in response to the customers’

and back office departments, receive JAL Philosophy Education

To transport customers to their destination within the scheduledwish to use time at the airport effectively and reduce waiting

to develop the right attitude. It is on that basis that staff acquire

timeframe and without endangering safety—a basic value fortime. Among these are a smartphone app that informs custom-

the required knowledge and skills to ensure that customers haveany airline—requires smooth communication and coordination

ers of waiting times at security checkpoints at Haneda Airport,a safe and pleasant journey.

among numerous departments such as Reservations, Airports,

and the JAL Express Tag Service, which speeds up the baggage

In-Flight, Ground Handling, Cargo, Maintenance, Flight Opera-

check-in procedure and reduces waiting time. We are also

job category also promotes active cooperation between staff intions, Cabin Attendants, and Sales, as well as other support

renovating lounges at airports in Japan and overseas so thatdifferent work areas. To give an example from the airport

departments and head office planning divisions. By proceeding

waiting time can be spent more comfortably.

department, when special care is needed by a customer using asurely and steadily with each flight, we strive to achieve on-time
performance in air transport as a competitive product advantage.

2016
8th A nn u alMeanwhile, JAL SKY SUITE-configured aircraft, which offer

Providing JAL Philosophy Education to all staff regardless ofwheelchair or baby stroller, a ‘baton pass’ takes place fromspaciousness and high quality, have been introduced on an

Reservations and Ticketing or Sales, and the information is also

increased number of international routes. On domestic routes,

passed on to flight crew, cabin attendants, and ground handling

JAL SKY NEXT seating, which features genuine leather-covered

staff. This kind of cooperation between departments in making

seats, has been introduced on all domestic aircraft and in-flight

preparations ensures a smooth journey for the customer.

Wi-Fi service is now available free of charge. As for in-flight

We would like not only departments who serve customers one

meals, we are now delivering top-quality cuisine on Europe,

on one but also all employees to be able to respond to individualNorth America, Australia, and Southeast Asia routes in collabo-

requests. The roughly 33,000 members of the JAL Group, eachration with professional chefs based on the concept of ‘yourresponsible for different work areas, develop fine sensitivity andexclusive restaurant in the sky.’ On all international routes fromthe ability to cater to customer needs and pass them on to theJapan, we have a brand-new in-flight menu for children called

next department. In this way, we deliver a travel experience that

BEDD for Kids, and serve halal-certified meals for Muslim

stays in the memory and the heart of each customer.

customers as part of efforts to meet diverse dietary needs.

34

JAL REPORT 2017

JAL REPORT 2017

35

Ⅰ

Ⅲ

The JAL Group’s Growth Story

Performance and Strategies
by BusinessⅣ

A Business Base that Supports
Value Creation

Ⅴ

Financial / Data Section

HUMAN RESOURCES STRATEGYVALUE CREATEDCONVENIENCEOUTPUTFor Greater Convenience

Management Strategies
Designed to Create ValueOUR POLICYVA LU E - U P

From October 30, 2016, flights which had been operatedby Hokkaido Air System Co., Ltd. (HAC) switched flight code

We believe that the JAL Group route network is one of its

from the HC flight code to the JL flight code. Meanwhile, thestrengths and an important factor when customers choose theHaneda = Yamagata route, using the Haneda Airport Policy

JAL Group. As well as offering a route network and timetable

Contest Slot awarded in fiscal year 2014, will continue tothat meets the needs of customers and society, we also deliver

operate two flights a day through the cooperation of regional

highly convenient products and services that accurately meetgovernments and other parties. To improve customer comfort,

customer needs at every touch point up to arrival at the destina-

the new Embraer 190 aircraft model with Class J seating wastion. Additionally, as well as enhancing the ‘time value’ of

introduced successively on regional routes to and from Osaka,

customers through high-speed transportation, one of the great

starting with the Itami = Kagoshima route. We further upgradedadvantages of air transport, we believe that delivering quality

products and services on domestic routes with JAL SKY NEXT

service for an appropriate fare is also an important factor inseats offering a pioneering standard of seat specs to all routes

improving customer convenience.

operated with the 777-300, 777-200, 767-300, and 737-800

Takuya Oda
Executive Officer, Human
Resources Management(excluding aircraft owned by Japan Transocean Air Co., Ltd.). By
Specific initiatives

offering free in-flight Wi-Fi service, we delivered new value and

On international routes, we increased seasonal flight frequency

greater convenience so that passengers can connect with family

to meet robust demand on the Narita = Honolulu and Narita

and friends from the skies just as they would on the ground.

= Bangkok routes. On the Haneda = Honolulu route, a new First

Going forward, we will continue to respect the customer

Class service was introduced during the year-end holidays inperspective as we work to improve customer convenience andresponse to customer demand, with promotional measures

comfort by embracing the challenge of further expanding our

stepped up to deliver a higher-quality travel experience forroute network and improving products and services. In thiscustomers flying to Hawaii. To meet high demand during theway, we remain firmly committed to delivering unparalleledsummer period, the Narita = Moscow route was increased toservice so that all customers may enjoy a refreshing andfive flights a week.

inspiring travel experience.

Under the new Medium Term Management Plan, we aim to further enhance
human resources opportunities guided by the key phrase ‘Linking the contributionof individual strengths to value creation.’

Linking the contribution of individual strengths to value creation
To deliver high-quality service to customers and make contributions to society, it is essential to

TOPICSJAL ranks number one in two indicators of the International Airlines category
in the JCSI survey

encourage the personal growth of individual employees. To do that, we have established a variety
of systems and structures for recruitment, education, personnel management, and other areas toenable employees to develop their potential to the maximum.
Under the new Medium Term Management Plan, Human Resources Management has adopted

In the 4th Japan Customer Satisfaction Index survey conducted

Recent improvements to our international routes have seen

in 2016 by Service Productivity and Innovation for Growth*

an expansion in routes operated with JAL SKY SUITE-configured(Head Office: Shibuya-ku, Tokyo), JAL placed first in the Interna-

aircraft and improved in-flight meals based on collaborative

tional Airlines category in the indicators Repeat Intention andagreements. On domestic routes, a promotional campaign to

Recommendation Intention.

offer free in-flight Wi-Fi service has been one of the benefits for

One of JAL’s management targets was to rank first in

customers. In this way, the JAL Group has united to embrace thethese two indicators of the International Airlines category andchallenge of creating new value in order to deliver a refreshing

the Domestic Routes category of this survey by fiscal year 2016.

and inspiring travel experience to every customer.

This result means the target has been achieved in the first of
the two categories.

* Website of Service Productivity and Innovation for Growth:
W EB

36

JAL REPORT 2017www.service-js.jp/

the slogan ‘Linking the contribution of individual strengths to value creation’ and is working tofurther enhance human resources opportunities through the following four measures:■ Build mentally and physically healthy, highly motivating and productive work environments
Through workstyle innovation, wellness promotion, and measures to develop highly productive
work environments, we aim to create professional opportunities for diverse human resources,
and thus develop conditions for consistent personal growth.
■ Encourage expression of individuality in an atmosphere of mutual respect
We will continue efforts to cultivate global human resources and promote diversity to make JALa truly global airline where diverse human resources can express their individuality.

JAL REPORT 2017

37

Ⅰ

Ⅲ

The JAL Group’s Growth Story

Management Strategies
Designed to Create Value

Ⅳ

Performance and Strategies
by Business

A Business Base that Supports
Value Creation

Ⅴ

Financial / Data Section

HUMAN RESOURCES STRATEGYOUR POLICYVA LU E - U P

ACTIVITIESDiversity and Inclusion

In fiscal year 2016, we introduced group mentoring as ameans of instilling awareness of women’s career development.

In 2014, JAL Group top management declared their commit-

We also introduced a career continuity support system offering

ment to diversity. Since then, we have aspired to be a company

employment opportunities within the JAL Group to employees

where everyone can work in a positive atmosphere regardless of

who relocate due to marriage, a partner’s work transfer, or togender, career, nationality, age, sexual orientation, gendercare for a family member. Meanwhile, we held seminars in

identity, disability, or other personal attributes. We will continue

Shanghai and Beijing, where female employees— who form theto promote diversity and inclusion, developing the abilities ofmainstay of our operations in mainland China— assembled toeach employee in an atmosphere of mutual respect for individu-

think about what was needed to achieve further career ad-

ality, and thereby grow as a team that creates unprecedented

vancement including workstyles for women.

new value.
Cultivating global human resources
As part of our aspiration to become a truly global airline, we arestrengthening human resources cultivation measures in both
domestic and overseas regions.
In Japan, from fiscal year 2016 we enhanced training forstaff who are transferred overseas by adding a lecture on diverse
cultures to the program, among other things. We also introduced a system of intern training at overseas companies foryoung mid-level employees, with little experience of working
overseas. For staff in overseas regions, we implemented suchmeasures as global training to help nurture human resources to■ Build value-creating organizations that possess an ambitious spirit of challenge
To realize our aim of staying one step ahead in value creation, we are working to create

To respond to diverse customer needs, we give opportunities to
employees from a wide range of backgrounds

organizations possessing a spirit of challenge. In response to dramatic changes in the businesszational manager posts in Japan.

Examples of Diversity and Inclusion Initiatives

professional team. In this way, we aim to transform the JAL Group into a company full ofvalue-creating energy, richly endowed with human resources who strive to put ideas into reality.
■ Practice the JAL Philosophy more intensively to achieve targets
The basis for these measures is the JAL Philosophy. Deepening efforts to ensure its full permeation by moving from “understanding” to “practice” will help each individual and organizationachieve their targets.

LGBT* initiatives
Career opportunities for female employees

The JAL Group also strives to promote understanding of LGBTWe announced numerical targets of a 20% ratio of female

and participates in discussions with LGBT students, LGBT Ally

managers within the JAL Group, and a 15% or higher ratio of

events, and other activities. We have also made LGBT Allyfemale managers at section head level or higher in JAL by fiscal

stickers to distribute to employees who participate in LGBT-related

year 2023. We are continuing with related initiatives centeredtraining in order to raise employee awareness. We will continue

on improving work environments, strengthening human resourc-

to promote various forms of training and activities thates cultivation, and developing the corporate culture.

contribute to a more accurate awareness and understanding ofGoals and slogans of human resources strategy
Link individual input to value creation

LGBT issues.
Action through seven initiatives* LGBT is a general term for the sexual minority groups Lesbian, Gay, Bisexual,and Transgender.

(1) Nurture leaders who accelerate innovation

Commitment
through four
declarations

1. Organizations with a spirit of challenge
Build value-creating organizations thatpossess an ambitious spirit of challenge

2. Diverse human resources
Encourage expression of individuality in an
atmosphere of mutual respect
3. Highly productive work environments
Build mentally and physically healthy, highly motivating
and productive work environments
4. Foundation
Practice the JAL Philosophy more intensively to help individuals
and organizations achieve their targets

38

JAL REPORT 2017

on long-term assignments to Japan was 26, an increase of fiveover fiscal year 2015, some of whom were assigned to organi-environment, JAL will nurture leaders who consistently embrace the challenge of accelerating
innovation on their own initiative and encourage each employee to act as a member of alead the JAL Group in the future. The number of employees sent

(2) Build value-creating teams of professionals(3) Nurture global human resources(4) Promote diversity(5) Accomplish workstyle innovation leading
to growth(6) Promote health management(7) Practice the JAL Philosophy
Researchers from Nadeshiko Lab present the results of their activities

JAL REPORT 2017

39

Ⅰ

Ⅲ

The JAL Group’s Growth Story

Management Strategies
Designed to Create Value

Ⅳ

Performance and Strategies
by Business

A Business Base that Supports
Value Creation

Ⅴ

Financial / Data Section

HUMAN RESOURCES STRATEGYACTIVITIESVA LU E - U P
Opportunities for the elderly

employees with low-level intellectual disabilities, opened a branch

and other services common to all departments. Going forward,

continue working while dealing with other personal demands such

The JAL Group has established systems to support diverse lifeat Narita in addition to the one at Haneda. Through these initia-

we will support the review of work processes in other depart-as illness, childrearing, and nursing care of family members,plans after retirement. Employees who wish to continue work-

tives, the employment rate of people with disabilities in fiscal year

ments to boost work efficiency and improve the productivity ofintegrating this activity with diversity promotion, including wom-ing are given active opportunities to suit their abilities and2016 reached 2.56%. We have expanded these activities into thethe entire JAL Group.

en’s career advancement and workstyle innovation.

experience in an environment that allows them to work over the

agricultural field, and now use agricultural produce grown by thelong term with a sense of security. Making use of their accumu-

disabled as ingredients for in-flight meals. By creating an environ-lated rich experience and knowledge, they contribute to main-

ment in which everyone, regardless of disability status, can work

taining and improving the quality of customer service andtogether in an atmosphere of mutual respect, we are expanding

nurturing aviation professionals.

the scope of activities into a wide range of fields.

Workstyle Innovation
The Workstyle Innovation Promotion Office, established in fiscal
year 2014, plays the central role in offering opportunities forworkstyle reform. These include use of IT tools that allow more
freedom in the way of working, improvement of the office

At the fully renovated Fukuoka Airport office, frontline andback-office departments have merged, significantly improving
communication and information sharing

Cabin attendants perform stretch exercises before flight duty

environment, and introduction of telework. To improve work
efficiency by streamlining the work process, we will implement
This senior specialist works on the frontline of aircraft
maintenance to support safety in the skies

initiatives in fiscal year 2017 to visualize total work hours,

Practicing the JAL Philosophy
TOPICS

review work processes, and integrate common tasks. In thisway, we hope to set up a cycle of accelerated personal growth

The awards are open to all JAL Group employees and all

Employment of people with disabilities

for speedier decision-making and value creation, leading toemployees who handle JAL services and products, including

Come see Mom and Dad at work!
Office tours

The JAL Group actively promotes the employment of people withcorporate growth.

employees of entrusted companies, subcontractors, companies

As an initiative to promote Premium Friday, we organized office

we invest in, and other partner companies.

tours for family members of

disabilities, ensuring that individual employees grow day by day in

In fiscal year 2016, we set up the IT Service Desk, which

an environment that does not see disabilities as barriers to em-

offers on-the-spot troubleshooting of problems with IT equip-

ployment. In fiscal year 2016, the coffee shop ‘Kilatto,’ run byment, and a Business Support Center, which provides translation

In fiscal year 2016, a new award was introduced in the Effort

employees to visit the office.

and Ambition category for efforts that contribute significantly to

The children enjoyedinvigorating the workplace through unwavering efforts andwide-ranging hands-on experi-

ambitious setting of challenging new initiatives and higher goals.

ences, from exchanging
business cards with the compa-

CASE STUDYny president to taking a guided

Building a Professional Team with an Ambitious Spirit of Challenge

Supporting Employees’ Development ThroughPromotion of Health Management

The JAL Nadeshiko Lab is a cross-departmental project engaged in investigating what isneeded to ensure that JAL is a company that offers opportunity to all employees. Having
entered its second year in October 2016, it has further expanded the scope of its activities.

tour, where they saw a different side of Mom and Dad up
close at work.

Come see Mom and Dad at work!
Exchanging business cards with an
executive was a valuable experience

In addition to the existing research team, a new team has been formed to carry out

The mental and physical health of employees is an essential

projects proposed by the researchers in the first year. For example, the new team gave

precondition in pursuing the material and intellectual growth of all

in-house nursing care seminars and distributed nursing care badges. It also regularly

employees, as advocated in the JAL Group Corporate Policy. Basedorganizes events such as panel discussions with ‘ikubosu’—a term for managers whoon this principle, we worked from fiscal year 2012 to enhance

understand the needs of working parents—and lunchtime networking clubs to promotehealth in cooperation with employees, society, and health insur-

interactions among employees, all of which contribute to women’s career advancement.

than 1,300 participants from 62 countries. JAL, which has

ance associations through health promotion measures called JAL

signed the Women’s Empowerment Principles (WEPs), served as

Wellness 2016 in the previous Medium Term Management Plan.

the official airline for the Summit, and has supported world-

Among other initiatives in fiscal year 2016 was the startup of a new Innovation Lab,in which 31 enthusiasts from different departments and job categories got together toinnovate with robots, virtual reality, and other advanced technologies. The Lab has carriedout experimentation and testing with these technologies to explore new business models incollaboration with various companies.
Into the future, JAL will continue advancing in a spirit of challenge to deliver fresh

A trial of robot-assisted baggage transport at
Fukuoka Airport

In fiscal year 2017, JAL’s Executive Vice President was ap-

2017 Global Summit of Women (GSW) in Tokyo
The Global Summit of Women for female leaders in businessand government circles was held in Tokyo and attracted morewide activities for women’s career advancement since 1990.

pointed Health Management Officer, and under his strong leadership, enhanced health promotion measures will be implemented
under JAL Wellness 2020. We will also support employees whovalue to customers and realize innovative products and services.

40

JAL REPORT 2017

JAL REPORT 201741

HUMAN RESOURCES STRATEGY

ACHIEVEMENTS

VA LU E - U P
JAL Group Ratio of Female Managers■ No. of female managers in the JAL Group(Number of employees)

Ratio of female managers(%)

We have been working to

25.0

1,000
800
691
600

promote diversity since fiscal

20.0

year 2014, aiming to become
a company where diverse

15.0

16.3

15.6

15.1

14.1

400

846

799

756

human resources including
10.0

200

5.0

0

0

2013

2014

2015

2016

Performance andStrategies by Businesswomen can participate. The
current number of female
executives is nine.

（年度）
(FY)

Workstyle Innovation
Number of telework cases(Total number of employees)
4,000

3,000

Total work hours (paid vacation/average overtime hours)
Ratio of paid holiday taken

Monthly average overtime hours(%)(Hours)

100.0

2,922

80.0

20
84

84

85.5
15

81
60.0

2,000

1,729

5

20.0
263
2013

2014

0

0
2015

12

40.0

1,000

0

11.4

10

2016 （年度）
(FY)

2013

2014

2015

2016 （年度）
(FY)

2013

2014

2015

2016 （年度）(FY)

Telework has become accepted as a

By encouraging varied workstyles and creating a corporate ethos that is fair toworkstyle that enables employees to

employees whose time is limited by duties such as childcare or nursing care, JAL

work from anywhere, at any time. It

seeks to become a company where all can participate.

also allows logging of work time in

We advocate a healthy work-life balance that allows all employees tounits of hours and working even fromperform their duties efficiently in order to improve productivity and use the timeoutside the home.

left over for physical and mental recreation and self-development. We believethat when these personal and learning experiences are fed back into the workplace, new value will be created, which will in turn lead to corporate growth.
Consequently, we are taking measures to encourage planned taking of paid
holiday and to limit work hours to an appropriate level.
In fiscal year 2016, the average paid holiday taken was 17 days, or 85.5%of the total entitlement, while in back-office departments the monthly average of

The JAL Group has three businesses:
international passenger operations,domestic passenger operations andother businesses. In this section, we
review operating performance andoutline our strategies for each business in the new Medium Term Management Plan.

At a Glance. . . . . . . . . . . . . . . . . . . . . .  44
International Passenger Operations . . . .  46
Domestic Passenger Operations . . . . . . .  48
Other Businesses. . . . . . . . . . . . . . . . . .  51
Group Companies. . . . . . . . . . . . . . . . .  52

overtime work was 12 hours. In fiscal year 2017, we will strive to achieve ourdeclared targets of 20 days of paid holiday taken (100%), and 1,850 hours of
total work time.

42

JAL REPORT 2017

JAL REPORT 2017

43

I

Ⅱ

The JAL Group’s Growth Story

Ⅳ

Management Strategies
Designed to Create Value

Performance and Strategies
by BusinessⅤ

A Business Base that Supports
Value Creation

Financial / Data Section

AT A GLANCEInternational Passenger Operations

Domestic Passenger Operations

Other (JALPAK Co., Ltd.,JAL CARD, Inc., etc.)

Other (JALPAK Co., Ltd.,JAL CARD, Inc., etc.)

14.3 %

40.4 %

Fiscal 2016
revenueby category

Domestic routes

45.3 %

Revenue passengers carried*(Billions of yen)(Thousand passengers)

-7.5%

600.0

400.0

406.6

454.8

448.7

415.2

vs. fiscal 2015

7,793

7,723

7,525

8,460

8,394

Passenger revenues-0.5%(Billions of yen)

600.0

vs. fiscal 2015

485.2

6,000

400.0

3,000

200.0

487.4

487.5

40.4 %

Fiscal 2016
revenueby category

Domestic routes

-0.8%

9,000

vs. fiscal 2015

International routes

45.3 %

Passenger revenues

437.5

14.3 %

International routes

501.2

+1.4%

Revenue passengers carriedvs. fiscal 2015

(Thousand passengers)
35,00030,020498.6

31,21831,644

32,114

2013

2014

2015

32,57025,00015,000

200.0

5,000

0

0

0

2012

2013

2014

2015

2016 (FY)

2012

2013

2014

2015

Revenue passenger load factor*

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

90.0

60,000+0.6pt85.0

vs. fiscal 2015

79.7

80.0

76.1

76.5

75.0

44,74540,00034,03680.3

46,23535,390+0.8% +0.1%

47,696

vs. fiscal 2015

vs. fiscal 2015

50,56350,62140,305

36,10940,633201420152016 (FY)(Million passenger km / Million seat km)

80.0

60,000

+1.4%

75.0

vs. fiscal 2015

63.1

20,0002014■Revenue Passenger Kilometers

2015

2016 (FY)■Available Seat Kilometers

vs. fiscal 2015

36,44337,08423,012

23,74536,30635,86935,42324,341

23,99324,550

64.0

0

60.0

2013

-1.2%

+0.9%

vs. fiscal 2015

40,000

69.3

66.1

2012

2016 (FY)

Revenue Passenger Kilometers* / Available Seat Kilometers*

65.0

2015

2012

(%)

67.9

2014

2016 (FY)

Revenue passenger load factor*

70.0

0
2013

2013

20,000

75.7

70.0
2012

0

2012

2016 (FY)

2012

2013

2014

2015

2016 (FY)

2012

2013

2014

■Revenue Passenger Kilometers

2015

2016 (FY)■Available Seat Kilometers* From fiscal year 2015, revenue passengers carried, revenue passenger kilometers, available seat kilometers, and revenue passenger load factor include code-share tickets sold by othercompanies for JAL-operated flights.

44

JAL REPORT 2017

JAL REPORT 2017

45

I

Ⅱ

The JAL Group’s Growth Story

Ⅳ

Management Strategies
Designed to Create Value

Performance and Strategies
by Business

A Business Base that Supports
Value Creation

Ⅴ

Financial / Data Section

INTERNATIONAL PASSENGER OPERATIONS

We are strengthening cooperation with oneworld alliance members and otherairline partners to create an even more convenient route network connecting
Japan and the world. We are also rolling out high-quality, full-service JAL SKY
SUITE-configured aircraft to lift the levels of inflight convenience and comfort.

International Cargo

We will also expand the number of routes with JAL SKY

Import and export cargo

SUITE-configured aircraft and increase market share, mainly byvolume handled by JAL cargo

focusing on expected stable demand from business passengers,

operations increased from theand maintain high load factors to support passenger unit revenue.

second quarter of fiscal year

In fiscal year 2017, the first year of the new Medium Term

2016, reflecting rising global

Management Plan, we forecast continued strong demand on

demand for semiconductors

outbound and inbound routes. Against this backdrop, we aim toamid advances in IoT and

Medium Term Management Plan – Growth Strategy

Fiscal 2016 Results

self-driving technologies. As aresult, revenue cargo ton

Expanding our routes and network to improve customer

In fiscal year 2016, we actively worked to tap buoyant inboundkilometers rose 9.5% from theconvenience

demand for international flights. Outbound demand from Japanprevious fiscal year.

We aim to increase customer convenience by improving ourwas also strong.

further increase yields using our revenue management system
Special thermal storage and vacuum
insulation materials keep thetemperature inside containers steadyat around 5˚CWe also added new products to our lineup, including the JAL

while maintaining high load factors.
We are continuing to expand our route network. In April
2017 we launched a new route between Haneda and New York,
which improved connections to North America from domestic
airports. We will also add a new Narita = Melbourne route on

To address rising demand, we added more flights on

CARGO Charter Service, which provides transport services using

September 1, 2017 and a Narita = Kona route on September 15.

demand for connections for flights originating in North America

Hawaii routes (Narita = Honolulu, Kansai = Honolulu) and on

freighters chartered from and operated by our partner carriers, and

The Japan–Australia Economic Partnership Agreement (Japan-

and Southeast Asia. We will also work more closely with our

the Narita = Bangkok route. In partnerships with other carriers,

a new version of our fixed-temperature airfreight container.

Australia EPA) came into effect from 2015. Our new route to

joint business partners and other companies to create useful

China Airlines expanded its code-share arrangement to all

network services. Taking advantage of the expected increase inflights between Japan and Taiwan, while Russian airline S7, aflight slots at Tokyo metropolitan airports in 2020, we will

member of the oneworld alliance, increased its code-share

optimize this business opportunity by building a highly conve-

flights to a total of 19, extending the reach of our global routenient route network.

network.

Welcoming Customers into Comfortable Cabinsat Bangkok’s Suvarnabhumi International Airport to improve

increase capacity on international routes at an average annual

Guide to Japan, providing information about Japan throughWe are introducing aircraft with our new JAL SKY SUITE config-

comfort for passengers. We also set up the “On Trip JAL”

rate of 5%, in line with market growth. By 2020, we plan toJAL’s worldwide websites, in March 2017. We also added

uration, which offers fully-flat Business Class seats and “Newwebsite to offer travel tips and seasonal travel information.

increase available seat kilometers (ASK) by 23% compared with

Korean and Thai language support to the guide’s smartphone

Spacious Economy” seats, on Europe, North America, andWe aim to spur demand for travel by showcasing the attrac-

the fiscal year 2016 level. Demand for flights originating insite, bringing the total number of languages to nine (English,

Honolulu routes. The new configuration will also be introduced

tiveness of each region with interesting and detailed content

overseas markets is projected to grow at a rapid pace. We will

Simplified Chinese, Hong Kong Traditional Chinese, Taiwan

onto medium-haul routes.

about possible destinations.

actively target that demand, aiming to lift the ratio of inboundTraditional Chinese, French, German, Russian, Korean, Thai)

passenger demand to around 50% of total demand in interna-aiming to showcase Japan in overseas markets and stimulatetional passenger operations by fiscal year 2020.

inbound demand.

route network, including addressing an expected increase in

In marketing and services, we upgraded the Sakura Lounge

In products, we are gradually introducing aircraft fitted

Melbourne, Australia’s second biggest city in terms of population, will seek to capitalize on closer ties between the two

Medium Term Management Plan and Outlook
for Fiscal Year 2017

countries. The new route to Kona, the gateway to the Island of
Hawaii famed for its natural beauty, will be our second direct
destination in Hawaii.

Under the new Medium Term Management Plan, we plan to

In marketing and services, we renewed our online JAL

Leveraging JAL’s Strengths to Attract More Overseas

with the JAL SKY SUITE configuration onto more routes.

Customers

The new configuration has fully-flat seats when reclined with

We aim to attract more overseas customers to the JAL Brand byunobstructed aisle access in Business Class and “New Spacious

actively conducting sales promotions to raise brand visibility andEconomy” seats with more room than the industry norm in

TOPICS

by building a stronger business base, including reinforcing andEconomy Class. Aircraft with this configuration have recently

expanding our online services.

been added to routes between Kansai and Honolulu and

New Narita = Melbourne, Narita = Kona Routes Added

between Chubu and Honolulu.

First Class / JAL SUITE

JAL will launch flights between Narita and Melbourne on September 1, 2017 and between Narita and Kona on September 15.
Melbourne is Australia’s second most populous city and is
growing rapidly. Many Japanese companies are already based in
Melbourne, but with the start of the Japan-Australia EPA in
January 2015, ties between the two countries are set to become
even closer. Our new route to Melbourne, along with our existing
route to Sydney, will strengthen the JAL network in Oceania.

The route to Kona on the Island of Hawaii, a popular destination in the Hawaii archipelago, will mark the start of JAL flights toKona Airport for the first time in nearly seven years since October2010. The Island of Hawaii, also known as the Big Island, is a highly
appealing destination with a stunning natural environment. The
new route will give first-time visitors to Hawaii the urge to return
again, while customers who have only experienced Honolulu will
have the opportunity to see a different side of Hawaii.

Business Class / JAL SKY SUITE III

Upgraded Sakura Lounge at Suvarnabhumi International Airport

Premium Economy Class /JAL SKY PREMIUM

46

JAL REPORT 2017

Economy Class / JAL SKY WIDER

JAL customers can now fly to Melbourne and Kona from Narita

JAL REPORT 2017

47

I

Ⅱ

The JAL Group’s Growth Story

Management Strategies
Designed to Create Value

Ⅳ

Performance and Strategies
by BusinessⅤ

A Business Base that Supports
Value Creation

Financial / Data Section

DOMESTIC PASSENGER OPERATIONS

We are increasing convenience and simplicity with JAL SKY NEXT configured aircraft. Our focus is on improving convenience for passengers by adding more services such as in-flight Wi-Fi. We are also playing our part in revitalizing regional
economies as a regional partner and by providing vital links for residents in outlying islands and regional cities through our extensive domestic network.

routes. On routes to outlying islands in Kagoshima Prefecture
operated by Japan Air Commuter Co., Ltd. we will introduce theadvanced ATR42-600 turboprop.
In product initiatives, we started providing Japan’s only free
in-flight Wi-Fi service on flights operated with JAL SKY NEXTconfigured aircraft. We also plan to progressively introduce JAL
SKY NEXT configuration on the 737-800 fleet operated by Japan
Transocean Air Co., Ltd.

Medium Term Management Plan – Growth Strategy

Diamond Premier Lounge at New Chitose Airport

calendar effects of the Silver Week holidays in September. As aresult, revenue passengers carried increased from the previous

Our domestic passenger operations face a major risk from Japan’s

year. However, passenger unit revenue declined amid the chal-shrinking working age population. However, we see newlenging market climate, leading to a drop in passenger revenue.

growth opportunities ahead, such as rising inbound demand in
the lead-up to the 2020 Olympics and Paralympics in Tokyo. To

which has been very popular with customers since its launch in* 777-300, 777-200, 767-300 and 737-800 (excluding aircraft operated by Japan
Transocean Air Co., Ltd.)

December 2016, is designed to stimulate the domestic travel
market by encouraging
customers to discover new

To help the Kumamoto region recover from the earthquakes, we provided full support for recovery efforts. We

In marketing, we introduced an innovative new mileageaward service called Go Somewhere with Miles. The service,

Outlook for Fiscal 2017

destinations in Japan onoffered specially reduced fares on flights to and from Kyushu inand generate steady growth, we will focus on two key strategies

response to increased demand for flights to Kyushu in order to

In fiscal year 2017, the first year of our new Medium Term

port. The final destinationin the new Medium Term Management Plan.

return home, help as volunteers, or such, and provided freeManagement Plan, we expect the market climate to be moreis selected by JAL, but

First, we will maintain and enhance our high-value-addedtransport of relief supplies and volunteer groups heading tochallenging due to new routes launched by other carriers andcustomers need less thanservices. During the previous Medium Term Management Plan

affected regions. We also launched a marketing campaign toincreased price competition. In response, we will assign aircraft

half the normal number of(fiscal 2012 – 2016), we worked to refine our full-service carrier

stimulate recovery in tourism demand in the Hokkaido region,

to meet demand and strive to boost profitability. We will also

required miles to qualify forbusiness. We implemented a variety of initiatives to achieve thatwhich was hit by successive typhoons. The campaign included

extend initiatives implemented through to fiscal year 2016 todomestic reward tickets.

goal, such as introducing JAL SKY NEXT-configured aircraft

tie-ups with travel companies to provide special products during

realize high-value-added services that support our position as a

The new service wasfeaturing genuine leather seats and LED cabin lighting, and thethe campaign period, as well as other initiatives to encourage

full-service carrier.

expanded to Itami Airport

first in-flight Wi-Fi service on domestic routes. These initiatives

travel throughout Hokkaido.
In product initiatives, we completed the revamp of all

initiatives under the new plan in conjunction with stepped up

applicable JAL SKY NEXT aircraft* which were launched in May

efforts to create new value, such as the introduction of the new

2014. We began to offer in-flight Wi-Fi services for free aboard

A350 and upgraded in-flight Wi-Fi services. Our goal is to set

JAL SKY NEXT-operated flights, helping to create a more enjoyable

our services apart from those of our competitors to ensure

and comfortable in-flight experience for domestic passengers.

customers continue to choose JAL.
Second, we will work to generate new demand. We face

On Itami routes, we improved product competitivenesswith the introduction of the Embraer 190, which is the first

the real risk of contraction in the domestic travel market. To

regional jet in our fleet to be equipped with a Class J cabin.

achieve stable growth in these conditions, we need to create

In airport services, we raised the quality of services at

new sources of growth to compensate for falling demand.

domestic airport lounges. We fully renovated Sakura Lounges at

Specifically, we will implement initiatives to attract more inter-

New Chitose, Naha, Fukuoka and Hiroshima airports, added

national visitors to Japan and extend our reach from the domes-

田・伊 丹 発 国 内線特典航空券(往復)に交換routes from Haneda Air-adequately address major changes in the operating environment

were welcomed by customers. We will continue to extend these6 , 0 0 0 マ イ ル で羽In route operations, we aim to increase convenience androutes from April 2017 as

comfort on our regional network. We plan to further increase

part of efforts to offer new

routes operated with the Embraer 190, centered on Itami

value to JAL customers.

詳細はどこか に マ イル

検索

Go Somewhere with Miles is aninnovative new mileage award service

TOPICS

Overseas Marketing Campaigns to Generate New Demand
The number of international visitors to Japan continues to growIn fiscal year 2017, we will create even more opportunities

strongly. In 2016, 24.03 million people visited Japan, exceedingfor overseas customers to experience regional Japan. We will

the record set in 2015. To attract more overseas visitors tocontinue to use the Japan Explorer Pass to stimulate demand,regional Japan, we began offering Japan Explorer Pass airfares

create highly convenient systems to encourage wider use of

new Diamond Premier Lounges, the top-class lounge for domestic

online from fiscal year 2015. Customers can now buy thesedomestic routes, and upgrade content and services on our new

tic market into overseas markets. We plan to set airfares andpassengers, at New Chitose, Itami and Fukuoka airports, andtickets on overseas JAL websites in 22 countries and regions

Explore Japan website.

launch marketing campaigns that encourage more people toimproved the food and beverage menu and service hours.

worldwide with multiple language support. We also set up theenjoy the charms of all Japan’s regions, not just its major cities“Explore Japan” promotional website, which provides tourist

and famous tourist spots, which will lead to growth in theinformation about regional Japan and a range of other usefulcontent such as booking services for hotels, traditional Japanese

number of visitors and revitalize regional economies.

inns, tours, activities and transport through one convenient

By implementing those two key strategies, we aim to overcome

website. In addition to showcasing the charms of regional

tough competition in the market and generate stable growth.

Japan, the site is a one-stop portal for travel services, allowing
visitors to seamlessly organize accommodation and travel
experiences in Japan.

Fiscal 2016 Results

Promotional website Explore Japan

In fiscal year 2016, we took steps to stimulate demand tocounter the impact of the Kumamoto earthquakes and negative

48

JAL REPORT 2017

W EB

jal.japantravel.com/

Embraer 190 equipped with a Class J cabin

JAL REPORT 2017

49

I

Ⅱ

The JAL Group’s Growth Story

Management Strategies
Designed to Create Value

Ⅳ

Performance and Strategies
by Business

A Business Base that Supports
Value Creation

Ⅴ

Financial / Data Section

OTHER BUSINESSESJAL GROUP AIRLINES

Maintaining Vital Air Links to Revitalize
Regional Economies

Businesses in this segment are working to increase the JAL Group’s corporate value
by improving convenience for customers.
Financial results for the two main companies in this segment were as follows:

J-AIR Co., Ltd. (J-AIR)

JALPAK Co., Ltd.

JAL CARD, Inc.

The JAL Group’s principal member airline covering regional routes,

JALPAK Co., Ltd. worked to increase sales by rapidly launching new

JAL CARD, Inc. stepped up efforts to sign up new members, running

Our regional network provides vital transport links to residents in

J-AIR is based at Osaka International Airport (Itami) and operates

products, offering more high-value-added products and conducting

effective marketing campaigns using online advertising and direct mail,regional cities and outlying islands. JAL Group airlines are progres-198* daily flights on 31 routes in a network connecting various

well-timed marketing campaigns to match changing demand. Also, toand accepting credit card applications at airports and other locations

sively switching from propeller aircraft to regional jets on regional

regions to meet customer needs. The company is introducing thecapture growing inbound demand, the company began sales of theusing tablet devices. As a result of these efforts, the number ofroutes to improve comfort and convenience for customers using our

new Embraer 190 with a Class J cabin and expanding its regional

JAL Visit Japan Dynamic Package for overseas visitors to Japan.

members as of March 31, 2017 totaled 3,272,000, an increase ofregional network. We are committed to contributing to regional

network to remain competitive and continue expanding as a regional

communities and revitalization projects through our highly conve-

airline. J-AIR is also actively supporting regional communities, such as

to overseas destinations, down 0.6% from the previous fiscal year.

cation with customers, we upgraded “MyJALCARD,” a dedicatednient network and high-quality services.

running flight experience

Despite upgrades to the smartphone online booking system to improve

online service that customers can access after enrollment, and en-events and airline classes

usability and active promotion of Business Class and Premium Econo-

hanced the service menu for members. The number of transactions

for children from areas

my Class tickets, passenger numbers declined year on year amid weak

was firm, supported by an increase in retail partners offering double

affected by earthquakes.

demand for trips to Europe and a drop in available seats on flights tomiles on purchases and initiatives to enroll or encourage members to* As of June 2017

Honolulu due to the introduction of new aircraft. The number ofswitch to more prestigious cards. As a result, operating revenue

domestic customers handled was 2,510,000, up 3.3% from the(before elimination of intercompany transactions) was steady at 20.4

previous fiscal year. Growth was supported by a campaign promoting

billion yen. Also, for the second consecutive year, JAL CARD wascheaper JAL airfares to Kyushu, stepped up sales and procurement

ranked top for Recommendation Intention and Meeting Customer

activities, and effective online marketing. As a result, operating

Expectations in the credit card category of the 2016 Japanese Custom-

revenue (before elimination of intercompany transactions) increased

er Satisfaction Index (JCSI) survey. We also received the highest ranking

0.2% year on year to 172.5 billion yen.

for “Awareness of Quality,” highlighting JAL CARD’s good reputation

Japan Transocean Air Co., Ltd. (JTA)
Established as Southwest Air Lines in 1967 before the return of
Okinawa to Japan, JTA has been providing vital air links to Okinawa
residents for 50 years. In addition to connecting Okinawa’s mainisland and outlying islands, JTA operates 70 scheduled flights each

Hokkaido Air System Co., Ltd. (HAC)

day on 13 routes between Okinawa and Haneda, Chubu, Kansai,
Komatsu, Okayama, and Fukuoka airports with a fleet of 12 737

HAC was established in September 1997 to provide convenient air

aircraft. Targeting inbound demand, JTA offers the highest level oflinks to destinations across Hokkaido Prefecture. The airline isservice in the JAL Group combined with a hint of Okinawa culture.

marking its 20th anniversary in 2017. HAC currently has a fleet of

The airline is also doing its

three SAAB 340B aircraft, which operate 26 daily flights linking

part to support the regional

Hakodate, Kushiro, Rishiri Island, and Misawa with Okadama Airport

economy by widely promot-

in Sapporo, and Okushiri with Hakodate Airport. The airline willing Okinawa as an appeal-

continue to focus on flight safety to maintain support from Hokkaido

ing destination for tourists.

residents while working to attract more private and small group

In fiscal year 2016, JALPAK handled 241,000 customers traveling

In fiscal year 2017, we will continue to listen to customer
feedback and make booking systems more user-friendly to respond

143,000 from the end of the previous fiscal year. To improve communi-with customers.
We will continue to work on improving customer satisfaction in

accurately to diversifying customer needs, aiming to provide a pleasantfiscal year 2017 by actively offering new services and enhancing thetravel experience that customers can only enjoy with JALPAK. We willappeal of our mileage award program.

also continue to implement new initiatives to attract as many overseas
visitors to Japan as possible.

customers, in addition tobusiness travelers. HAC will

Japan Air Commuter Co., Ltd. (JAC)
JAC was established to initially operate flights on four routes linking
the Amami Islands. The airline, which marks its 34th anniversary in
2017, is committed to its mission of maintaining and enhancing theregional network centered on Kagoshima and vital air links withalso do its part to support
the development of theregional economy andcommunities in Hokkaido.

Ryukyu Air Commuter Co., Ltd. (RAC)

isolated islands. Today, JAC operates flights on 22 routes, mainly
serving outlying islands in Western Japan, such as Tanegashima,

A regional airline celebrating its 32nd anniversary in 2017, RAC provides

Yakushima, and the Amami Islands, as well as destinations such

convenient connections to outlying islands in the Okinawa region. Basedas Oki and Tajima. The airline is working to improve customer

at Naha Airport on the main island of Okinawa, the airline operates

convenience by introducing the advanced ATR42-600 turboprop onto

between 41 and 43 daily flights on 12 routes, with connections to theroutes from 2017 andislands of Amami Oshima and Yoronjima to the north, Minamidaitojima

adding a new service

and Kitadaitojima to the east, Kumejima to the west, and Miyakojima,

linking Tokunoshima,

Taramajima, Ishigakijima, and Yonagunijima in the Sakishima chain to

Okinoerabu (stopover) andthe southwest. The airline is working to improve convenience for

Naha on Okinawa from

customers and businesses

fiscal year 2018.

in outlying islands,
encouraging more tourists
to visit the islands andfocusing on contributing tolocal industries.

50

JAL REPORT 2017

JAL REPORT 201751

A Business Base that
Supports Value Creation

GROUP COMPANIESThe JAL Group comprises Japan Airlines Co., Ltd., 81 subsidiaries (52 consolidated
subsidiaries) and 56 affiliated companies (13 equity-method affiliates) supplying a
range of air transport products and services to customers and business partners.

Air Transport Business Segment

Other Segments

JAL, 27 consolidated subsidiaries, three non-consolidated subsidiaries and three equity-method affiliates

25 consolidated subsidiaries, 26 non-consolidated
subsidiaries, 10 equity-method affiliates and 43
non-equity method affiliates

Main Companies

Main Companies

Air Transport Business

MaintenanceJAPAN TRANSOCEAN AIR CO., LTD.
JAPAN AIR COMMUTER CO., LTD.
J-AIR CO., LTD.
HOKKAIDO AIR SYSTEM CO., LTD.
RYUKYU AIR COMMUTER CO., LTD.

JAL AIRTECH CO., LTD.

Passenger Sales
JALPAK CO., LTD.
JAL SALES CO., LTD.

Airport Passenger Handling
JAL SKY CO., LTD.
JALSKY SAPPORO CO., LTD.
JALSKY OSAKA CO., LTD.
JALSKY KYUSHU CO., LTD.
JAL SKY AIRPORT OKINAWA COMPANY, LTD.

Cargo
JUPITER GLOBAL, LTD.

Airport-Related Business
JAL ABC, INC.
OKINAWA FUELING FACILITIES CO., LTD.

Ground Handling
JAL GROUND SERVICE CO., LTD.

Others
Maintenance
JAL ENGINEERING CO., LTD.
JAL MAINTENANCE SERVICE CO., LTD.

JAL INFORMATION TECHNOLOGY CO., LTD.
AXESS INTERNATIONAL NETWORK, INC.
JAL CARD, INC.

The JAL Group strives to create
sustainable value in order to realize
its Corporate Policy. In this section,
we look at the steps JAL is taking toachieve that goal and explain theGroup’s business base.

JAL Group CSR . . . . . . . . . . . . . . . . . . .  54

Cargo

Compliance / Risk Management. . . . . . .  66

JAL CARGO SERVICE CO., LTD.
JAL KANSAI AIRCARGO SYSTEM CO., LTD.
JAL CARGO SERVICE KYUSHU CO., LTD.

Corporate Governance . . . . . . . . . . . . .  68
Our External Directors Discuss JAL . . . . .  72
Board of Directors and Officers . . . . . . .  76

Passenger Sales
JAL NAVIA CO., LTD.
JAL MILEAGE BANK CO., LTD.

Directors . . . . . . . . . . . . . . . . . . . . . .  76
Audit & Supervisory Board Members. . .  79
Executive Officers. . . . . . . . . . . . . . . .  80

Airport-Related Business
JAL ROYAL CATERING CO., LTD.

52

JAL REPORT 2017

JAL REPORT 2017

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The JAL Group’s Growth Story

Ⅲ

Management Strategies
Designed to Create Value

Ⅴ

Performance and Strategies
by Business

A Business Base that Supports
Value Creation

Financial / Data Section

JAL GROUP CSR

Flight safety is the foundation and social responsibility of the JAL Group. The
highest priority in our CSR activities is to ensure the safe operation of every flight.
This is also the basis of our corporate value. In addition to ensuring flight safety,
our mission is to communicate the JAL Group’s firm commitment to safety and oursafety initiatives to the society, while striving to realize the JAL Group Corporate
Policy by resolving various issues facing society.

JAL Group’s Key CSR Issues (Materiality)

The JAL Group will engage in corporate social responsibilityof Japan” to meet society’s expectations and solve social issues

activities through its core air transport business as the “Wings

to create a better society for the next generation.

three key issues (materiality) – Coexist with the Earth, Contrib-

Issues facing society are always changing due to develop-

ute to Communities, and Nurture Future Generations.

ments in society and the environment. The JAL Group has

Coexist with the EarthJAL Group Basic CSR Policy

therefore used ISO 26000 and SDGs to identify the Group’s

Ensuring flight safety is the Group’s universal priority issue.

Contribute to Communities

Nurture Future Generations

JAL Group Corporate Policy
The JAL Group will: Pursue the material and intellectual growth of all our employees;
Deliver unparalleled service to customers; andIncrease corporate value and contribute to the betterment of society.

Coexist with
the Earth

Leverage the advantages ofour core air transport businessSolvesocialissuesWork to solve social issues through the airtransport business, with top priority on
ensuring flight safety.

Business
CSR
Nurture Future
Generations

P.56

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

P.60

P.62

Material CSR Issue Selection Process

Contribute toCommunities

Non-business
CSR

JAL Philosophy

Make a broad contribution tosociety as a member of society

STEP 1

Identify social issues
Use ISO 260000, SDGs, and other international guidelines to identify social issues

STEP 2

Prioritize issues
Pinpoint material issues for stakeholders and the JAL Group, and select those that should be tackled first.

As a member of society, we will communicate
the JAL Group’s firm commitment to safety andits safety initiatives, while working to resolvea broad range of issues facing society.

STEP 3Focus on JAL’s unique strengths
Develop initiatives and create value that only JAL can deliver through efforts
that embody the JAL Philosophy, the basis of shared awareness,values, and thinking of all Group employees.

Set KPIs and implement initiatives
Set key performance indicators (KPIs) for the selected issues and implement concrete initiatives under the JAL Group
Medium Term Management Plan for Fiscal Years 2017 – 2020.

■ Basis for Selection of Material Issues

CSR Management[ Stakeholder perspective ]CSR Promotion Framework
Board of Directors
President
Corporate Brand Promotion Council
CSR Committee

54

JAL REPORT 2017

[ JAL Group perspective ]The JAL Group CSR Committee meets every six months, leading●

Requirements in international guidelines●

JAL Philosophy

Group efforts to build a better society and create a sustainable●

Dialog with internal and external stakeholders●

JAL Group Medium Term Management Plan for Fiscal Years

future. The committee is tasked with understanding current

2017 – 2020 (JAL Vision)social expectations of the JAL Group, identifying issues, anddeveloping appropriate responses, while referring to ISO 26000
and the United Nation’s Sustainable Development Goals (SDGs).
The effective implementation of this PDCA cycle is used to
improve and promote our CSR activities.

JAL REPORT 2017

55

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The JAL Group’s Growth Story

Management Strategies
Designed to Create Value

Ⅲ

Ⅴ

Performance and Strategies
by Business

A Business Base that Supports
Value Creation

Financial / Data Section

JAL GROUP CSR

Coexist with the EarthJAL Group Stance on Coexist with the Earth

CONTRAIL Project – using passenger aircraft in atmospheric

Atmospheric observation project with Tohoku University

Aviation Biofuel

observations

The JAL Group supports Tohoku University’s greenhouse gas

The JAL Group views environmental protection as an important

The JAL Group is part of the CONTRAIL Project, run jointly byresearch project, which uses JAL aircraft to make atmosphericissue. We have developed guidelines highlighting areas that the

the National Institute for Environmental Studies, the Meteoro-

observations. Since 1979, the Center for Atmospheric andeffective way of achieving large reductions in CO2 emissions.

Group needs to tackle and created related action plans. The JAL

logical Research Institute, JAMCO CORPORATION, and the JAL

Oceanic Studies at Tohoku University’s Graduate School ofAviation biofuel is projected to be widely used worldwide fromGroup’s approach to environmental issues is summed up in ourFoundation. The project, which aims to improve our understand-

Science has been conducting research into global changes in

2030, but commercial aviation biofuel is already being produced

Environmental Guidelines and concrete initiatives are translated

ing of the mechanisms of global warming, uses JAL’s scheduledgreenhouse gases, using monthly scheduled domestic flights

in the US. Unlike the US, Japan does not have sufficient land to

into Action Plans.

international flights. Automated observation equipment andoperated by the JAL Group* to measure CO2 concentrations ingrow plants to make aviation biofuel. However, using municipal

manual pumps operated by researchers on board the aircraft are

the atmosphere. The program, which has been running for morewaste and other waste materials has significant cost advantages

used to take air samples. By observing conditions in the upper

than 30 years, has been gradually expanded to include otherin Japan in terms of raw material procurement and transporta-

atmosphere, researchers can understand the distribution,gases such as methane and nitrous oxide. This project is now thetion. We view waste materials as the most promising option formovement, and seasonal changes of greenhouse gases. Super-world’s longest study of greenhouse gas using aircraft. Flights

manufacturing low-cost aviation biofuel in Japan and believe

computers have been used to conduct advanced analysis ofare currently operated by JAL Group subsidiary J-AIR Co., Ltd.

JAL has a vital role to play in actively driving development byEnvironmental Guidelines and concrete initiatives
W EB

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

Low-Carbon Initiatives

gathered data since 1993, leading to a better understanding of
the world’s carbon cycle and enabling researchers to make* Flights initially operated by Toa Domestic Airlines, then Japan Air System (JAS) prior toits merger with Japan Airlines.

Many countries are developing aviation biofuel as a highly

bringing related companies together.
Our roadmap envisages commercial flights powered by

The vast majority of JAL’s CO2 emissions are generated from fuelhighly accurate long-term forecasts of climate change on aused by our aircraft. We are implementing a range of initiatives

global scale. The CONTRAIL Project also provides information

Monitoring forest fires

production from 2030. To achieve this timeline, we will partici-

that will be useful for our planet in the future, such as the

The JAL Group is cooperating with a project run by the Japanpate in Japanese industry-government-academia teams anddevelopment of measures to reduce global warming and ad-

Aerospace Exploration Agency (JAXA) to monitor large-scale

actively drive development, aiming to significantly reduce CO2

Tackling climate change

dress climate change. Moreover, there are hopes that the project

forest fires using satellites, as part of efforts to protect theemissions from aircraft and contribute to global efforts to create

As part of our response to climate change, we are working towill provide a scientific basis for developing national strategies

global environment and prevent disasters caused by fire. The

a recycling-based society.

reduce emissions of greenhouse gases in our air transport

on emissions trading schemes by providing accurate data on the

project was launched in 2003 by researchers at Hokkaido

business, such as actively introducing fuel-efficient aircraft into

volume and distribution of greenhouse gas emissions.

University. JAL Group flight crew report any fires seen from theto reduce CO2 emissions.

domestic aviation biofuel by 2020 and full-scale commercial

cockpit to the research team, which uses the information to

our fleet in line with business plans. In daily flight operations,our flight crews execute Eco Flight operations through intelli-Aircraft with a project logo

Process of converting waste to aviation biofuel

improve the accuracy of forest fire detection satellites.
Gasification(gasification
furnace)+conditioning

gent operational choices and timing while ensuring flight safety.
We also optimize aircraft loads such as fuel and onboard consumables to reduce aircraft weight. We actively reduce theRaw material(waste material)

environmental impact of ground support equipment (power, airHybrid gas

Chemical
synthesis(FischerTropsch
reaction)

Production of ethanolusing fungus

conditioning equipment) for aircraft at airports and the Engineering & Maintenance Division regularly cleans aircraft engines
to restore fuel efficiency. These are just some of the many

Cellulose (paper)
separation

CONTRAIL Project logo

Production of ethanolusing saccharificationand fermentation

Fuel conversion
process(upgrading)PureaviationbiofuelConversion toaviation fuel(alcohol-to-jet fuel)Distillation

initiatives deployed across our business, from flight operations
to maintenance, to reduce CO2 emissions.
Raw material(waste material)

The JAL Group also uses its unique position as an airline tohelp realize a low-carbon society and meet public expectations

Production of ethanolusing fungus

Conversion toaviation fuel(alcohol-to-jet fuel)

A Siberian forest fire seen from the cockpit on a JAL flightabout the environment. We have been a committed long-term
participant in the CONTRAIL Project, a joint research project
involving various public research groups that takes advantage ofthe broad reach and high frequency of flights by commercial

Automatic air Sampling
Equipment (ASE)

aircraft to conduct atmospheric observations. We also support
research aimed at improving the accuracy of satellite systems
used to monitor large-scale forest fires.
JAL is also part of a joint industry-government-academia
project working to develop and introduce domestic aviation
biofuel. The project team, which is made up entirely of Japaneseorganizations, is working to use biofuel on commercial flights intime for the 2020 Olympics and Paralympics in Tokyo, aiming tohelp create a low-carbon, sustainable society.

CONTRAIL Project
W EB

56

JAL REPORT 2017www.jal.com/ja/contrail/
JAL REPORT 2017

57

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The JAL Group’s Growth Story

Ⅲ

Management Strategies
Designed to Create Value

Ⅴ

Performance and Strategies
by Business

A Business Base that Supports
Value Creation

Financial / Data Section

JAL GROUP CSR

Eco-First Commitment

priority issues. We will continue to implement our Sky Eco

Reducing Waste

Saving Water Resources

The JAL Group is working to realize a recycling-based society and

The JAL Group is working to reduce its use of water amid risingprotect the environment by ensuring the effective use of the Earth’s

concern about water resources worldwide. In fiscal year 2016, welimited natural resources. By promoting the 3Rs (reduce, reuse, recycle)

reduced water usage by 0.9% year on year by reusing waste waterand reducing waste, we are targeting a final disposal rate of less thanand implementing water-saving measures.

program, which aims to ensure the Earth and its abundant
As an airline responsible for a vital part of public infrastructure,resources are passed on to future generations so that they can

the JAL Group is fully aware of its responsibility to the global

continue to view and enjoy our beautiful planet from the skies.

environment. We are therefore working to step up our environmental initiatives. In 2010, we fulfilled our Eco-First Commit-

2% for industrial waste generated by our domestic business sites. In

In particular, we are focusing on efficient use of water at ourment, leading to official certification as an Eco-First Company.

fiscal year 2016, the total volume of waste declined 1.1% year on year

aircraft maintenance facilities, which use large volumes of water. By

We also joined the Eco-First Promotion Council in fiscal year

and the final disposal rate improved 0.1 percentage points. As a result,washing more aircraft by hand, we have reduced water usage by 40%

2016. Controlling the environmental impact of our operations

we achieved our final disposal rate target of less than 2%.

compared with automated aircraft cleaning equipment used previously.

To reduce waste from our operations while also improving

In maintenance procedures and parts cleaning processes, our mainte-business efficiency, we have ended the use of paper manuals for flightnance teams use large amounts of pure water. Approximately 240m3 ofcrews and cabin crews and replaced them with digital manuals inpure water is recycled and recirculated daily by our reprocessing facilities.

and protecting the environment remains one of the JAL Group’s

Engine water washing

Maintenanceinnovation. New workstyles such as hot-desking have resulted in

Water use (Japan)

Minute atmospheric dust particles accumulate in aircraft engines during flight. Engines take in andsurplus office equipment, which is reused and recycled, to help reduce

compress air in the combustion process, causing accumulated dust to reduce fuel efficiency, which

the Group’s environmental impact (around 56 tons of equipment was(Thousands of m3)
500

leads to higher CO2 emissions. We regularly wash the interior of engines with water, removing any

reused or recycled in fiscal year 2016).

dust and dirt and restoring engine performance, which improves fuel efficiency by around 1%.
This process is conducted at intervals of 200 to 300 days for the Boeing 777 (PW4000 engine),
767 (CF6 engine) and 737-800 (CFM56 engine).

Reduced use of auxiliary power unit (APU) and closure of window shades
While parked

We are also recycling cabin waste based on standardized procedures for beverage cans, newspapers, in-flight magazines and plastic
Air Transport Association (IATA) and airport operators on comprehenEvery year, we recover around 800 tons of cargo packing materials

air-conditioning. This shortens the operating time of the APU at the rear of the aircraft, reducing

as fencing stakes and gardening supplies.

445

430

426

2012

2013

2014

2015

2016（年度）
(FY)

300
200
100
0

Also, when the JAL Group switched to new uniforms in 2013, werecovered around 180 tons of old uniforms and supplied them torecycling facilities for materials recycling. The uniforms were ultimately
used to make thermal and noise insulation materials for vehicle interiors.

Reducing Electricity Use
The JAL Group is working to reduce energy consumption at its groundWe participate in several projects run by external research bodies, contributing to society by using

facilities (offices, workshops, etc.) We have been introducing LED lights

the unique characteristics of our aircraft while ensuring flight safety.

and other types of energy-saving lighting at our maintenance facilities(hangars, docks), helping to reduce the Group’s domestic electricity

Use of continuous descent operations (CDO)
During descent452

sive initiatives to dispose in-flight waste.
(polyethylene sheets), which are recycled to make plastic products such

CONTRAIL Project using passenger aircraft for atmospheric observations / reporting
forest fires, and helping Tohoku University with atmospheric observations

454

400

bottles. The JAL Group also continues to work with the International

Closing window shades blocks out sunlight, lowers cabin temperatures, and reduces use of
CO2 emissions.

In flight

iPads. We are also promoting paperless meetings as part of workstyleuse by 5.8% year on year to 113 million kWh in fiscal year 2016.

Our flight crews actively use a sloped descent approach called CDO to reduce CO2 emissions, only

Also, in fiscal year 2016, we were awarded certification as anwhen safety criteria and other specified conditions are met.

Excellent Operator for Energy Conservation (S-Class) by the Ministry of
Economy, Trade and Industry for the second consecutive year. Goingforward, we will continue to implement initiatives that reduce theReduced flap, delayed flap & delayed landing gear and idle reverse initiatives
To prevent an unnecessary increase in air resistance, our flight crews reduce the use of flaps

At landing

sustainable society.

(devices at the back of the main wings designed to increase lift) and delay deployment oflanding gear and flaps, while ensuring safety at all times. Reverse thrust is employed whenengines are idling, only when specified runway conditions are met. These approaches help to

While taxiing

Group’s impact on the environment as part of our efforts to create a

Polyethylene sheets used as cargo packing materials

Total waste volume and final disposal rate (Japan)

lower CO 2 emissions.

(Tons)
5,000

Engine out taxi – use of only one engine on the ground

4,000

When taxiing to parking spots, our flight crews shut down one of the aircraft’s two engines toreduce CO2 emissions, only when specified conditions are met.

2.5

4,327
3,720

3,000
2,000

Electricity use (Japan)

1.2

3,415
1.2

3,475

2.0

3,436

1.2

1,000
0

JAL REPORT 2017

2013

2014

2015

134

129

125

120

(FY)
2016（年度）

2013

2014

2015

113

1.0

0

■ Total waste volume

58

1.5

0.5

2012

150

100

1.1

0.9

(Millions of kWh)
200

50

0
2012

2016（年度）(FY)

Final disposal rate

JAL REPORT 2017

59

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The JAL Group’s Growth Story

Management Strategies
Designed to Create Value

Ⅲ

Ⅴ

Performance and Strategies
by Business

A Business Base that Supports
Value Creation

Financial / Data Section

JAL GROUP CSR

Contribute to Communities
Our Stance on Supporting Communities

part in volunteer activities, such as harvesting rice cultivatedIn initiatives to support innovation in agricultural andwith spring water that emerged after the earthquake near Ubu

marine products, we ran promotional campaigns for rice andOur aviation business connects people and helps to spread

Shrine in Aso City. JAL will continue to run programs that

products made with Japanese indigo (ai) from Aomori Prefecture

Japanese culture around the world.

provide support to the region.

in conjunction with the start of the JAL NEW-JAPAN PROJECT.

Through the JAL Group’s core air transport business, we

In April 2017, one year after the earthquakes, we invited

We also promoted Seiten no Hekireki – Aomori Prefecture’s firstare harnessing our unique position and strengths as an airline toelementary school children from Kumamoto Prefecture to takeA-grade rice brand – in JAL’s international lounges at Haneda

implement activities that contribute to society. Guided by thepart in airline classes and flight experiences called Ashita no

and Narita airports, explaining the story behind the brand’s

JAL Group Basic CSR Policy, our initiatives are designed to bring

Tsubasa (Wings of Tomorrow) at Aso Kumamoto Airport. The

development and offering samples for tasting, which proved

people together, revitalize regional economies, and supportclasses are designed to give children – society’s future leadersindustry, as well as support communities worldwide.

– an opportunity to think about future career prospects by

Helping Communities Recover from Disasters

Sending relief supplies to the area affected by the Kumamoto earthquakes

popular with passengers.
A PR team was also set up in Aomori Prefecture to pro-giving them deeper insight into work in the field of aviation andmote Seiten no Hekireki. These efforts led to a three-foldtheir hometowns, and by motivating them to set and strive toincrease in rice fields and rice harvested over the previous fiscal

reach their goals. The classes are run by JAL Group volunteers.

year. Targeting the health food properties of Japanese indigo,a species of flowering plant that is also used as dye, we teamed

The JAL Group helps regions and communities recover from major

up with a company called Aomori Ai, which is developing

disasters. One initiative is JAL’s VISIT TOHOKU! Campaign, a region-

related products, to create a type of cake called financier

al support project. The project is a way of expressing the JAL

containing Japanese indigo. JAL serves these cakes to passen-Group’s gratitude to society by supporting the Tohoku region fromgers during flights and they are also available for purchase on

a broad perspective, such as promoting regional industries and tour-

the JAL Group website. Passengers on JAL’s international flights

ism and helping communities recover from the earthquake.

Water donated to the drought-affected Republic of Palau

JAL is also a partner in the Tohoku Cotton Project,

the affected region. JAL Group volunteers actively support

illustrate the steady progress we are making in supporting
Families enjoy trips to Okinawa through the JAL Gifts of Smiles Project

JAL NEW-JAPAN PROJECT

innovation in agricultural and marine products.

We launched the JAL NEW-JAPAN PROJECT nearly two years ago

with regional businesses and groups to develop regional econo-

to enhance the appeal of Japan’s regions, under the slogan

mies and boost the number of permanent residents through“Revitalizing Communities Together.” Focusing on themes suchactivities aimed at “Revitalizing Communities Together.”

Going forward, the JAL Group plans to work more closely

regional agricultural corporations by helping sow cotton seeds
and by weeding and harvesting the cotton fields. Cotton
harvested by farmers with the support of JAL Group employees

Providing Disaster Relief

is used to design and make original products, which are provided to passengers on flights and can be bought using JAL miles.

The JAL Group has been a member of the Joint Committee foras promoting regional tourism and supporting innovation in

In fiscal year 2016, we made roughly 20,000 handkerchiefs

Coordinating and Supporting Voluntary Disaster Relief since

agricultural and marine products, we are working with residents

using the Tohoku cotton.

fiscal year 2008. We make recommendations from a businessand regional groups to raise awareness of hidden tourist spots

We also continue to run the JAL Gifts of Smiles Project,

standpoint about volunteer activities during major disasters.

and identify, commercialize, and sell local specialties as part ofwhere we take elementary school children affected by the Great

Through the committee, companies, social welfare councils,a broad package of support for the sustainable development of

The JAL Group has supported art exhibitions for roughly 40

East Japan Earthquake on family trips to Okinawa.

NPOs, and the Central Community Chest of Japan work

Japan’s regions.

years, using its expansive international and domestic route

Cultural Exchanges

Another JAL initiative is the Kyushu Support Project,

together to create a framework to support volunteer activities

In tourism promotion initiatives, we teamed up with

network to transport paintings and other artworks for display

launched to help the Kyushu region recover from major damage

after disasters. JAL also helps to transport relief supplies andregional businesses and groups to develop new travel products

at exhibitions. Using the expertise gained from transporting

caused by the 2016 Kumamoto Earthquakes. Also, through ourvolunteers to affected areas.

in Mie Prefecture aimed at attracting visitors after the G7

artworks, we provide customized transport services to museums

Ise-Shima Summit in May 2016. The Ise Shrine in Mie Prefecture

for around 30 events each year. Through the JAL Group’s core

JAL NEW-JAPAN PROJECT, we are working with regional part-On April 17, 2016, the day after the Kumamoto earth-ners to develop and promote products that highlight the Kyushu

quakes, we transported 3,000 blankets on an emergency flightis rebuilt every 20 years in a ceremony called shikinen sengu

air transport business, we aim to help connect future genera-

region. We have selected a wide range of food items, which arefrom Itami Airport to Aso Kumamoto Airport at the request ofthat goes back more than 1,300 years, ensuring the shrine istions to high culture and society by continuing to bridge Japan

included in in-flight meals and served in airport lounges.

Kumamoto City. The blankets were provided by AEON Co., Ltd.,

always new and beautiful through a process of perpetualand the world as the “Wings of Japan.”with which we have an emergency relief supply transport

renewal called tokowaka. Inspired by the spirit of thisgives employees the opportunity to visit areas affected byagreement. We also used a total of 49 scheduled flights tolong-standing Ise tradition, JAL, Ise City and Mie Prefecture

disasters to see, experience and learn from recovery efforts ontransport roughly 50 tons of emergency evacuation tents,

co-created and sell Tokowaka Wedding Tours. Wedding couples

the ground. Participants visited Kumamoto Castle and Aso

medicine, food, and other items to the affected area.

who take part in the tours mark the important milestone in

We also run a Recovery Support Training Program, which

Shrine, which were both heavily damaged by the Kumamoto

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properties of Japanese indigo. The spray is exclusive to JAL andthe packaging is designed by JAL and Aomori Ai. These products

an earthquake disaster recovery projected launched in 2011 byagricultural corporations, apparel firms and other companies incan buy a deodorant spray that makes use of the antibacterial

Overseas, the JAL Group donated 10 tons of water to theearthquakes. During the visit, JAL employees heard firsthandRepublic of Palau, which was affected by drought. The waterfrom residents about the earthquakes and the situation after

was transported to Palau on May 7, 2016 in the cargo hold of

the disaster. Participants were also given the opportunity to takea chartered aircraft.

JAL REPORT 2017

their lives by visiting Ise Shrine as an expression of gratitude totheir partner.

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Management Strategies
Designed to Create Value

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Performance and Strategies
by Business

A Business Base that Supports
Value Creation

Financial / Data Section

JAL GROUP CSR

Nurture Future Generations
JAL Group Stance on Nurture Future Generations

JAL SORAIKU

As part of its CSR activities, the JAL Group is working to

The JAL Group runs a wide range of programs aimed at nurtur-nurture future generations based on the theme of “brighting future generations.

futures.” To support those efforts, we launched JAL SORAIKU
in November 2016 as a new educational program to give

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children a deeper connection with Japan and the world andwww.jal.com/ja/csr/soraiku/● JAL Factory Tours – SKY MUSEUM

SKY BATON: Passing the Baton to Younger Generations to Create the Future of the Tohoku Region

World Children’s Haiku
This poetry project is designed to spread the joy of haiku, the world’s

The JAL Group works with its customers to support the development

shortest form of poetry, and develop artistic sensitivity through theof areas affected by disasters. SKY BATON was launched by the JAL

writing of poetry. Another goal is to foster deeper interest in andGroup to support the Tohoku recovery effort by helping the younger

understanding of Japanese culture and Japan.

generation who will be entrusted with Tohoku’s future. Through the

The project dates back to a haiku contest hosted by JAL on

program, children who live in disaster-stricken areas receive support for

an American radio program in 1964. Since the creation of the JAL● JAL Paper Plane Classes

their studies. JAL’s support involves matching miles contributed byFoundation in 1990, we have hosted the biennial World Children’s● JAL Sky Eco Classes

customers to the program through JAL Charity Miles. JAL also cooper-

Haiku Contest. Children aged 15 and younger from around the world,of fiscal year 2020, the program will feature various activities● JAL Career Talk for Students

ates with Chance for Children (CFC), a public interest incorporated

including Japan, submit haiku with an attached drawing. More thancentered on hands-on experiences that JAL can provide as an● JAL Safety Demonstrations by Cabin Attendants

association, by donating JAL/CFC education vouchers to many children

680,000 works from 52 countries and regions have been submitted toairline. By giving children an insight into the wonders of the● JAL Job Interview Simulation for Students

in the program.

date. Grand prize-winning haiku from each country are collected andthe global environment.
Targeting a total of one million participants by the end

published the following year in an anthology called “Haiku by Worldsky, we hope to lead them on a new journey of discovery

Children,” which is donated to educational institutions and libraries

and learning that encourages them to think about their

JAL Factory Tours – SKY MUSEUM

future prospects.

in Japan and overseas. In fiscal year 2016, the 14th anthology was

JAL Factory Tours are run at the JAL Maintenance Center adja-

published under the theme “Morning.”

cent to Haneda Airport. The tours are free and give visitors the
Encouraging interest in airline industry careersopportunity to learn about how airlines operate and get a close

JAL runs a range of programs designed to make its businessview of aircraft maintenance. We started these tours in the

more accessible, boost interest in study, and encourage people

mid-1950s, soon after the Company was founded. The tours

to think about their careers. Examples include the recently

were significantly expanded in 2013 and renamed JAL Factory

renewed JAL Factory Tours – SKY MUSEUM and JAL Career Talk

Tours – SKY MUSEUM. Admission to the fun hands-on museum

for Students, which features talks by flight crew, cabin crew,is free and is geared for all ages from elementary school students

and other JAL employees about their jobs and motivation.

upwards. One of the main goals of the museum is to use our

JAL/CFC education voucher presentation ceremony

JAL Scholarship Program

special position as an airline to explain to children – society’s
Encouraging interest in Japan and the world

future leaders – how aircraft and airports work and inspire them

JAL also runs a number of programs to cultivate interest in new

to have ambitious goals and envision a prosperous future.

experiences and encourage people to think about Japan and the

The museum welcomed over 120,000 visitors in fiscal year 2016.

world. Examples include workshops to discuss how to addresssocial issues facing developing countries, opportunities to

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www.jal.co.jp/kengaku/interact with the people and culture of Japan’s regional communities in the primary sector by staying at private lodgings andfarmhouses, and the JAL Origami Plane National Competition,

JAL Paper Plane Classes

a new addition to our program lineup.

Award ceremony for the World Children’s
Haiku Contest

The 14th Haiku by WorldChildren – “Morning”

Through the JAL Scholarship Program, college students from acrossAsia and Oceania are invited to Japan to promote mutual understanding and prepare young men and women for leadership roles in shaping
the region’s future. It offers opportunities to experience JapaneseSupport for UNICEF

culture, such as the tea ceremony and Zen meditation, and workshopswith Japanese students. Established in 1975, the program is currently

In 1991, JAL launched the Change for Good fundraising campaign for

operated by JAL and the JAL Foundation. To date, a total of 1,564

UNICEF on flights between Tokyo (Narita) and New York to collectoverseas students have taken part in the program.

foreign coin donations from passengers.

In 2016, the program was conducted in the Tokyo area and in

The campaign was expanded in 2006 to include all international

JAL Paper Plane Classes are run by around 720 JAL Group

Ishikawa Prefecture for about three weeks starting on June 27, withflights operated by JAL. Donation boxes were also installed in customs

employee volunteers who have been certified as instructors by

26 students from 15 countries and regions taking part.

areas and lounges at airports in Japan. We also continue to support

Encouraging interest in the Earth

the Origami Airplane Association. The JAL Group started training

We are expanding our JAL Sky Eco Classes, which explain in a

instructors 10 years ago in 2007. JAL holds Paper Plane Classes

straightforward way the Group’s efforts to reduce CO2 emissions

in Japan and overseas and also runs a national competition.

from aircraft and other environmental initiatives. We have also

In fiscal year 2016, we held 204 classes attended by a total oflaunched a new program with HAKUTO – a private team aiming

25,063 people, as part of learning programs to encourage people

to send a robotic rover to the moon – to spur interest in space.

to think about their own future from the perspective of aircraft andThese are just some of the programs aimed at stimulating

the future of Japan and the world through human interaction. We

curiosity in our planet and space. We want these activities toplan to hold paper plane competitions across Japan for contestants

encourage people to think about our planet, fostering an

who progress through qualifying rounds. The finalists will be invitedinterest in protecting the global environment that is passed on

to the JAL Origami Plane National Competition in November 2017.

to future generations.

We are also planning to hold a JAL Origami Plane World Competi-

We have recently set up alumni organizations overseas to create afundraising efforts by transporting donated coins to different countries

network of previous participants who are playing active roles around thefree of charge. Foreign coins collected during the campaign areworld. We also launched a new exchange program in 2015 for Japanese

donated to UNICEF, which uses the funds to protect the lives, healthand Korean junior high school students. In the program’s second year,

and rights of children.

Korean junior high school students visited Wakayama Prefecture.

At the end of each year, JAL cabin crew and other employees
volunteer to collect donations for UNICEF through street fundraising activities.

tion in 2020. Going forward, the JAL Group will continue to use its
Paper Plane Classes to nurture future generations and promoteinternational exchange between Japan and the world.
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JAL REPORT 2017www.jal.com/ja/csr/soraiku/origami

JAL Scholarship – Japanese and Korean Exchange Program (2016)

Recovered UNICEF donation boxes

JAL REPORT 2017

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Management Strategies
Designed to Create Value

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Performance and Strategies
by Business

A Business Base that Supports
Value Creation

Financial / Data Section

JAL GROUP CSR

Other Initiatives
Protecting Human Rights

Supply Chain Initiatives

chains. The NPO works to increase ethical business practices in

The JAL Group holds annual communication meetings withThe JAL Group has been a signatory to the United Nations

Building strong partnerships with suppliers

supply chains through its online platform, which allows member

suppliers, primarily companies that indirectly provide materials

Global Compact since December 2004. As part of our support

The JAL Group needs the cooperation and support of many

companies to share information with customers and suppliersto the Group. The meetings are used as a forum to ensure

for its principles, we have made a public commitment to pro-suppliers to operate its flights and provide products and services

worldwide. Sedex also monitors efforts by suppliers to improve

suppliers understand the Group’s basic stance on procurement

tecting human rights in all our business activities.

to customers on a daily basis. As explained below, we areresponsible practices.

and to share information and ideas. In fiscal year 2016, a total

Sedex is a London-based NPO focusing on global supply

Communication meetings* with suppliers

working to build strong partnerships with suppliers based on

The JAL Group primarily uses Sedex’s CSR information

to reinforce respect for human rights across the Group by

mutual trust by ensuring fair and transparent procurement

platform for suppliers that provide products used directly by ourDuring these communication meetings, we explain the JAL

putting our action policy – the JAL Philosophy – into practice.

activities. Showing our appreciation for the work carried out by

customers, such as inflight meals and merchandise, but we areGroup’s basic approach to procurement, the JAL Group Supplier

Educating our workforce about human rights is a vital step in

suppliers is also a key part of our business relationships.

encouraging more of the Group’s suppliers to become Sedex

Code of Conduct, and criteria that have to be met to secure orders.

members to increase mutual understanding and trust.

We also encourage suppliers to become members of Sedex and talkTo realize the JAL Group Corporate Policy, we are working

eliminating discrimination based on gender, age, nationality,
race, ethnicity, religion, social status, disability, sexual orienta-

When selecting suppliers, we assess a broad range of factors,

we are working to raise employee awareness of human rights

such as the company’s reputation and its corporate social

through various internal educational programs, such as training

responsibility (CSR) initiatives, in addition to the quality and costcourses for new hires and managers.

of its products and services and delivery performance. We also

We have also established a number of hotlines that employees can use to report harassment that infringes human

work to ensure fair and transparent procurement activities byoffering numerous opportunities for many suppliers in Japan
2. To ensure our customers access safe and reliable services in thecourses for all JAL Group employees to give them a better

lead-up to the 2020 Olympics and Paralympics in Tokyo, we will

understanding of actions that constitute sexual harassment andimplement a range of environmental initiatives to support thepower harassment, aiming to ensure our personnel are nevercreation of a sustainable society, such as sharply reducing CO2

victims or perpetrators of harassment of any kind. We have also

emissions from our aircraft and taking steps to reduce theprevent discrimination of employees who take maternity leave,
childcare leave, family-care leave and other necessary breaks
from work.
On March 25, 2016, the President released a message forall employees, calling for the Group to improve its understand-providing e-learning modules for all JAL Group employees,
establishing a counseling hotline, and distributing “LGBT Ally”
stickers for staff undergoing training to show their support for
the LGBT community.

Build mutual
understanding
and trust

Suppliers

View supplier data
and monitor
improvements
Provide CSR
data based oninternational
standards*

ers are also invited to join JAL Factory Tours-SKY MUSEUM to givethem a deeper understanding of the JAL Group.
* Communication meetings with suppliers are held every year and are organized by theProcurement Division. Similar meetings are also run by the Airport Operations Divisionand the IT Planning Division.

Provide CSR data,submit reports on
improvements

effects of heat on our customers during the event.
3. Promoting procurement based on CSR
We are working with suppliers to promote procurement activities
in line with the JAL Group CSR Policy. Specific initiatives are
aimed at legal compliance, protecting the global environment,
respecting human rights, appropriate labor practices, fair busi-

Evaluate CSR activities,
advise improvements,
monitor progress* International standards: ISO 14001, SA 8000, OHSAS 18001, Ethical Trading Initiative(ETI) Base Code, etc.

A communication meeting for suppliers

ness practices, and responding to consumer issues.

ing about the LGBT community (sexual minorities). We aretaking a number of concrete steps in this area, including

and increase the competitiveness of the entire supply chain. Suppli-

and overseas to do business with the JAL Group.

rights. To support our work in this area, we run e-learning

established clear rules and run internal training courses toabout ways of working with them to optimize the management

1. Fair and transparent procurementtion, gender identity, and other attributes. To address this issue,of 46 companies participated in these meetings.

JAL Group Supplier Code of Conduct

Tokyo 2020 Olympics and Paralympics – JAL Group Action Plan

We established the JAL Group Supplier Code of Conduct in April

JAL has developed an action plan for the upcoming Tokyo 2020 Olympics and Paralympics in its role2016. The code, which is available in Japanese, English, andas an official partner in the passenger air transport services category. In addition to providing safe

Chinese, is based on the principles of the United Nations Global

and reliable transport services to all competitors and parties involved in the Olympics and Paralym-Compact and covers four key areas: (1) human rights, (2) healthpics, we aim to help make the event a success by implementing activities in the following six areas.

and safety, (3) business management, and (4) the environment.

We will also actively work to create a legacy for the public after the games have finished.

We ask all our suppliers to understand and comply with the
Supplier Code of Conduct.
JAL Group Supplier Code of Conduct
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www.jal.com/en/csr/iso/fair_operating/pdf/
code_conduct_ja.pdf

Building a sustainable supply chain
In 2015, the JAL Group became a global member of the Sedex
platform, operated by Sedex Information Exchange Limited, aspart of our efforts to build a sustainable supply chain bypromoting ethical and responsible supply chain business(1) Nurture future generations through support for sports
Help deepen understanding of issues facing the disabled andcreate a more caring society by using the Tokyo 2020 Paralympics
as an opportunity to promote disabled sports in Japan.
(2) Improve accessibility to generate demand
Make travel more accessible for the disabled, the aged and othergroups that face limitations in air travel.
(3) Improve and promote the basic quality of our services (safety,
on-time operations)
Promote Japan’s reputation for service quality in areas such as
safety and on-time operations, particularly to overseas customers,
to increase the number of visitors to Japan.

(4) Create an eco-friendly society
Implement a range of environmental initiatives to support thecreation of a sustainable society, such as sharply reducing CO2
emissions from our aircraft and taking steps to reduce the effectsof heat on our customers during the event.
(5) Grow inbound demand and revitalize regional economies
Help revitalize regional economies by exploring and implementing
ways of encouraging more of Japan’s growing number of overseas
visitors to see regional areas, not just the main venues in Tokyo.
(6) Deliver a sophisticated customer experience
In the lead-up to 2020, when the world’s eyes will be on Japan,
use advanced services and cutting-edge technologies to create an
airline experience that inspires renewed excitement in air travel.

activities and strengthening risk management.

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Management Strategies
Designed to Create Value

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Performance and Strategies
by Business

A Business Base that Supports
Value Creation

Financial / Data Section

COMPLIANCE / RISK MANAGEMENT

Promoting Compliance

Risk Management

Business Continuity Plan (BCP)

5. Financial Risk Committee
The Financial Risk Committee is chaired by the Executive Officer ofWhen responding to specific risks that threaten our ability to fulfill our

To promote compliance with all laws, regulations and rules governing

The JAL Group manages risks by dividing them into three categories:

Finance and Accounting, and includes the President, Executive Vice

responsibilities as a provider of transport services to the public, such as

our corporate activities, we have designated the General Affairs(1) corporate risks associated with management in general, excluding

President and leaders of relevant departments and divisions. The

pandemic influenza, unidentified infectious diseases, or earthquakes,

Department of Japan Airlines Co., Ltd. to oversee all compliancerisks related to air transportation; (2) operational risks associatedCommittee identifies financial risks as appropriate and strives to

we have established a business continuity plan (BCP) that enables us tomatters, and are implementing various measures in a focused effort towith aviation safety, aviation security and other issues related to air

facilitate improvements in corporate management. More specifically,

continue business effectively in emergency situations based on guide-

elevate employee awareness.

transportation; and (3) strategic risks associated with businessit conducts regular simulations of financial conditions and reviews

lines established in collaboration with regulatory bodies and othermanagement that may have a material impact on corporate revenues

the results. In the event of a major financial crisis, large-scale

relevant institutions. The BCP covers the basic points of policies andand expenditures.

disaster or other major risk-generating event that the Committee

procedures necessary to ensure the safety of our employees and their

expects to exert a large, quantifiable impact on the Group,

families and to maintain air transport operations essential to the JAL

Every employee in the JAL Group reinforces compliance byputting the JAL Philosophy into practice in their work each day.
Employees also use the Group’s Intranet to view a range of regulations

We have established the following five committees in order toand handbooks related to compliance, such as JAL Group Regulations

identify, analyze and assess existing risks and implement appropriate

it calculates the estimated financial impact and, if necessary, pursues

Group, including reservations, information provision, payments, andon Preventing Insider Trading, the JAL Group Handbook on Protecting

measures to mitigate those risks.

collaborative responses with the Risk Management Committee.

settlements. We conduct regular reviews and revisions as required toenhance practical application of the BCP.

Personal Information, Information Security Action Handbook, Guide to
the Antimonopoly Act, and Group Hotline Regulations.

1. Risk Management Committee

Information Security Measures

During the outbreak of Ebola hemorrhagic fever in West Africa

The Risk Management Committee is headed by the Executive Office

An incident involving the unauthorized disclosure of personalin 2014, we activated our BCP, which includes measures to respond toCompany and a law firm, which can be used by any person working inof General Affairs, and primarily comprises general managers

information from the JAL Group occurred in September 2014.

pandemic influenza or unidentified infectious diseases. We coordinatedthe JAL Group. This enables us to promptly identify and remedy cases

responsible for supervising operations departments. The Committee

Hackers attacked the JAL Mileage Bank’s systems and gained illegal

our response with relevant government bodies, developed theof misconduct, power harassment and other issues, and reinforce

takes responsibility for overall risk management—encompassing

access to the customer information management system. We deeply

necessary systems and added the Policy for Handling the Ebola Virus

compliance management.

corporate risks, operational risks, and strategic risks— to stabilize

regret the inconvenience and concern caused to customers and other

Disease (International Flights) to our BCP.

Group-wide management activities. It has also established the JAL

people affected by the breach. We responded by strengthening

framework. We run classroom compliance training courses for all

Group Basic Policies on Risk Management. When existing risks are

information security as a top priority and by taking steps to prevent

speedy confirmation of the safety of all JAL Group employees and theirGroup employees at our business sites, publish compliance newslettersidentified, it reports on the progress of responses and shares

any recurrence.

families in the event of a large-scale disaster. The Group-wide systemfour times each year, hold seminars about laws and regulations

information with Group management via the Management Liaisonorganized by the Legal Affairs Department, run practical exercises on

Committee.

We have also set up a Group Hotline with contact points in the

We are implementing a wide range of initiatives to support this

how to deal with targeted email attacks and other threats, and provide

2. Information Security Committeee-learning on information security twice a year. Through these initia-

The Information Security Committee is headed by the Executive Officer

tives, we are working to foster a culture of compliance across theof General Affairs and the Executive Officer of IT Planning, andentire JAL Group, ensure business activities are in tune with accepted

comprises the leaders of relevant departments. The Committeesocial standards and reduce legal risk.

carries out activities specific to information management, upgrades

In addition, an executive from each JAL Group company is given
overall responsibility for compliance at their companies. They comprise

information security measures, and strives to reduce corporate risk.

We introduced a safety confirmation system in 2007 to facilitate

was upgraded in 2014 to make safety-related information available

Specifically, we implemented previously planned information
security measures ahead of schedule to establish a robust system tomore quickly. Communication and other exercises are conducted

detect and monitor increasingly advanced and complex cyber-attacks,

regularly throughout the JAL Group to foster staff awareness of risk

while continuing to upgrade preventive measures to the highest level.

management and reinforce preparedness for unexpected situations.

Risk Management System

3. Group Council for Safety Enhancement General Meeting

the JAL Group Compliance Network, which is responsible for swiftly

The Corporate Safety and Security Department promotes safety

sharing relevant information and strengthening the compliancerigorously under the direct control of the President. The Groupframework at each Group company. This includes sending email

Council for Safety Enhancement General Meeting, with thenewsletters four times each year containing useful information, such

Corporate Safety and Security Department serving as Secretariat,

as news about compliance developments inside and outside the Group

shares information on safety in daily operations, determines

and compliance case studies.

countermeasures, considers important measures related to safety,

Board of Directors

Promotion of Safety and Security
Council for Safety Enhancement
General Meetingand checks policies.
4. Group Operational Safety Promotion Committee

Promotion of Aviation Safety

President
Management Liaison Committee
Risk Management Committee
Administration: General Affairs Department (Overall Supervision of Risk management)

Financial Risk
Committee

Organized as a committee under the Group Council for Safety
Enhancement General Meeting, the Group Operational Safety
Promotion Committee maintains and strengthens collaborative,
safety-related measures among departments, divisions and Group

Safety Management
Security Management

Information Security Committee

Corporate Risk, Operational Risk, Strategic Risk

airlines with the aim of enhancing the safety of Group air transport
operations as a whole. The Committee comprises the Executive
Officer (who serves as Chairperson) of the JAL Operational Safety
Promotion Committee, leaders of departments responsible for JAL
safety management appointed by the Chairperson, and Executive
Officers responsible for safety at Group airlines.

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Designed to Create Value

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Performance and Strategies
by Business

A Business Base that Supports
Value Creation

Financial / Data Section

CORPORATE GOVERNANCE

Basic Stance on Corporate Governance
The JAL Group aims to contribute to society through its business
operations. As the leading company for safety in Japan’s transport
sector, we work to ensure safe operations – the cornerstone of ourbusiness – while offering the highest level of service to customers. We
also endeavor to fulfill our economic responsibility to all stakeholders bygenerating an adequate level of profits through the provision ofhigh-quality products and services based on fair competition, while also
meeting our wider responsibilities to society.
In line with this thinking, we have established the JAL Philosophy
in accordance with the JAL Group Corporate Policy, “The JAL Group will
pursue the material and intellectual growth of all our employees, deliver
unparalleled service to our customers, and increase corporate value andcontribute to the betterment of society.” We will strive to enhance
corporate value and achieve accountability by establishing a corporate
governance system that results in a high level of management transparency and strong management oversight, while at the same time engaging in rapid and appropriate management decision-making.
The Board of Directors has established corporate governance thatadheres to the Fundamental Policies of Corporate Governance as a key setof rules pursuant to the Companies Act, relevant laws and regulations,and the Articles of Incorporation, and reviews it at least once a year.

Corporate Governance System
Board of Directors
The Board of Directors ensures a high level of management transparency and strong management oversight through the election ofcandidates for the positions of Director, Audit & Supervisory Board
Member, and Executive Officer, decides their remuneration, and makes
important decisions.

In order to separate the management oversight functions andbusiness executive functions, the board appoints a Director who is not abusiness executive director as Chairperson, and an appropriate numberof three or more External Directors who qualify as highly independent toprovide appropriate advice.
In order to carry out efficient decision-making, the board may
delegate decision-making concerning matters set forth in the Administrative Authority Criteria Table to the President pursuant to Regulations for
Kessai (written approval) and Administrative Authority approved by theboard. The Management Committee has been established for the purposeof contributing to appropriate and flexible decision-making concerning
management issues by the Board of Directors and the President.
The Board of Directors has established the Corporate GovernanceCommittee, which comprises the Chairperson of the Board and External
Directors, to evaluate the effectiveness of the Board of Directors withreference to self-evaluations by each Director once a year, review theoperation, etc., of the board appropriately, and disclose a summary of
its findings.

Directors
Legal considerations are explained to the Directors to ensure that they
are aware of their responsibilities, including the “fiduciary duty ofloyalty” and the “duty of ensuring prudent management.” The term ofoffice is set at one year in order to confirm their accountability eachfiscal year. The Company has also introduced a remuneration system for
Directors (excluding External Directors) based on sound financial
incentives designed to promote sustained growth.
External Directors are appointed from among persons with vast
knowledge and experience in various fields in order to ensure diversity.
Those who do not qualify as highly independent as defined by the“Standards for Independence of External Directors” (described below)
established by the Company are not appointed. Furthermore, one
External Director among the External Directors is appointed Lead

Corporate Governance System
General Meeting of Shareholders
Appointment/Dismissal

Auditing

Board of Directors
Instruction/
Delegation of Authority

Appointment/Dismissal
Instruction/Command

Appointment/
Dismissal

Appointment/
Dismissal

Corporate Governance Committee

ReportAdvisory

President
Recommendation

Recommendation

Management
Committee

Board of Audit &Supervisory Board
Members

Nominating Committee
Compensation Committee

Collaboration

Independent External Director to improve coordination with the Audit &Supervisory Board Members and internal divisions.

Board of Audit & Supervisory Board Members
The Board of Audit & Supervisory Board Members makes appropriate
judgments from an independent, objective perspective, based on theirfiduciary responsibilities to the shareholders, when fulfilling their roles
and responsibilities, such as auditing the execution of Directors’ duties,
appointing or dismissing accounting auditors and executing rights
concerning auditors’ remuneration.

Audit & Supervisory Board Members
The Audit & Supervisory Board Members monitor important mattersconcerning corporate management, business operations and theexecution of duties by reviewing important Kessai (written approval)
documents, as well as participating in board meetings and otherimportant meetings. Furthermore, the Audit & Supervisory Board
Members, together with staff members of the Audit & Supervisory
Board Members Office, conduct an annual audit of each business site,
subsidiary and affiliated company and report the results to theRepresentative Directors. The Audit & Supervisory Board Members also
share information with the internal audit departments and accounting
auditors and hold regular meetings with Audit & Supervisory Board
Members of subsidiaries to improve and strengthen auditing of the
JAL Group.
The Audit & Supervisory Board Members are provided with themeans to acquire a sufficient understanding of their required roles andresponsibilities through the provision of corporate information andopportunities for regular participation in external training and external
associations, etc., for which the Company bears the necessary expenses.
Eternal Audit & Supervisory Board Members are appointed fromamong persons with vast knowledge and experience in various fields,
and those who do not qualify as highly independent as defined by the“Standards for Independence of External Directors” (described below)
established by the Company are not appointed. Eternal Audit & Supervisory Board Members ensure sound management by conducting audits
from a neutral and objective standpoint, with the cooperation ofinternal audit departments and accounting auditors.

Establishment of Various Committees
Corporate Governance Committee(Chairperson: Kimie Iwata, Lead Independent External Director)
The Corporate Governance Committee inspects initiatives under the JAL
Group Fundamental Policies at least once a year, conducts analyses andevaluations to verify whether they contribute to sustainable growthand enhancement of corporate value in the medium to long term,and provides necessary recommendations and reports to the Board of
Directors. The committee comprises three External Directors (Kimie
Iwata, Eizo Kobayashi and Masatoshi Ito) in addition to Director andChairperson Masaru Onishi.
Nominating Committee(Chairperson: Masatoshi Ito, Director, External, Independent)
When submitting a proposal to the General Meeting of Shareholders
concerning the appointment of candidates to the positions of Directorand Audit & Supervisory Board Member, the Nominating Committee
makes a comprehensive judgment of the personality, knowledge, ability,
experience and performance of the candidate in response to inquiries
from the Board of Directors and reports back to the board. The Nominating Committee considers a succession plan for top management
members such as the President, moreover, in order to realize our
Corporate Policy, medium- to long-term management strategies andmanagement plan. The committee comprises three External Directors(Kimie Iwata, Eizo Kobayashi and Masatoshi Ito), President Yoshiharu
Ueki and Executive Vice President Tadashi Fujita.
Compensation Committee(Chairperson: Eizo Kobayashi, Director, External, Independent)
The Compensation Committee discusses matters concerning theamounts of compensation paid to Directors, Executive Officers andAudit & Supervisory Board Members based on requests from the Boardof Directors and reports back to the board. The Compensation Committee members are the same as the Nominating Committee members.
Personnel Committee(Chairperson: Yoshiharu Ueki, President)
When appointing or dismissing an Executive Officer, the Board of
Directors consults the Personnel Committee and takes the Personnel
Committee’s response into account before making a decision. The
Personnel Committee members are the same as the Nominating
Committee members.
Officers Disciplinary Committee(Chairperson: Kimie Iwata, Director, External, Independent)
Any disciplinary action imposed on Directors or Executive Officers isdetermined by the Officers Disciplinary Committee. The Officers Disciplinary Committee members are the same as the Nominating Committee members.

ReportPersonnel Committee
Officers Disciplinary Committee
Accounting
AuditorFinancial Audit

Group Earnings
Announcement
Session
ReportSignificant
IssuesInstruction/
Delegation of Authority

JAL
Philosophy
CouncilGroup Operational
Safety Promotion
Committee

Group Council for
Safety Enhancement
General Meeting
Tokyo 2020
Olympic andParalympic
Promotion
Committee

Executive Officers Board
Departments and Subsidiaries

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JAL REPORT 2017

Corporate Brand
Promotion Council

CSR
Committee

Management
LiaisonCommittee

Audit

Collaboration

Risk Management Committee
Financial Risk Committee
JAL Wellness Promotion Committee

Composition of Voluntary Committees

Collaboration

Guidance/Advice

Legal Advisors

The Chairperson ◎Board Member ○Corporate Governance Committee

Director,
Chairperson

Representative
Director, President

Masaru Onishi Yoshiharu Ueki

Director

External Director

External Director

External Director

Tadashi Fujita

Kimie Iwata

Eizo Kobayashi

Masatoshi Ito

◎

○

○

○

Nominating Committee

○

○

○

○

◎

Compensation Committee

○

○

○

◎

○

Personnel Committee

◎

○

○

○

○

Officers Disciplinary Committee

○

○

◎

○

○

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Management Strategies
Designed to Create Value

Ⅲ

Ⅴ

Performance and Strategies
by Business

A Business Base that Supports
Value Creation

Financial / Data Section

CORPORATE GOVERNANCE

Evaluating the Effectiveness of
the Board of Directors

Standards for Independence of External Directors

Training Policy for Directors andAudit & Supervisory Board Members

Framework for Incentive Remuneration
1. Annual incentives (performance-linked bonuses)
The amount to be paid every fiscal year as an annual incentive will vary

We have set out the following standards to determine whether
In accordance with the Fundamental Policies of Corporate Governance,

External Directors and Eternal Audit & Supervisory Board Members

Legal considerations are explained to the Directors to ensure thatfrom approximately 0 to 200 depending on the degree of achieve-

the Company is working to improve the effectiveness of the Board of

qualify as independent (in principle, a person to whom none of thethey are aware of their responsibilities, including the “fiduciary duty

ment, with 100 representing the amount to be paid when achieve-

Directors in order to increase corporate value. In January 2017, as partfollowing apply shall be judged to be independent).

of loyalty” and the “duty of ensuring prudent management.”

ment is in line with performance targets. The indices for evaluating

The Company provides opportunities for Audit & Supervisory Board

performance will include profit attributable to owners of parent,

Members to sufficiently understand their roles and responsibilities byindicators related to safe flight operations and individual evaluation

providing corporate information and opportunities for participation

indices for each officer. These indicators will be reviewed as necessary

in external training programs and associations, the cost of which isin accordance with changes in business conditions, the roles of officers

covered by the Company.

and other factors.

of these efforts, the Company conducted its second survey of executives who participate in Board of Directors meetings to evaluate theeffectiveness of the board. The results of the survey are discussed by
the Board of Directors, which evaluates recommendations from the

1. A person who executes or has executed business in the Company ora consolidated subsidiary during the past 10 years.
2. A person who could be described by any of items a~f during the

Corporate Governance Committee, passes resolutions on measures topast three years.

resolve any anticipated issues and implements those measures.

a. A business counterpart or a person executing business for a

1. Measures to Address Issues Highlighted by the Previous Survey
The previous survey on the effectiveness of the Board of Directors
raised key issues related to discussions about medium- and long-

Members a deeper understanding of the JAL Group, we arrange

one business year exceeded 1% of the consolidated revenue of

tours of airports, sales offices, maintenance facilities, flight operation

the Company or the business counterpart.

offices, aircraft cabins, freight facilities and other sites and provide

The number of shares to be granted every fiscal year as a long-term

training on safety.

incentive will vary from approximately 0 to 220 depending on theb. A major shareholder of the Company or a person executing
business for a shareholder holding an equity ratio of 5% or more

continued to discuss and develop the new medium term managementin the Company.

also made in several other areas, including enhanced reporting toc. A major lender to the Company or a person executing businessd. A person who receives over 10 million yen in donations annually

responsive reports on developments such as responses to thefrom the Company, or a person belonging to an entity receiving

Kumamoto earthquakes. Information provided to External Directors

such donations.

business site inspections.
2. Results of Second Survey
The survey confirmed that the Board of Directors needs to further
expand the scope of discussion to improve the quality of discussion
about medium- and long-term management strategy. The Board of
Directors was praised for the dynamic nature of debate during
meetings, but the results of the survey highlighted the need forbroader and more active input from External Directors, and forholding meetings, notably the need to make resolution discussion
points clearer to enhance the effectiveness of discussion by the
Board of Directors.
3. Responses
The Board of Directors will clearly set out the broad strategic
direction of the Group’s management strategy and actively discuss
topics such as business strategy, human resources development andGroup-wide risk management as part of more active debate at
meetings. It will also confirm whether the results of its discussions
are reflected in strategy implementation.

granted when achievement is in line with performance targets. The
performance evaluation period will be three years, with performancefor three consecutive fiscal years evaluated every year. The indices for

Basic Policy

evaluating performance will be items prioritized in the medium term

1. To support the sustained and steady growth of the Company andmanagement plan, including consolidated operating margin, consoli-

the JAL Group and to improve corporate value over the medium anddated ROIC, and customer satisfaction. These items will be considerede. A person receiving remuneration of over 10 million yen, excluding

long term, the Company will encourage the performance of duties

for review in every medium term management plan period.

Director’s remuneration, from the Company or a person belong-consistent with its Corporate Policy and management strategies anding to an organization receiving remuneration exceeding 1% ofprovide strong incentives for the achievement of specific manage-

Executive Officers through the share-based remuneration plan, thement targets.

Company will establish a target number of held shares for eachthe consolidated revenue of the Company.
f. A person executing business for the Company who also executes
business for another company as External Director.
3. The spouse or a relative within the second degree of kinship of anindividual described in 1 or 2.
(Note) “A person executing business” refers to an executive director or executive officer.

greater information sharing with them about the airline industry
and the operating environment. Another issue was procedures forremuneration)

degree of achievement, with 100 representing the number to be

Remuneration Policy for Directors (excluding
External Directors) and Executive Officers

for such a lender.

the Board of Directors through regular reporting and timely andwas also improved through briefings and more opportunities for

2. Long-term incentives (performance-linked share-based

business counterpart whose transactions with the Company forterm management strategy. In response, the Board of Directors
plan, which is due to start in fiscal year 2017. Steady progress was

To give External Directors and Eternal Audit & Supervisory Board

Selection of External Directors
During the selection process for External Directors, the Company
consistently strives to ensure comprehensive diversity while nominating
candidates with a wealth of experience in various fields who are also
equipped with insight, specialized knowledge and other strengths.
Selection of nominees is also based on the Standards for Independenceof External Directors presented above.

For the reasons for selection of External Directors,
please refer to P.78-79: Board of Directors and Officers.

2. To encourage a healthy entrepreneurial spirit, the Company will
establish appropriate proportions for annual incentives (perfor-

With respect to common stock granted to eligible Directors andposition and impose limits on share sales in order to further promote
the aligning of interests with shareholders.

mance-linked bonuses) linked to fiscal year performance and forlong-term incentives (performance-linked share-based remunera-

Procedures for Determining Remunerationtion) linked to corporate value in accordance with medium- to

Matters related to remuneration for Directors and Executive Officers

long-term performance, designed to promote alignment of interests

will be decided by the Board of Directors following a deliberation andwith its shareholders.

recommendation process by the Company’s voluntarily established3. The Company will reward the management team appropriately
based on the Company’s business performance.

Compensation Committee. A majority of the members of the Compensation Committee will be External Directors and the Chairperson
will be appointed from among the External Directors.

Remuneration Levels and Composition
1. The Company will set appropriate remuneration levels based on the
Company’s operating environment and with reference to objective
data on remuneration in the marketplace.

Succession Planning for
Senior Management Positions

2. Taking into account factors including the position of the Company’sbusiness and the effectiveness of incentive remuneration, the

The Nominating Committee is responsible for examining succession

Company sets proportions for (1) the amount of fixed basic remu-plans for President and other senior management positions to ensureneration*, (2) the amount of annual incentives (performance-linked

the Company realizes its Corporate Policy, medium- and long-termbonuses) to be paid according to the degree of achievement against

management strategies and management plan.

targets, and (3) the amount of long-term incentives (perforWe will continue to strengthen support systems for meeting-related

mance-linked share-based remuneration) to be issued according toprocedures, such as ensuring the Board of Directors has access tothe degree of achievement against targets, as follows:

appropriate materials for discussing resolutions and is adequately

Guideline in the case of 100% achievement against targets:briefed. We will also work to enhance the quality of discussion by the(1) : (2) : (3) = 50% : 30 % : 20%

Board of Directors by drawing on the expertise of External Directors

The above ratio is for guidance only and adjustments can be made toand encouraging active contribution from company executives.

reflect changes in the price of the Company’s shares or other factors.

For key corporate governance data,
please refer to P.122-123: ESG Data.

* This amount excludes allowances in cases where an Executive Officer servesconcurrently as a Director or where an Executive Officer has representative authority.

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The JAL Group’s Growth Story

Ⅲ

Management Strategies
Designed to Create Value

Performance and Strategies
by BusinessⅤ

A Business Base that Supports
Value Creation

Financial / Data Section

OUR EXTERNAL DIRECTORS DISCUSS JAL

JAL’s Corporate Governance Continues to Evolve

Kobayashi: The company went through an extremely difficult experience of a bankruptcy, but I
am impressed by how it used the event as an opportunity to earnestly improve governance. I think
there is no doubt that JAL is today one of Japan’s leading companies in this area and can easily
bear comparison with other corporations.
Ito: I also feel that the governance of the JAL Group has advanced considerably. To give a concrete
example, while discussing the formulation of the New Medium Term Management Plan, which waslaunched in April 2017, and while working on the compensation system for Executive Officers, theExternal Directors benefited from effective information provision in advance. Also, our opinions areevaluated adequately by the Board of Directors. There is an approach of actively accepting a wide
range of opinions, so that a free and frank exchange of views takes place at Board meetings.

Eizo Kobayashi
External Director

And what is your assessment of the current state ofcorporate governance?
Iwata: The standard of governance has risen greatly in the past five years. There has also been an
evident change in the operation of the Board of Directors. When I first took office as an External
Director, matters of essential importance were decided by the Management Committee. Discussions at Board meetings simply followed the same line, and the time spent on these meetings wasvery short. Nowadays, practical matters can be left to the Management Committee or otherexecutive councils so that more important discussions can take place at Board meetings. Amongthe outcomes of this improvement are the New Medium Term Management Plan and the new

The JAL Group Board of Directors includes three External Directors who monitor Groupmanagement and provide appropriate advice. Here, Kimie Iwata, our Lead Independent
External Director who has observed the long rebuilding process of the JAL Group, takes
the lead role in a discussion among our External Directors. They speak frankly as theygive their opinions and suggestions, evaluating the current state of corporate governance, identifying relevant issues, and indicating their expectations of the JAL Group.

compensation system for Corporate Officers.
Kobayashi: In terms of information disclosure, as Mr. Ito said, External Directors receive ample
briefing in advance so we can attend Board meetings equipped with a good understanding of the
topics for discussion. In 2016, when the New Medium Term Management Plan was being drafted,

Masatoshi Itowe were involved in discussions from the brainstorming stage, and joined company directors inExternal Director

presenting our opinions on the plan. Through these discussions, we were able to further deepen
our understanding of the JAL Group. It also gave us the opportunity to exchange opinions withexecutive officers who are not members of the Board of Directors. That was a very valuable experience for External Directors. My impression is that the JAL management team has a strong commitment to sharing information with External Directors and that their contact with us is based on an

From the time of our bankruptcy up to now, what is yourassessment of JAL’s efforts in the area of corporate governance?

attitude of openness.
Iwata: Yes, I agree. Of the companies whose management I have been involved in, JAL has the

Iwata: I think JAL’s governance has reached a good standard through two key drivers. Firstly,

most advanced attitude when it comes to information disclosure to External Directors. There is anright after the bankruptcy in 2010, JAL adopted the approach set out in the new Corporate Policy

open atmosphere in which External Directors can access information at any time. The fact thatand the JAL Philosophy under the guidance of the then Chairman Dr. Kazuo Inamori. They provid-

company directors and External Directors work alongside each other in the same open office is,

ed a psychological reference point around which employees have been able to unite in their work.

I think, a good indication of this attitude. It allows us to exchange views at close quarters in an

I believe this was very significant. Another important factor was the adoption of the business

open atmosphere. We are also free to take part in meetings of all the executive councils, including

management techniques of the amoeba management system. One more major impetus was that

the Management Committee, the once monthly Group Earnings Announcement Session, leader

the Corporate Governance Code, which was applied to Japanese corporations from June 2015,

workshops, the Corporate Brand Promotion Council, and the Group Council for Safety Enhance-

was discussed repeatedly by the Board of Directors in terms of how it should be applied to benefit

ment General Meeting. Moreover, if there are any unclear points in the materials we receive inKimie Iwata

management operations. As a result, the JAL Group took the approach of strengthening governanceadvance or any other issue, we are given the opportunity to have it explained, which means that

External Director

by complying fully with each principle of the Corporate Governance Code. Today, JAL has achieved

we can go to the meetings thoroughly prepared.

compliance not just on paper but in practice. I believe these initiatives have made possible
the stable standard of governance that JAL has reached.

Ito: I agree. Having an advance briefing is a very efficient system and is very beneficial. If I were to
ask for an improvement, it would be for the process leading to the adoption of items for discussion
to be set out a bit more clearly.

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The JAL Group’s Growth Story

Ⅲ

Management Strategies
Designed to Create Value

Performance and Strategies
by BusinessⅤ

A Business Base that Supports
Value Creation

Financial / Data Section

OUR EXTERNAL DIRECTORS DISCUSS JAL

Iwata: It’s important that External Directors act as effective advisors to the president, and at theCan you tell us about important tasks and responses for the futureand your expectations of the JAL Group?

same time, that we bring to our roles individual strengths that we can make use of. I have previously been engaged in operations to promote corporate social responsibility and career advancement for women. I have drawn on this experience to give a considerable number of talks to JAL
staff. The period before the bankruptcy must have been difficult in many ways. It would also have

Kobayashi: JAL is one of Japan’s leading companies in the area of corporate governance, but further

been inaccurate to say that JAL’s corporate social responsibility initiatives were adequate. Today

strengthening and improvement of governance is always possible. To avoid being bound by conven-however, JAL is one of Japan’s most progressive companies, having for instance been selected astional thinking and to think outside the box, one important point is to constantly apply the PDCA

a Nadeshiko Brand for three consecutive years. JAL is also tackling workstyle innovation, which is

cycle so that corporate governance is addressed through the comprehensive abilities of the entire JAL

closely relevant to women’s career advancement, by introducing telework and free-address offices

Group. The introduction of a new compensation system for executive officers is one example of how

among other things. For instance, the target of reducing overtime by half in two years has alreadythings are taking shape, and I hope that we can continue implementing initiatives of this kind.

been achieved across around 30% of all organizations, and the number of holidays increased by
two days from the previous fiscal year. These are among the clear results of JAL’s activities in the

Iwata: The implementation of succession planning leaves room for improvement. In addition to

field of corporate social responsibility. When I see these improvements, I feel that I have fulfilledserving as advisors to the president, I think that External Directors also need to work on revitalizing

at least part of my duty as an External Director.

the Nominating Committee.

Kobayashi: My experience at a general trading company cannot be applied without modification

Ito: Recently, there has been a focus on how to integrate environmental, social, and corporate

to JAL, which is in a different industry, but I think there are definitely areas where I can make agovernance issues into management operations. I think that studying and responding to thesecontribution. For instance, general trading companies place emphasis on areas such as risk

issues is a self-evident duty of a corporate citizen. This is because JAL is able to continuously

management and the allocation of management resources. Therefore, I think I can present opinions

generate profits by operating a business that serves society. As the use of aircraft increases customer

from the viewpoint of a general trading company in areas such as effecting major businessconvenience, it can also generate interaction between people and produce other huge benefits.

transformation in a difficult market environment and carrying out risk management from a global

I would like to see each employee reflect more deeply than before on what constitutes JAL’s businessperspective. I believe that I can also make increasing contributions in the strategy for new businessactivities and what value it can bring to customers and society. In this way, JAL can proceed evendomains that was presented under the heading JAL Focus in the new Medium Term Management

more effectively with business activities that serve society across the whole of its value chain.

Plan. I hope my suggestions will be incorporated effectively in management operations.
Iwata: I think that JAL’s activities relating to the environment, society, and corporate governance are
Ito: As mentioned in the JAL Group Corporate Policy, JAL is committed to providing unparalleledof a good standard, including when compared to those of other companies. But operating aircraft

service, which clearly identifies JAL’s work as being part of the service industry. Recognizing thatitself uses large amounts of resources and generates CO2 emissions. Therefore, I look forward tocorporate value arises from social value, JAL founds its basic value on safety, on-time operations,seeing further improvement on the environmental front. Across all of its business activities, I think

comfort, and convenience for the customer. But it would be difficult to stand out among thethat JAL is a very honest company. On the other hand, it can be quite conservative in some aspects.

world’s airline companies on the strength of basic values alone. So it’s important to see how much

It is important to conduct business activities honestly and reliably, of course, but personally I would

added value JAL can deliver on the “soft” side. This means that it needs to refine the added value

like to see the company become a little more adventurous. The company succeeded in achieving

which is uniquely JAL and which goes beyond the basic values of safety, on-time operations,

good results from the previous medium term management plan, but merely carrying on the samecomfort, and convenience. For that reason, JAL needs to place the customer even more at thethings in the new Medium Term Management Plan will not lead to sustainable growth. As thecenter of its operations and consistently deliver unparalleled service. I believe that thinking about

keyword of the new Medium Term Management Plan is ‘challenge,’ I am excited about the future.

what the customer wants from a long-term perspective will help to distil a uniquely JAL quality andI hope to see JAL become a company with a stronger spirit of challenge than ever before.

enhance the JAL Group brand. In my work with a food manufacturer, I gave top priority to thinking
about what the customer wanted and was always thinking about how we could deliver greater

Profiles of External Directors

value. I think I can draw on this experience in the pursuit of quality that is uniquely JAL.

Kimie Iwata

Eizo Kobayashi

Masatoshi Ito

April
August

April
June

April
April

Iwata: To create value, and protect value from impairment, JAL has decided to center its businessactivity around the two pillars of safety and brand strategy. This approach is reflected in the
councils and committees it operates. In addition to Board meetings and CSR Committee meetings,
I attend meetings of the Group Council for Safety Enhancement General Meeting and the Corporate Brand Promotion Council to present my opinions.

74

JAL REPORT 2017

1971 Joined the Ministry of Labor
2003 Retired from Ministry of Health,Labour and Welfare
December		Full-time Advisor of Shiseido Company,
LimitedJune
2008 Representative Director, Executive Vice
President, of Shiseido Company, Limited
March2012 Audit & Supervisory Board Member (External),
Kirin Holdings Company, Limited
June		
Advisor of Shiseido Company, Limited
July		
External Director of the Company (to present)
July		
President of Japan Institute for Women’s
Empowerment & Diversity Management(to present)
October 2015 Audit and Inspection Commissioner of theTokyo Metropolitan Government (to present)
March2016 Director of the Board (External), Kirin Holdings
Company, Limited (to present)
April		External Director of STRIPE INTERNATIONAL
INC. (to present)

1972 Joined ITOCHU Corporation
2004 President and Chief Executive
Officer of ITOCHU Corporation
April
2010 Representative Director Chairmanof ITOCHU Corporation
July		
External Audit & Supervisory Board
Member of Asahi Mutual Life
Insurance Company (to present)June2011 Director Chairman of ITOCHU
CorporationJune
2013 Director (External), OMRONCorporation (to present)June2015 External Director of the Company(to present)June2016 Chairman of ITOCHU Corporation(to present)		
External Director of Japan ExchangeGroup, Inc. (to present)

1971 Joined Ajinomoto Co., Inc.
2003 Representative Director, President of
Ajinomoto Frozen Foods Co., Inc.
June
2009 Representative Director, President & Chief
Executive Officer of Ajinomoto Co., Inc.
June
2015 Representative Director & Chairman of theBoard of Ajinomoto Co., Inc. (to present)
February 2016 Chairman of the JAA Council, Japan
Advertisers Association Inc. (to present)
June		
External Director of the Company(to present)
June		
External Director of Yamaha Corporation(to present)

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Ⅲ

Management Strategies
Designed to Create Value

Ⅴ

Performance and Strategies
by Business

A Business Base that Supports
Value Creation

Financial / Data Section

BOARD OF DIRECTORS AND OFFICERS

Directors

J
●

I
●

H
●

A
●

B
●

E
●

F
●

B
●

C
●

D
●

Masaru Onishi

Yoshiharu Ueki

Tadashi Fujita

Junko Okawa

Director, Chairman

Representative Director, President

Representative Director,
Executive Vice President

Representative Director, Senior Managing Executive Officer

J
●

I
●

H
●

Masatoshi Ito

Eizo Kobayashi

External Director

External Director

JAL REPORT 2017

D
●

A
●

Chairman of the Management Committees,
Chairman of the Council for Group Safety Enhancement,
Chairman of the Corporate Brand Promotion Council,
Chairman of the JAL Philosophy Committee

76

C
●

Aide to the President,
Chief Wellness Officer,
Chairman of the JAL Wellness
Promotion Committee

G●

General Manager of the Communication Division,
Chairman of the Committee for Tokyo 2020 Olympic and Paralympic Promotion,
Chairman of the CSR Committee
E
●

F
●

G
●

Kimie Iwata

Norikazu Saito

Hideki Kikuyama

Toshinori Shin

External Director

Director, Senior Managing
Executive Officer

Director, Senior Managing
Executive Officer

Director, Senior Managing
Executive Officer

General Manager of the
Finance & Accounting Division

General Manager of the Managing
Division Route Marketing

General Manager of the Flight Operations Division,
Safety General Manager
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Management Strategies
Designed to Create Value

Ⅲ

Ⅴ

Performance and Strategies
by Business

A Business Base that Supports
Value Creation

Financial / Data Section

BOARD OF DIRECTORS AND OFFICERS

Audit & Supervisory Board Members(As of July 1, 2017)

Masaru Onishi
Director, Chairman

Yoshiharu Ueki
Representative Director, President
Chairman of the Management Board
Meeting, Chairperson of the Council forGroup Safety Enhancement, Chairman of
the Corporate Brand Promotion Council,
Chairman of the JAL Philosophy Committee

Beginning his career in engineering and maintenance, Chairman Onishi acquired extensive knowledge and a
network of contacts in the airline industry. Appointed President in 2010, he was involved from an earlystage in the process of corporate reorganization following the bankruptcy. Today, as Director, Chairman of
the Board and a member of the Corporate Governance Committee, he continues to contribute significantly
to strengthening the supervisory functions of the Board of Directors. He also serves as an External Director
for the Japan Airport Terminal Co., Ltd., Chairman of the JAL Foundation and Representative Director of the
Air Traffic Service Research Institute (ATSRI).
From his start as a flight crew member, President Ueki has accumulated an extremely high level of frontline
experience and insight into flight safety. As Representative Director and President since 2012, he oversaw
preparation of the Medium Term Management Plan. His strong leadership and decision-making capabilities
have been driving the sure accomplishment of the Plan. He is also making a significant contribution tostrengthening of the Board of Directors supervisory functions as a member of the Nominating Committee,
Compensation Committee and other bodies.

(As of July 1, 2017)

Hisao Taguchi
Audit & Supervisory Board
MemberYasushi Suzuka
Audit & Supervisory Board
MemberTadashi Fujita
Representative Director, Executive Vice
President, Executive Officer
Aide to the President, Chief Wellness Officer,
Chairman of the JAL Wellness Promotion
Committee

Junko Okawa
Representative Director, Senior Managing
Executive Officer
General Manager of the Communication
Division, Chairman of the Committee forTokyo 2020 Olympic and Paralympic
Promotion, Chairman of the CSR Committee

Norikazu Saito
Director, Senior Managing Executive Officer
General Manager of the Finance andAccounting Division

Hideki Kikuyama
Director, Senior Managing Executive Officer
General Manager of the Managing Division
Route Marketing

Toshinori Shin
Director, Senior Managing Executive Officer
General Manager of the Flight Operations
Division, Safety General Manager

Kimie Iwata
Independent External Director

Eizo Kobayashi
Independent External Director

Masatoshi Ito
Independent External Director

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JAL REPORT 2017

Executive Vice President Fujita worked in sales departments at Headquarters and at regional offices in
Osaka, Okinawa, Paris and other regions. As General Manager of the Managing Division Passenger Sales, he
had overall responsibility for all the Profit Centers and achieved strong results in that area. Today, while
performing the duties of Representative Director and Executive Vice President, he also serves as Aide to the
President, making a significant contribution in all these roles to the further reinforcement and enhancementof JAL’s management systems.
Director Okawa accumulated a wealth of workplace experience and expertise as a cabin crew member. As
Cabin Attendant General Manager from 2010, she applied high level management perspectives and provencapabilities to assuring the division’s success in meeting a diverse range of challenges and targets. Now as
Senior Managing Executive Officer and General Manager of the Communication Division, she is contributing
substantially to implementing promotional measures designed to raise the JAL Brand values ahead of theTokyo 2020 Olympic and Paralympic Games.

Hiroyuki Kumasaka
Audit & Supervisory Board
Member(Independent External Auditor)

Mr. Taguchi has served in various departments, including Sales, Personnel Affairs andFlight Operations. He was appointed Executive Officer and CEO for the Americas Officein April 2007 and Executive Vice President in February 2010. He has been a member ofthe Audit & Supervisory Board since February 2012.

During his career at JAL, Mr. Suzuka has engaged primarily in maintenance operations
such as maintenance projects and engineering. He has, moreover, made a substantial
contribution to JAL Group management. A member of JAL’s Audit and Supervisory
Board since July 2012, he is also chairperson of the Japan SAP Users’ Group.

Mr. Kumasaka has acquired a wealth of experience and advanced knowledge inaccounting in the course of a career as a certified public accountant. He became a JAL
External Auditor in March 2011.

Director Saito has specialized for many years primarily in finance and accounting, constantly deepening his
knowledge of finance, accounting, IR, and other fields. Today, as Director, Senior Managing Executive
Officer and General Manager of the Finance and Accounting Division, he is providing guidance in JAL’s
development of systems for highly transparent information disclosure that is comprehensible to shareholders
and investors, while also promoting management decision-making appropriate to raising shareholders’ profit.
Director Kikuyama engaged in work ranging from IT systems, passenger reservations, and human resourcesmanagement and labor to corporate planning at Headquarters as well as at branch offices in Osaka, theUnited States and elsewhere. In his current position as Director, Senior Managing Executive Officer andGeneral Manager of the Managing Division Route Marketing, he is using his expertise to assess andimplement improvement and stabilization of reliable route revenues and expenditures.

Shinji Hatta
Audit & Supervisory Board
Member(Independent External Auditor)

While employed as a flight crew member, Director Shin acquired considerable workplace experience andinsight into flight safety. Today, as Director, Senior Managing Executive Officer, General Manager of the
Flight Operations Division and Safety General Manager, he is applying his highly developed management
perspectives and capabilities to overcoming challenges and achieving a wide range of targets at
Headquarters.
External Director Iwata’s rich fund of experience and results in various fields, including support for women’s
activities, diversity, CSR and workstyle reformation, has equipped her to bring strong direction and solid
advice from an objective perspective to the Company. She also serves as President of the Japan Institute for
Women’s Empowerment & Diversity Management, an audit and inspection commissioner for the Tokyo
Metropolitan Government and Director of the board (External) of Kirin Holdings Company, Limited, among
other capacities.
External Director Kobayashi provides the Company with sound direction and advice based on his
accumulated experience and expertise as top management of a general trading company. He also serves as
Chairman of ITOCHU Corporation, External Director of OMRON Corporation and External Auditor of Asahi
Mutual Life Insurance Co., among other capacities.

Osamu Kamo
Audit & Supervisory Board
Member(Independent External Auditor)

Professor Hatta is an authority on financial auditing and corporate internal control
and has served as an External Auditor for JAL since July 2012. A professor of Aoyama
Gakuin University, he also serves as an outside auditor for the Development Bank ofJapan Inc. and as a council member on the Japanese government’s Financial Services
Agency Business Accounting Council, among other positions.

Since his certification as an attorney in April 1973, Mr. Kamo has accumulated extensive
experience and expertise in the fields of compliance and corporate governance. An
attorney for the Ginza Sogo Law Firm, he also serves as a committee member for
CHANS (Office for Government Procurement Challenge System, under the jurisdictionof the Japanese Cabinet Office), among other capacities.

External Director Ito has rich experience and deep insight acquired as top management of global enterprises
engaged in marketing from the customers’ perspectives. He also serves as Representative Director andChairman of Ajinomoto Co., Inc., President of the Japan Advertisers Association Inc. and External Directorof Yamaha Corporation, among other capacities.
JAL REPORT 201779

BOARD OF DIRECTORS AND OFFICERS

Financial / Data Section

Executive Officers(As of July 1, 2017)

MANAGING EXECUTIVE OFFICERS
Nobuyoshi Gondo

Yuji Akasaka

General Manager, Corporate Safety & Security,
Family Assistance & Support

General Manager, Engineering & Maintenance, President,
JAL Engineering Co., Ltd.

Ryuzo Toyoshima

Hideo Ninomiya

General Manager, Corporate Control

General Manager, Managing Division Passenger Sales, General Manager,
Domestic Passenger Sales, President, JAL Sales Co., Ltd.

Shinichiro Shimizu
General Manager, Secretary’s Office

Tadao Nishio
General Manager, Corporate Planning

EXECUTIVE OFFICERS
Tetsuya Onuki

Hideki Oshima

President, J-AIR Co., Ltd.

Managing Division Route Marketing (International Relations and Alliances)

Munemitsu Erikawa

Eri AbeSenior Vice President, China, Vice President and Regional Manager, Beijing

General Manager, Cabin Attendants

Kiyoshi Marukawa

Kazuko Yashiki

President, Japan Transocean Air Co., Ltd.

Vice President, Haneda Airport, President, JAL Sky Co., Ltd.

Akira Yonezawa

Takuya Oda

General Manager, Managing Division Route Marketing(International Route Marketing)General Manager, Human Resources

Toshiki Oka
General Manager, IT Planning

Hiroyuki Hioka
General Manager, General Affairs

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

Yoriyuki Kashiwagi
Deputy General Manager, Managing Division Passenger Sales
General Manager, International Passenger Sales,
General Manager, Web Sales
Senior Vice President for Eastern Japan Area

Hiroo Iwakoshi
General Manager, Cargo & Mail

Atsushi Maeda
General Manager, Procurement

Hoshiko Nakano
Senior Vice President for Western Japan Area

Yasuyuki Sato

Financial Data – Six-year Summary. . . .  82
Evaluation and Analysis ofFinancial Conditions . . . . . . . . . . . . .  84
Consolidated Financial Statements. . . .  98
Consolidated Subsidiaries . . . . . . . . . .  121ESG Data. . . . . . . . . . . . . . . . . . . . . . .  122

Managing Division Route Marketing (Products and Services Planning)

International Route Map . . . . . . . . . . .  124

Shunsuke Honda

Domestic Route Map. . . . . . . . . . . . . .  126

Hiroki Kato
President, Japan Air Commuter Co., Ltd.

Financial information, ESG data, andother details about the JAL GroupManaging Division Route Marketing (Domestic Route Marketing)

Tomohiro Nishihata
Managing Division Route Marketing (Passenger System Planning)
Deputy General Manager of Digital Innovation Promotion

Takahiro Abe
General Manager, Airport Operations

80

JAL REPORT 2017

William Hiroyuki Saito
Digital Innovation Promotion

Glossary . . . . . . . . . . . . . . . . . . . . . . .  127Data on Incidents . . . . . . . . . . . . . . . .  128Stock Information /Corporate Information . . . . . . . . . . .  129

JAL REPORT 2017

77
81

I

Ⅱ

The JAL Group’s Growth Story

Ⅲ

Management Strategies
Designed to Create Value

Ⅳ

Performance and Strategies
by Business

A Business Base that Supports
Value Creation

Financial / Data Section

FINANCIAL DATA — SIX-YEAR SUMMARYFY2011FY2013

FY2014FY2015

Thousands of
U.S. dollars*1

FY2016FY2016

Years ended March 31
Operating revenue
Operating expenses
Operating income
Ordinary income
Profit attributable to owners of parent
Cash flow from operating activities
Cash flow from investing activities* 2
Cash flow from financing activities
Free cash flow*3
Depreciation and amortization
EBITDA*4
EBITDAR
Capital investment (Purchase of non-current assets)

1,204.8
999.8
204.9
197.6
186.6
256.6
–62.4
–274.4
194.1
81.2
286.1
318.4
98.6

1,238.8
1,043.5
195.2
185.8
171.6
264.8
–129.0
–60.6
135.8
81.0
276.2
307.1
121.8

1,309.3
1,142.5
166.7
157.6
166.2
247.9
–166.7
–61.9
81.2
82.7
249.5
281.0
164.5

1,344.7
1,165.0
179.6
175.2
149.0
261.1
–199.2
–67.3
61.8
85.8
265.5
292.7
198.6

1,336.6
1,127.4
209.1
209.2
174.4
312.3
–207.2
–49.6
105.1
88.5
297.7
321.1
210.6

1,288.9
1,118.6
170.3
165.0
164.1
253.1
–215.5
–53.5
37.5
95.7
266.1
286.2
233.1

11,489,143
9,970,888
1,518,245
1,470,835
1,463,356
2,256,466–1,921,436–477,145
335,020853,7032,371,949
2,551,804
2,077,948

As of fiscal year-end
Total assets
Net assets
Interest-bearing debt
Shareholders’ equity

1,087.6
413.8
208.4
388.5

1,216.6
583.1
160.1
565.0

1,340.1
711.0
134.2
690.2

1,473.3
800.7
100.5
776.4

1,578.9
870.5
92.6
843.0

1,728.7
1,003.3
116.0
972.0

15,409,368
8,943,693
1,034,602
8,664,444

Per share data (yen, U.S. dollars)* 5
Profit attributable to owners of parent
Net assets
Dividends
Average number of shares during the fiscal year (thousands of shares)

514.52
1,071.19—
362,704

473.36
1,558.15
95.00
362,671458.45
1,903.53
80.00
362,639411.06
2,142.00
104.00362,584481.292,325.79
120.00362,500

456.56
2,749.71
94.00
359,594

4.06
24.5
0.8
—

17.0
63.6
17.9
35.7
0.5
23.8
26.4
8.3
11.3
—
30,875

15.8
36.0
16.9
46.4
0.3
22.3
24.8
8.4
11.5
20.1
30,882

12.7
26.5
13.0
51.5
0.2
19.1
21.5
8.6
12.2
17.5
31,472

13.4
20.3
12.8
52.7
0.1
19.8
21.8
8.7
12.3
25.3
31,534

15.7
21.5
13.7
53.4
0.1
22.3
24.0
9.1
11.7
24.9
31,986

13.2
18.1
10.3
56.2
0.1
20.6
22.2
9.4
11.7
20.2
32,753

—
—
—
—
—
—
—
—
—
—
—

385.2
43,03630,313
6,844
70.4
12.7
9.0

406.6
44,74534,036
7,525
76.1
11.9
9.1

437.5
46,23535,390
7,723
76.5
12.4
9.5

454.8
47,696
36,109
7,793
75.7
12.6
9.5

448.7
50,56340,305
8,460
79.7
11.1
8.9

415.2
50,621
40,633
8,394
80.3
10.2
8.2

3,701,025
—
—
—
—
—
—

481.1
35,523
22,26428,965
62.7
21.6
13.5

485.2
36,44323,01230,020
63.1
21.1
13.3

487.4
37,08423,74531,218
64.0
20.5
13.1

487.5
36,30623,99331,644
66.1
20.3
13.4

501.2
35,86924,341
32,114
67.9
20.6
14.0

498.6
35,42324,55032,570
69.3
20.3
14.1

4,444,495
—
—
—
—
—
—

53.7
1,314

50.4
1,378

54.2
1,512

60.3
1,754

54.2
1,724

43.3
1,887

386,225
—

25.0
355

25.0
360

25.4
366

24.2
356

23.3
363

22.2
357

198,413—

Key Performance Indices
Operating margin (%)
ROE (%)ROA (%)
Equity ratio (%)
D/E ratio (Times)
EBITDA margin (%)* 6
EBITDAR margin (%)*7
Unit cost (yen)*8
Unit cost (yen) (Including fuel cost)
Dividend payout ratio (%)
Number of employees
Business data
International passenger operations
Passenger revenues
Available seat kms (million seat kms)* 9, 11
Revenue passenger kms (million passenger kms)*10, 11
Revenue passengers carried (1,000)*11
Revenue passenger load factor (%)*11
Yield (yen)*10,11
Unit revenue (yen)*11
Domestic passenger operations
Passenger revenues
Available seat kms (million seat kms)*9
Revenue passenger kms (million passenger kms)*10
Revenue passengers carried (1,000)
Revenue passenger load factor (%)
Yield (yen)Unit revenue (yen)International cargo operations
Cargo revenue
Revenue cargo ton-km (million ton kms)
Domestic cargo operations
Cargo revenue
Revenue cargo ton-km (million ton kms)

82

FY2012

Billions of yen

JAL REPORT 2017

*1 US dollar amounts are provided forconvenience only, based on theexchange rate of ¥112.19/USD on
March 31, 2017.
*2 Excluding deposits and withdrawals
from deposit accounts*3 Free cash flow = Cash flow fromoperating activities + Cash flowfrom investing activities*4 EBITDA = Operating income +Depreciation expense*5 Japan Airlines Co., Ltd. conducted a2-for-1 stock split on October 1,
2014. Figures for profit per share,
net assets per share and dividend pershare have been calculated assuming
the stock split was conducted at thestart of fiscal 2011.
*6 EBITDA margin = EBITDA /Operating revenue*7 EBITDAR margin = EBITDAR /Operating revenue
EBITDAR = Operating income +Depreciation expense + Aircraft lease*8 Unit cost = Consolidated airtransport cost (excluding fuel costs
and fuel costs for resale to a relatedcompany) / ASK*9 ASK (available seat kilometers). A
unit of passenger transport capacity:
Total number of seats x Distanceflown (kms)*10 RPK (revenue passenger kilometers).
Total flight distance covered byrevenue passengers: Number ofrevenue passengers x Distanceflown (kms).
*11 From fiscal 2015, revenue passengers
carried, revenue passenger kilometers,
available seat kilometers and loadfactor include codeshare tickets
sold by other companies for
JAL-operated flights.

JAL REPORT 2017

83

I

Ⅱ

The JAL Group’s Growth Story

Ⅲ

Management Strategies
Designed to Create Value

Ⅳ

Performance and Strategies
by Business

A Business Base that Supports
Value Creation

Financial / Data Section

EVALUATION AND ANALYSIS OF FINANCIAL CONDITIONS
Economic Conditions

Economic trends in Japan and overseas affect demand for the JAL
Group’s passenger and cargo services. In the fiscal year ended
March 31, 2017 (fiscal 2016), the Japanese economy continued torecover at a moderate pace, supported by an improving employment and income environment. However, growth in consumer
spending and capital investment lacked momentum. Overseas,
there were signs of weakness in resource-producing countries andin emerging economies in Asia, including slower growth in China.
Crude oil prices, which impact our fuel procurement costs, theGroup’s international passenger revenues and international cargo
revenues, were lower than the level in the previous fiscal year, but
fuel prices started to rise from December 2016 after the Organization of the Petroleum Exporting Countries (OPEC) agreed to cut
back production. In the first three quarters of the fiscal year, theInbound demand (number of visitors to Japan)

Government’s
target for 2020

(Million people)

40 million visitors

40

10

1.0

(%)

(Billions of yen)

1,500.0

250.0

25.0

200.0

1,238.8

1,309.3 1,344.7 1,336.6 1,288.9

600.0

100.0

300.0

50.0

Operating margin
209.1

195.2
166.7

179.6

2014

2015

2016

(FY)

100.0

13.2%

13.4%

10.0
50.0

5.0

0
2013

164.1

149.0

15.0
15.7%

2012

174.4

166.2

150.0

170.3

15.8%
12.7%

171.6

20.0

2014

2015

2016

0
2012

(FY)

2013

2014

2015

2016

(FY)

3.7

Analysis of Consolidated Operating Results

Iraq War /SARS outbreak
9/11 Terrorist
Attacks

1.0

1. Earnings Summary

Operatingrevenue

1,288.9¥billion

170.3

Operatingincome ¥billion

164.1

Profit attributable toowners of parent ¥billion

1987
1988
1989
1990
1991
1992
1993
1994
1995
1996
1997
1998
1999
2000
2001
2002
2003
2004
2005
2006
2007
2008
2009
2010
2011
2012
2013
2014
2015
2016

2020

2016

2015

2014

2013

2012

2011

2010

2009

2008

2007

2006

2005

0
(Year)

Source: Japan National Tourism Organization

Source: International Civil Aviation Organization (scheduled flights)

JAL Group

The JAL Group comprises Japan Airlines Co., Ltd. (JAL), 81 subsidiaries and 56 affiliated companies.
Operating in the economic climate described above, the JAL
Group worked towards its Rolling Plan 2016 in the JAL Group
Medium Term Management Plan for Fiscal Years 2012 – 2016.
Specifically, the Group focused on instilling greater focus on profits
among its staff through the JAL Philosophy and amoeba management system and worked to improve management efficiency toprovide the highest level of service to customers, backed up by afirm commitment to operational safety.
To achieve the targets in the Medium Term Management Plan,
the Group focused on three key areas – safety, customer satisfaction and finance. While some safety and customer satisfaction
targets were missed, the Group achieved two key financial goals:

84

Profit attributable to owners of parent0
2013

Gulf War

0

200.0

150.0

2012

3.0

2.0

(Billions of yen)

0

4.0

20

Operating income(Billions of yen)

900.0(Billions of passengers)

to 1,118.6 billion yen, operating income declined 18.6% to170.3 billion, ordinary income decreased 21.1% to 165.0 billion
yen, and profit attributable to owners of parent fell 5.9% to164.1 billion yen.

Operating revenue

1,200.0

Global passenger traffic

Global Financial
Crisis30

an operating margin of more than 10% for five consecutive fiscal
years and an equity ratio of 50% or higher at the end of fiscal 2016.
As a result, consolidated operating revenue declined 3.6%
year on year to 1,288.9 billion yen, operating expenses fell 0.8%

Japanese yen strengthened against the US dollar, but weakened
from December 2016 amid growing expectations that the Federal
Open Market Committee (FOMC) would raise interest rates.
In 2016, global passenger traffic (scheduled flights) continued
to grow overall, reaching 3.79 billion passengers, partly due to theentry of more low-cost carriers (LCC) into the air travel market(source: ICAO).
According to the Japan National Tourism Organization (JNTO),
roughly 24 million people visited Japan in 2016. The Japanese
government is aiming to increase the number of visitors to 40
million in 2020. In addition to providing overseas travel services toJapanese customers, the JAL Group will step up efforts to tap into
this projected growth in inbound demand.

JAL REPORT 2017

Amoeba Management System
Maximize revenues, minimize costs and promote lean management

Management by all(Year)

In fiscal 2016, consolidated operating revenues declined 3.6% year
on year to 1,288.9 billion yen, reflecting a drop in fuel surcharge
revenues and a negative impact from the stronger yen on international routes and falling prices on domestic routes amid competition
from other carriers.
Operating expenses decreased 0.8% year on year to 1,118.6
billion yen. Maintenance costs and personnel costs increased, but
fuel costs declined due to the stronger yen and lower fuel prices.
The Group also continued cost reduction efforts from the previous
fiscal year using its amoeba management system and otherapproaches.
Consolidated operating income fell 18.6% year on year to170.3 billion yen and profit attributable to owners of parent
declined 5.9% to 164.1 billion yen.

Fiscal 2016 Consolidated Operating Results

1,336.6
1,205.2(Billions of yen)

YoY change(%)

1,288.9– 47.6– 3.6

1,159.3– 45.8– 3.8

1,127.4

1,118.6

– 8.8

– 0.8

1,014.3

1,006.2

– 8.1

– 0.8

209.1

170.3

– 38.8– 18.6

190.8

153.1

– 37.6– 19.7

15.7
209.2

13.2
165.0

– 2.4pt– 44.2—– 21.1

Profit attributable to ownersof parent*1

174.4

164.1

– 10.2– 5.9

ASK (million seat kilometers)*2

86,432

86,045

– 387

– 0.4

RPK (million passenger
kilometers)*3

64,64765,183

+535

+0.8

22.3
24.0
9.1
11.7

20.6
22.2
9.4
11.7

– 1.6pt– 1.8pt
+0.3
– 0.0

—
—
+3.2
– 0.4

Operating revenue
Air transportation
segment
Operating expenses
Air transportation
segment
Operating income
Air transportation
segment
Operating margin (%)
Ordinary income

EBITDAR margin (%)*5

Efficient use ofmanagement resources

Fiscal2016

YoY change(billions of yen)

EBITDA margin (%)*4

Rigorous profit
management

Fiscal2015

Unit cost (yen)*6
Including fuel*1 Profit attributable to owners of parent*2 ASK (available seat kilometers). A unit of passenger transport capacity: Total
number of seats x Distance flown (kms)*3 RPK (revenue passenger kilometers). Total flight distance covered by revenue
passengers: Number of revenue passengers x Distance flown (kms).
*4 EBITDA margin = EBITDA/Operating revenue
EBITDA = Operating income + Depreciation expense*5 EBITDAR margin = EBITDAR/Operating revenue
EBITDAR = Operating income + Depreciation expense + Aircraft lease*6 Unit cost = Consolidated air transport cost (excluding fuel costs) / ASK

JAL REPORT 2017

85

I

Ⅱ

The JAL Group’s Growth Story

Fiscal 2016 Changes in operating income

International passenger revenues(Billions of yen)(Billions of yen)–¥38.8 billion(–18.6%)Forex
excluding fuelFuel
(excluding hedging)

– 2.9

+23.4

–19.8
+16.9
–2.9

International passenger
operations
International cargo
operations
Total

Forex
Fuel prices
Total

–30.4

Higher costs· Fuel surcharge (–)· Forex (–)· Net unit price (+) etc.

–34.7
– 4.9
–39.6

199.0

International
passenger operations
Domestic passenger
operations
Other
Total

+17.4
+6.0
+23.4

+15.1

Fiscal 2016
YoY change(–7.5%)

415.2· Decline in seatcapacity due todeployment of
JAL SKY SUITE

170.3

Fiscal 2015

–25.3
– 6.9
– 3.1
– 5.2
– 40.5

Revenue perpassenger

Number ofpassengers

Fiscal 2016

Factors affecting unit prices (estimate)

Fiscal 2016

Fuel surcharge

Forex etc.

Net unit price

Share of total
Fiscal 2015

– 4.3

25

26

Europe

– 6.6

15

15

Asia / Oceania– 10.6

35

34

China

– 15.511

10

Hawaii / Guam

+ 0.3

14

15

All routes / total

– 7.5

100

100

(Million seat kilometers)
Fiscal 2016

2. Segment Earnings

Operatingrevenue(1) Air transportation segment

In the air transportation segment, operating revenue declined 3.8%
year on year to 1,159.3 billion yen and operating income fell 19.7%
to 153.1 billion yen.
* Figures for operating revenue and operating income are before elimination of
intra-segment transactions.

Air transportation segment sales by business
Fiscal 2015

Fiscal 2016

YoY change(%)

billion

13,282

14,322+7.8

Europe

7,660

7,490

– 2.2

Asia / Oceania

18,102

17,836

– 1.5

China

3,454

3,506

+1.5

Hawaii / Guam

8,064

7,465

– 7.4

All routes

50,56350,621

+0.1

Total

· RPK

(Million passenger kilometers)

Fiscal 2016

YoY change(%)

Passenger revenues (billion yen)

448.7

415.2

– 7.5

ASK (million seat kilometers)

50,56350,621+0.1

RPK (million passenger kilometers)

40,30540,633+0.8

Revenue passengers carried(1,000)

8,460

8,394

– 0.8

Load factor (%)

79.7%

80.3%

+0.6ptYield*1 (yen)

11.1

10.2

– 8.2

8.9

8.2

– 7.6

53,04749,461– 6.8

468,017

91.0

Unit revenue*2 (yen)Passenger revenues

448,780

415,218

92.5

Revenue per passenger*3 (yen)Cargo revenues

54,27343,334

79.8

Mail service revenues

10,337

8,699

84.2

Luggage revenues

845

764

90.4

525,150

99.4

Passenger revenues

501,274

498,628

99.5

Cargo revenues

23,363

22,26095.3

Mail service revenues

3,575

3,959

110.7

Luggage revenues
Other revenues
Total

JAL REPORT 2017

297

301

101.2

162,453

166,224102.3

1,205,202

1,159,392

96.2

billionFiscal 2015

514,237

528,511

153.1¥*1 Yield = Passenger revenues / RPK*2 Unit revenue = Passenger revenues / ASK*3 Revenue per passenger = Passenger revenues / Passengers

Fiscal 2015

–7%

–5%

+6%

① International passenger operations

International passenger
operations

Domestic passenger
operations

86(Millions of yen)

1,159.3¥

OperatingincomeYoY change(%)

America*FSC = fuel surcharge– 8%

Fiscal 2016

America

Fiscal 2015

Other negative impact:–28.7 billion yen

Market impact: –10.1 billion yen

(%)

· ASK

– 0.7
+11.8

Financial / Data Section· Passenger revenues–2.6

Labor costs
Maintenance
Fuel volume
Other
Total

A Business Base that Supports
Value Creation

Revenues from international routes by geographic segment–3.1– 40.5

209.1

Fiscal 2015

448.7

+11.8

+9.0

– 39.6
Revenues
Excluding fuel
Total

Revenue growth

Hedge gains

Ⅳ

Performance and Strategies
by Business–¥33.5 billion

Plus symbol = positive for profits(higher revenues, lower costs, etc.)
Minus symbol = negative for profits(lower revenues, higher costs, etc.)

FSC*

Ⅲ

Management Strategies
Designed to Create Value

Fiscal 2016

America

10,497

11,335+8.0

Europe

5,801

5,976

+3.0

Asia / Oceania

14,63914,371

– 1.8

China

2,453

2,577

+5.1

Hawaii / Guam

6,913

6,372

– 7.8

All routes

40,30540,633+0.8· Revenue passengers carried

In route operations, the Group increased the number of flights onsome routes in response to strong demand, such as Narita =Honolulu, Kansai = Honolulu and Narita = Bangkok. In allianceswith other carriers, Iberia joined the Group’s joint business onflights between Japan and Europe and Iberia began offering JAL
codeshare flights on its Narita = Madrid route. China Airlines also
expanded its codeshare agreement with JAL to all flights between
Japan and Taiwan, while Russian airline S7 started codeshare
flights on routes between Moscow and Novosibirsk, Tyumen,
Kaliningrad, and Omsk, helping to extend the reach of the JAL
route network.
In products, we steadily introduced aircraft with the JAL SKY
SUITE configuration onto more routes. The new configuration has afull-flat seat in business class and “New Spacious Economy” seats ineconomy class.
In marketing and services, FlightStats, Inc. named JAL the mostpunctual major airline in the Asia-Pacific region in 2016 on both
domestic and international routes. JAL also received FlightStats’ topaward for network performance.

YoY change(%)(1,000)Fiscal 2015

Fiscal 2016

YoY change(%)

America

1,112

1,194

+7.4

Europe

641

660

+3.0

Asia / Oceania

4,208

4,047

– 3.8

China

1,307

1,381

+5.7

Hawaii / Guam

1,190

1,109

– 6.8

All routes

8,460

8,394

– 0.8

· Load factor(%)
Fiscal 2015

Fiscal 2016

YoY change(pt)America

79.0

79.1

+0.1

Europe

75.7

79.8

+4.1

Asia / Oceania

80.9

80.6

– 0.3

China

71.0

73.5

+2.5

Hawaii / Guam

85.7

85.4

– 0.4

All routes

79.7

80.3

+0.6

JAL REPORT 2017

87

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Ⅱ

The JAL Group’s Growth Story

In route operations, the Group introduced the Embraer 190 on
domestic routes, the first regional jet with JAL’s Class J configuration. The aircraft was initially introduced onto the Itami =Kagoshima route, followed by Itami = Sendai, Itami = Fukuoka
and Itami = Nagasaki in an effort to improve passenger comfort
on Itami routes.
In products, we completed the roll out of the JAL SKY NEXTconfiguration on all 77 aircraft that were earmarked for the
upgrade. We also ran a Stay Connected for Free Campaign on all
flights equipped with in-flight Wi-Fi services, delivering greater
comfort for passengers.
In marketing and services, we introduced a new service called
Go Somewhere with Miles, aiming to generate new demand fortravel to regional Japan and further stimulate domestic air travel.
We also fully refurbished Sakura Lounges at New Chitose, Naha,
Fukuoka and Hiroshima airports, and added new Diamond Premier
Lounges – the highest grade of passenger lounge on our domestic
network – at New Chitose, Itami and Fukuoka airports.

② Domestic passenger operations

Passenger revenues (billion yen)

Fiscal 2015

Fiscal 2016

YoY change
(%)

501.2

498.6

–0.5

ASK (million seat kilometers)

35,86935,423–1.2

RPK (million passenger kilometers)

24,341

24,550+0.9

Revenue passengers carried(1,000)32,11432,570+1.4

Load factor (%)

67.9%

69.3%

+1.4ptYield*1 (yen)

20.6

20.3

–1.4

Unit revenue*2 (yen)

14.0

14.1

+0.7

15,60915,309–1.9

Revenue per passenger (yen)*3*1 Yield = Passenger revenues / RPK*2 Unit revenue = Passenger revenues / ASK*3 Revenue per passenger = Passenger revenues / Passengers

Domestic passenger revenues(Billions of yen)– ¥2.6 billion(–0.5%)

‒ 9.6

501.2

· Competition withother airlines (–)· Calendar effects inSilver Week (–)

Fiscal 2015

Revenue perpassenger(2) Other Businesses

498.6

+7.0

· Growth in individual
passenger demand(+)· Decline in tourism
demand due toKumamoto
earthquakes (–)

Number ofpassengers

88

JAL REPORT 2017

Breakdown of main operating expenses(Billions of yen)

172.5

¥

billion

JAL CARD, Inc.
Operating revenue

¥

20.4

billionpromoting cheaper JAL airfares to Kyushu, stepped up sales andprocurement activities and effective online marketing that led tostrong demand for the JAL Dynamic Package.

Fiscal 2015

Fiscal 2016

Overseas travelers handled (1,000)

243

241

99.4

Domestic travelers handled (1,000)

2,429

2,510

103.3

Operating revenue (billions of yen)*

172.2

172.5

100.2

Fiscal 2016

Number of Cardholders (1,000)

3,129

3,272

104.5

Operating revenue (billions of yen)*

20.4

20.4

100.1

* Before elimination of consolidated transactions

1,118.6

Operatingexpenses¥(1) Fuel costs(Billions of yen)

Fuel costs

228.1

198.7

– 29.3–12.9

Landing and navigation fees

82.2

81.1

–1.1

–1.4

Maintenance costs

47.9

48.9

+1.0

+2.2

Air transport salescommissions*1

24.4

15.9

– 8.4

–34.7

Aircraft costs*2

98.4

100.4

+1.9

+2.0

Singapore Kerosene (USD/bbl)

Service costs*3

36.3

37.9

+1.6

+4.6

Dubai Crude (USD/bbl)

Personnel costs

249.9

273.3

+23.3

+9.3

Forex rate (JPY/USD)

120.5

Travel agency costs

82.3

81.5

– 0.8

–1.0

Fuel and foreign exchange markets
YoY change
(%)

60.0

57.2

– 4.6

47.2

45.6

– 3.3

108.6

– 9.9

277.5

280.4

+2.8

+1.0

(2) Personnel costs

1,118.6

– 8.8

–0.8

Personnel costs increased 23.3 billion yen year on year, reflecting
strategic investment in personnel to strengthen foundations for theGroup’s future growth. Specific steps included overhauling pay
structures and raising base wages.

(3) Profit management and cost control
The Group’s unit costs have been rising since fiscal 2012 due toimprovements in service provision. However, air transportation
revenue per ASK is also increasing. The Group will continue to focus
on maximizing profits per ASK.
(Yen)
20

120

100

Factors affecting changes in fuel costs

99

15(–12.9%)

10

–17.4
–5.9

8.4

13.3

12.6

12.5

12.3

–¥29.3 billion–6.0

Fiscal 2016

Fiscal 2015

1,127.4

Operating expenses decreased 0.8% year on year to 1,118.6
billion yen. Maintenance costs and personnel costs increased, but
fuel costs declined due to the stronger yen and lower fuel prices.
The Group also continued to implement cost reduction efforts
from the previous fiscal year using its amoeba management
system and other approaches.

228.1

billionAs shown in the table below, fuel costs declined 29.3 billion
yen year on year due to a drop in fuel prices and favorable
exchange rates.

YoY change(%)

YoY change

YoY change(%)

Fiscal 2015

Fiscal2016(Billions of yen)
YoY change(%)

Financial / Data Section

Fiscal2015*1 From fiscal 2016, international cargo operation sales commissions are offset bycargo revenues.
*2 Aircraft costs = Depreciation + Leasing fees + Insurance premiums and Other costs
related to aircraft.
*3 Service costs = Costs related to in-flight services, Airport lounges, Cargo and otheritems.

Fiscal 2016

A Business Base that Supports
Value Creation

3. Analysis of Factors Affecting Operating Expenses

Other

In other businesses, we worked to maximize the corporate value of
the JAL Group by improving convenience for customers. Financial
results for the two main companies in this segment were as follows.
JALPAK Co., Ltd. worked to increase sales by rapidly launching
new products, offering more high-value-added products and rollingout well-timed marketing campaigns in line with changing demand.
Also, to capture growing inbound demand, the company begansales of the JAL Visit Japan Dynamic Package for overseas visitors toJapan. Despite upgrades to the smartphone online booking system
to improve usability and active promotion of business class andpremium economy class tickets, the number of passengers handled
by JALPAK for travel to overseas destinations declined year on year
amid weak demand for trips to Europe and a drop in available seatson flights to Honolulu due to the introduction of new aircraft. The
number of passengers handled by JALPAK for domestic destinations
increased year on year. Growth was supported by a campaign

Ⅳ

Performance and Strategies
by Business

MyJALCARD, a dedicated online service that customers can accessafter signup. The number of transactions was firm, supported byan increase in the number of retail partners offering double miles
on purchases and initiatives to sign up or encourage members toswitch to more prestigious cards.

Total operating expenses

JALPAK Co., Ltd.
Operating revenue

Ⅲ

Management Strategies
Designed to Create Value

8.6

100
90

13.3

80
70

8.7

9.4

9.1

60
50
40

198.7

5

30
20

* Before elimination of consolidated transactions

JAL CARD, Inc. stepped up efforts to sign up new members,
running effective marketing campaigns using online advertisingand direct mail and accepting credit card applications at airports
and bank branches using tablet PCs. As a result of those efforts,
the number of cardholders increased year on year. Also, thecompany enhanced services for cardholders with the launch of

110

10
0

0
2012

2013

Air transport revenue per ASK*1

2014

2015

2016

(FY)

Unit cost*2 (left hand scale)Profit per ASK*3 (right hand scale) (Fiscal 2012 = 100)

Fiscal 2015

Fuel prices

Forex

Fuel volume /hedging gains(losses) etc.

Fiscal 2016

*1 Air transport revenue per ASK: (Air transport revenue – fuel surcharge – revenue
from resale of fuel to related companies) / ASK*2 Unit cost = Consolidated air transport cost (excluding fuel costs and fuel costs forresale to a related company) / ASK*3 Profit per ASK = Air transport revenue per ASK – Unit cost

JAL REPORT 2017

89

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Ⅱ

The JAL Group’s Growth Story

Profit attributable toowners of parent

4. Profit Attributable to Owners of Parent

Ordinary income declined 21.1% year on year to 165.0 billion yen,reflecting a decline in non-operating income, due mainly to a dropin gain on sales of flight equipment.
Profit attributable to owners of parent declined 5.9% year on

5. Cash Flows

164.1

¥

billionyear to 164.1 billion yen, which included the booking of income
taxes – deferred of 31.6 billion yen due to the application of new
tax effect accounting policies.

Cash provided by operating activities
Cash used in investing activities*2

253.1– ¥215.5– ¥ 53.5¥

billion(1) Cash flow from operating activities
After adjusting profit before income taxes and non-controllinginterests of 162.7 billion yen for non-cash items such as depreciation and amortization, and reconciling operating accounts receivable and payable and other items, operating activities provided net
cash (inflow) of 253.1 billion yen, a decline of 59.2 billion yen
compared with the previous fiscal year.

(2) Cash flow from investing activities
Investing activities used net cash (outflow) of 215.5 billion yen,a decline of 8.3 billion yen compared with the previous fiscal year,
mainly due to cash used for the purchase of non-current assets.

(3) Cash flow from financing activities
Financing activities used net cash (outflow) of 53.5 billion yen,
an increase of 3.8 billion yen compared with the previous fiscal
year, mainly reflecting cash used for cash dividends paid and forthe purchase of treasury shares.

Fiscal 2016

JAL REPORT 2017

ChangeLeased

Total

Owned

LeasedTotal

Boeing 777-200

12

0

12

12

0

12

—

(Billions of yen)

Boeing 777-200ER

11

0

11

11

0

11

—

YoY change

Boeing 777-300

4

0

4

4

0

4

—

Boeing 777-300ER

13

0

13

13

0

13

—

Income before income taxes

207.3

162.7

– 44.6

88.5

95.7

+7.2

40

0

40

40

0

40

—

Medium Boeing 787-8

23

0

23

25

0

25

+2

Large subtotal

16.4

–5.4

–21.8

Boeing 787-9

3

0

3

8

0

8

+5

Cash flow from operating
activities

312.3

253.1

–59.2

Boeing 767-300

9

0

9

6

0

6

–3

Capital investments*1–210.6–233.1

–22.4

3.4

17.5

+14.1

–207.2–215.5

–8.3

Other

Free cash flow*

3

105.1

37.5

Boeing 767-300ER
Medium subtotal
Small

28

4

32

29

2

31

–1

63

4

67

68

2

70

+3

0

11

–1

53

+2

10 small10 small

34

29

63

37

27

64

+1

16 large

0

17

17

0

17

16 large

17—
20 medium

20 medium54 small53 small56 regional

52 regional

Small subtotal
Regional EMBRAER 170
jet
EMBRAER 190

0

0

5

0

5

+5

9

0

9

5

0

5

–4

Cash flow from financing
activities

–49.6

–53.5

–3.8

Bombardier
DHC8-Q400

8

2

10

7

2

9

–1

Bombardier
DHC8-Q400CC

2

0

2

4

0

4

+2

SAAB 340B

13

0

13

12

0

12

–1

Bombardier
DHC8-Q300

1

0

1

1

0

1

—

286.2

–34.9

*1 Purchase of non-current assets*2 Excluding deposits and withdrawals from time deposits*3 Cash flow from operating activities + Cash flow from investing activities*4 Repayment of loans + Repayment of lease obligations*5 Cash flow from operating activities + Cash flow from investing activities +Cash flow from financing activities

51 medium

27

0

321.1

50 medium

11

Bombardier CRJ-200

EBITDAR24 large

26

– 6.5

–71.4

24 large

12

–28.5

–31.6

(Excluding regional aircraft,
total is 174)

51

–21.9

–15.9

(Excluding regional aircraft,
total is 174)0Cash dividends, other266.1

226 aircraft
85 international
141domestic

29

+2.6

55.5

84 international
146 domestic

12

–25.0

297.7

InternationalroutesEnd-fiscal 2017

230 aircraft

22– 67.5

EBITDA

Total
aircraft

End-fiscal 2016

Boeing 737-400–27.6

Total cash flow*

billionBoeing 737-800

Repayment of interestbearing debt*4

5

233.1

Fiscal 2017 Fleet Plan
As of end-fiscal 2016
(March 31, 2017)

As of end-fiscal 2015
(March 31, 2016)
Owned

Depreciation andamortization

Cash flow from investing
activities*2¥

enhance passenger convenience.
In fiscal 2016, capital investment in the air transportation
segment totaled 231.5 billion yen. Capital investment was mainly
used to purchase 17 new aircraft (two Boeing 787-8, five Boeing
787-9, two Boeing 737-800, five Embraer 190, two Bombardier
DHC-8-400CC and one ATR42-600), purchase leased aircraft andmake advance payments for aircraft.

Fiscal 2016 Fleet

billionCash flows

Other

Financial / Data Section

Capital investment

Capital investment during fiscal 2016 totaled 233.1 billion yen(including expenditure for intangible fixed assets). Capital investment by segment is as follows:
The air transportation segment invests in new aircraft toimprove operating efficiency. It also invests in intangible fixed assets
such as measures to improve the Group’s ability to respond todiversifying customer needs and systems to increase efficiency andBombardier
DHC8-Q100

4

0

4

2

0

2

–2

ATR42-600

0

0

0

1

0

1

+1

Regional subtotal
Total

90

A Business Base that Supports
Value Creation

6. Capital Investment and Aircraft Procurement

Large

Fiscal 2015

Ⅳ

Performance and Strategies
by BusinessbillionCash used in financing activities

The JAL Group primarily uses cash for investments that increase
corporate value and to return profits to shareholders and maintaina solid financial position. The Group conducts capital investment
based on strict investment criteria, aiming to secure an appropriate
level of return and maximize free cash flow.

Ⅲ

Management Strategies
Designed to Create Value

54

2

56

54

2

56

—

191

35

226

199

31

230

+4

Domestic
routesJAL REPORT 2017

91

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Ⅱ

The JAL Group’s Growth Story

7. Financial Position(1) Assets
As of March 31, 2017, total assets stood at 1,728.7 billion yen, an
increase of 149.8 billion yen compared with the end of the previous
fiscal year, primarily due to aircraft purchases and advancepayments for aircraft.

Shareholders’equity

¥

972.0

56.2

Equityratio

billion%March 31, 2017 and the shareholders’ equity ratio increased 2.8
percentage points to 56.2%.
Consolidated financial position(Billions of yen)End-fiscal 2015

End-fiscal 2016

YoY change+149.8

1,578.9

1,728.7(2) Liabilities

Cash and deposits*1

420.3

404.0

–16.2

Liabilities totaled 725.3 billion yen, an increase of 17.0 billion yen
from the end of the previous fiscal year, mainly due to the issue ofcorporate bonds and an increase in borrowings.

Interest-bearing debt*2

92.6

116.0

+23.4

Future rental expenses underoperating leases

96.9

76.4

–20.4

Shareholders’ equity

843.0

972.0

+128.9Equity ratio (%)

53.4

56.2

+2.8pt

0.1x

0.1x

+0.0x

ROE (%)*4

21.5

18.1

–3.5ptROA (%)*5

13.7

10.3

–3.4ptTotal assets(3) Net assets
Net assets totaled 1,003.3 billion yen, an increase of 132.8
billion yen from the end of the previous fiscal year, primarily due
to the booking of profit attributable to owners of parent and anincrease in accumulated other comprehensive income, against
cash dividends paid and the purchase of treasury shares.
As a result, shareholders’ equity totaled 972.0 billion yen as of

D/E ratio (Times)*

3

*1
*2
*3
*4

Including negotiable certificates of deposit
Including account payable installment purchase
D/E ratio = Balance sheet interest-bearing debt / Shareholders’ equity
ROE = Profit attributable to owners of parent / Average of start-of-year andyear-end shareholders’ equity*5 ROA = Operating income / Average of start-of-year and year-end total assets

Ⅲ

Management Strategies
Designed to Create Value

On international routes, fuel surcharges allow the Company tohedge some of its fuel costs. As a result, the Company uses fuelhedging for fuel used on domestic routes, which equates to approximately 40% of all fuel consumed by the Group’s air transport
operations. In addition, the Company’s foreign currency revenues
are roughly the same as its foreign currency expenses, excluding
fuel costs. Consequently, the Company uses fuel and exchange rate
hedging to mitigate fuel cost risks.

Issuer ratingA– (stable)

Japan Credit Rating Agency, Ltd. (JCR)

Long-termissuer rating

A (stable)*

The Company and its major consolidated subsidiaries haveestablished defined-benefit retirement plans such as corporate
pension plans and lump-sum retirement plans, as well as
defined-contribution pension plans. When employees retire, andon other occasions, the Company and its consolidated subsidiaries may also provide premium severance packages, which are
not included in calculations of the actuarial difference forretirement benefit obligations in retirement benefit accounting.
As of March 31, 2017, the Company and 39 consolidated
subsidiaries had lump-sum retirement plans. The Group also had
three corporate pension funds, including the Japan Airlines Welfare

92

JAL REPORT 2017Retirement benefit obligations

477.5

billionPension Fund. Certain overseas subsidiaries have defined-benefit
retirement plans.
The Japan Airlines Welfare Pension Fund also introduces anoption similar to a cash-balance plan as well as other alternatives.
The JAL Group Pension Fund, which is used by some domestic
consolidated subsidiaries, uses a cash balance pension plan.
Simplified accounting methods are used to calculate retirement benefit liabilities, assets and expenses for defined-benefit
corporate pension plans and lump-sum retirement plans at someconsolidated subsidiaries.

80

60
Roughly Roughly

40%

40

40%

Roughly Roughly

10%· Fuel surcharge

2017

Fuel use

Internationalroutes60%

Foreign currency
revenues

10%

Roughly Roughly0

HedgedThe Company is exposed to fuelcost risks on domestic routes,
which do not have the FSC*

Non-fuel
costs<Domesticroutes>hedging

5%

2019

(FY)

Impact on fuel costs (fiscal 2017)

Foreign currency
expenses<Internationalroutes>
FSC revenues

2018

5%

Sensitivity to fuel costs (without hedging)

FSC* revenue
received

Fuel costs

¥

Fuel
Forex

20

* Rating changed in July 2017

9. Retirement Benefit Obligations

(%)
100

Hedging policy*FSC = fuel surcharge

Rating & Investment Information, Inc. (R&I)

Financial / Data Section

Fuel cost hedging by fiscal year (as of end-fiscal 2016)(1) Policy· Forex hedging

JAL’s current credit ratings are shown in the table on the right.

A Business Base that Supports
Value Creation

10. Fuel and Exchange Rate Hedging

Domestic
routes40%

8. Credit Ratings

Ⅳ

Performance and Strategies
by Business

The Company is exposed toforex risks related to fuel costs,
as foreign currency expenses
excluding fuel costs are largely
offset by foreign currency
revenues

Crude oil (change in 1 US$/bbl)

2.6 billion yen/ year

Forex (change in 1 yen/US$)

1.5 billion yen/ year

(2) Controlling the risk of price fluctuations
The impact of fluctuations in fuel prices is mitigated by hedging
and fuel surcharges, but the benefits of those actions take time
to feed through to earnings in each fiscal year. However, over a
medium-term timeframe, the Company has been largely
successful in mitigating the risk of fluctuations in fuel prices.
Based on cumulative changes in prices for the last three fiscal
years, the Company has offset the impact of those changes
through hedging and fuel surcharges.

Cumulative impact of price fluctuations in fiscal 2014 – 2016

Fuel prices /forex

FSC / hedging

Impact–10100 (Billions of yen)

JAL REPORT 2017

93

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Ⅱ

The JAL Group’s Growth Story

Management Strategies
Designed to Create Value

Ⅲ

Ⅳ

Performance and Strategies
by Business

A Business Base that Supports
Value Creation

Financial / Data Section

Principal Business Risks

11. Distribution of Profits to Shareholders

The Company regards shareholder return as one of its mostimportant management issues. The Company’s fundamental policy
is to actively return profits to shareholders through continuous andstable dividends, while ensuring sufficient internal reserves to invest
in corporate growth, adapt to changes in the operating environment and build a strong financial structure.
In addition, following approval from shareholders at theOrdinary General Meeting of Shareholders on June 22, 2017,
the Articles of Incorporation were revised to enable the Board of
Directors to approve resolutions allowing the payment of interim
dividends, based on a record date of September 30 each year.

For fiscal 2016, the Company will pay a year-end dividend of
94 yen per share, in line with its dividend policy of allocating
roughly 25% of profit attributable to owners of parent after
deducting deferred income taxes. From fiscal 2017, the Company
will lift the ratio to roughly 30% to increase shareholder returns.
Also, taking into account conditions in the operating environment and the Group’s financial position, the Company will return
additional profits to shareholders as necessary through sharebuybacks and other means, review its future financial targets andflexibly consider further increases in shareholder returns.

12. Business Outlook and Issues to Be Addressed

The Company expects the airline market – the Group’s main
business field – to expand over the medium to long term, supported
by economic globalization. Asia is a particularly promising growthmarket for the airline sector. The pace of change in the Group’s
market and business climate and advances in technology are likely
to accelerate. To generate sustained and stable growth in thatenvironment, the Company will implement initiatives during thefour years of the JAL Group Medium Term Management Plan
(fiscal 2017 – 2020). Based on the theme, “Challenge, Leading toGrowth,” the Company will continue to refine its full-service carrierbusiness and steadily expand its business domains by creating anddeveloping new sources of earnings.
In international passenger operations, the Company anticipates
further growth in demand from overseas customers due to theupcoming 2020 Summer Olympics and Paralympics in Tokyo andan expected increase in the number of take-off and landing slots at
Tokyo metropolitan airports. However, the competitive environment
is likely to become more challenging as domestic and international
airlines, including low-cost carriers (LCC), increase the supply ofavailable seats. Against that backdrop, the Company will reinforce
its network, including through joint businesses on Pacific andEuropean routes and alliances with other airlines, and introduce
new aircraft with highly competitive cabin configurations, aiming toraise the Group’s presence in overseas markets, as well as in Japan,
to become a highly regarded global airline.

94

JAL REPORT 2017

In domestic passenger operations, the competitive environment
is likely to become tougher, including increased competition withrailway companies, amid sluggish growth in total transport demand
due to Japan’s falling population and aging society. Against thatbackdrop, the Company will introduce new aircraft such as the
Airbus 350, expand the number of routes with in-flight Wi-Fi
services, upgrade airport lounges and take other steps to boost
competitiveness by making its services more convenient andcomfortable. The Company will also work to increase the numberof travelers by encouraging more people, including overseas visitors,
to experience Japan’s regions, helping to revitalize local economies.
The Group faces the risk of significant short-term fluctuations indemand in the airline market due to various factors, including
natural disasters, wars, terrorist incidents and outbreaks of disease.
To mitigate the impact of those risks, the Company will leverage its
strengths in areas outside its full-service carrier business to createand develop new sources of earnings that can support stable
growth in the future.
Under the JAL Group Corporate Policy, “the JAL Group aims topursue the material and intellectual growth of all our employees,
deliver unparalleled service to our customers and increase corporate
value and contribute to the betterment of society.” To achieve thosegoals, all Group employees will work as one to increase corporate
value by reinforcing the Group’s businesses and financial position
and addressing society’s needs and issues.

The JAL Group has identified a number of risks that could have amaterial impact on investment decisions. The list is not exhaustive
and the JAL Group may be affected by unforeseen risks notdescribed below. This report also contains forward-looking
statements based on information available to the Company asof March 31, 2017. The JAL Group is exposed to the following
principal risks due to the nature of its business activities, centeredon the scheduled air transportation business and unscheduled airtransportation business.

(1) Risks related to the operating environment,
including the international climate andeconomic trends① Operating environment
The JAL Group’s air transportation business operates in Japan andmarkets worldwide. Demand for air travel may be affected bytrends in the global economy, natural disasters and adverse weather
conditions, terrorist attacks, regional conflicts, war, the outbreakand spread of infectious diseases, and other events.
In addition, the JAL Group’s services are partly dependent on
maintenance companies, airport personnel, sky marshals, fuelsuppliers, luggage handling companies, security companies,
and other third parties, which could affect the Group’sbusiness operations.
② Competitive environment
The Group faces severe competition in Japan and overseas in areas
such as routes, services, and pricing. On domestic routes, the Group
competes with other major Japanese airlines, new low-cost airlines,
and bullet train services. On international routes, the Group
competes with major domestic and international airlines, andcompetition is intensifying on both domestic and internationalroutes. Alliances, codeshare agreements, and reciprocal air frequent
flyer programs between overseas and Japanese airlines are contributing to the challenging environment on international routes.
Significant deterioration in this competitive climate and operating
environment could affect the Group’s operations.
The JAL Group is a member of the oneworld alliance, which
includes a number of other airlines. The Group has also formed
joint businesses with airline partners. The joint businesses extend
across international borders and have received antitrust immunity(ATI) approval. However, the JAL Group’s alliance strategy may beaffected by changes in operating conditions at other oneworld
member airlines or joint business partners, and by changes in the
oneworld alliance membership or major developments in theGroup’s alliance relationships.

(2) Aircraft risk
In the air transportation business, the JAL Group places orders foraircraft with the Boeing Company, Airbus SAS, Embraer SA,
Bombardier Inc., ATR, and Mitsubishi Aircraft Corporation toincrease efficiency by switching to more fuel-efficient aircraft andreducing aircraft types in the fleet. However, the delivery of new
aircraft may be delayed due to technical, financial, and otherreasons at aircraft manufacturers, which could force adjustments tofleet plans that affect the Group’s operations over the medium andlong term.

(3) Market risk
① Fuel price volatility risk
Fluctuations in fuel prices have a significant impact on the JAL
Group’s operating performance. The Company charges a fuelsurcharge to partly cover the impact of higher fuel prices. However,changes in fuel prices are not immediately reflected in the fuelsurcharge and it is inappropriate to ask customers to cover theentire increase in fuel prices. The Group also uses crude oil hedging
transactions to mitigate the risk of fuel price volatility. However,a sudden and steep drop in oil prices may not contribute to an
improvement in the Group’s operating performance, as the benefitsof the decline would not be reflected in business results immediately due to hedge contract positions and other factors.
② Exchange rate volatility risk
The JAL Group operates in countries other than Japan. As a result,some of its revenues and expenses are denominated in foreign
currencies. In particular, the price of aviation fuel, one of theGroup’s main costs, is largely linked to the US dollar. Fluctuations in
US dollar exchange rates therefore have a greater impact on theGroup’s expenses than on its revenues. To mitigate the impact of
exchange rate volatility on profits, the JAL Group uses foreign
currency revenues to offset foreign currency expenses and foreign
currency hedging transactions. The price of new aircraft is also
closely linked to the US dollar, which means the Group is also
exposed to the risk of exchange rate fluctuations when recording
the value of assets and depreciation costs related to aircraft.
To mitigate this risk, the Group uses hedging transactions todiversify opportunities for foreign currency exchange.

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Ⅱ

The JAL Group’s Growth Story③ Capital and financial market risk
The JAL Group needs to make significant capital investments, suchas procuring new aircraft. To meet funding needs for these investments, the Group may procure funds from financial institutions orcapital markets. The Group’s ability to secure funds and its funding
costs are affected by trends in capital and financial markets, and bychanges in its credit rating, which may limit the Group’s access tofunds and lead to higher funding costs.

(4) Disaster risk
The majority of the JAL Group’s passengers use aircraft departingfrom or arriving at Haneda and Narita airports. Consequently, these
airports play a vital role in the JAL Group’s air transportation
business. In addition, the Group’s Information System Center, whichplays an important role in managing the Group’s flights, reservations and other services, and the Operation Control Center, which istasked with controlling the operation and scheduling of the Group’s
fleet worldwide, are both located in the Tokyo area. Consequently,
a major earthquake or volcanic eruption in the Tokyo area could
lead to the protracted closure of Haneda or Narita airports, while afire, terrorist attack or other incident at these key facilities could
lead to a prolonged outage of the Group’s information systems andoperational capabilities, which would have a severe impact on theGroup’s operations.

(5) Flight safety risk
The JAL Group implements a wide range of measures on a daily
basis to ensure the safe operation of its flights. However, a single
fatal accident has the potential to undermine customer trust in theGroup’s flight safety and lead to a loss of public support. The Group
must also provide compensation for any passenger fatalities or
injuries in the event of an accident, which could have a severe
impact on the Group’s operating performance. In addition, safetyissues related to the same aircraft type operated by the Group or
safety issues on codeshare flights could undermine customer trustin the Group’s flight safety and lead to a loss of public support,
which could affect the Group’s operating performance. To limit the
impact of legal damages related to air accidents and to ensure
those affected by any accident receive sufficient compensation,
the Group has purchased liability insurance that provides aninternationally recognized level of compensation and coverage.

96

JAL REPORT 2017Management Strategies
Designed to Create Value

Ⅲ

Performance and Strategies
by Business(6) Regulatory and litigation risk

(7) IT system and customer data handling risk

The Group’s operations are subject to various international legal
restrictions and national and local government laws and regulations. Revisions to these laws and regulations may result in eventighter restrictions on the Group’s operations, which could lead toa significant increase in costs.

The JAL Group’s operations are dependent on a large number of IT
systems. Failures in these IT systems caused by flaws in computer
programs, computer viruses, and other cyber-attacks may lead tothe loss of critical data, as well as issues in flight operations, which
could affect the Group’s operations. Large-scale failures in powersystems, communication networks, and other infrastructure that
support IT systems could also result in significant disruption to theGroup’s operations.
In addition, inadequate handling of customers’ personal information by the Group or unauthorized access that results in thedisclosure of such information could damage public trust in theGroup’s business, systems and corporate brand and undermine
customer and market trust in the JAL Group, which could affect
the Group’s financial position and operating performance.

① Regulatory risk
The JAL Group conducts its operations in accordance with various
rules and regulations, such as Japan’s Civil Aeronautics Act andother regulations governing airline businesses, bilateral aviationagreements and other international arrangements, Japan’s Antimonopoly Act and other similar antitrust laws overseas, and rules ontaxes and public dues such as landing fees. Revisions to these rules
and regulations or notifications of legally enforceable airworthinessdirectives could have an impact on the Group’s operating performance. Moreover, the allocation of flight slots at Haneda and Narita
airports and the timing of the launch of new routes could also
affect the Group’s operating performance.
In addition, amid growing pressure on companies in recent years
to fulfill their corporate social responsibility to the environment,such as preventing global warming, the JAL Group is facing tighter
restrictions on CO2 emissions, noise pollution, harmful substances,and other environment issues. A further tightening of environmental
regulations that leads to a higher cost burden through emission
charging mechanisms or other schemes could have an impact on
the Group’s operating performance.

Ⅳ

A Business Base that Supports
Value Creation

Financial / Data Section(8) Personnel and labor relations risk
The JAL Group’s business is dependent on securing personnel who
have national certificates and other legally required qualifications
related to the operation of aircraft. However, due to the considerable amount of time required by employees to acquire thesequalifications and skills during the course of their duties, the JAL
Group may not be able to secure sufficient personnel whenrequired, which could affect the Group’s business operations.
In addition, many of the Group’s employees are members oflabor unions. A collective strike by Group employees or other labor
disputes could affect the Group’s aircraft operations.

② Litigation risk
The JAL Group’s business activities are exposed to the risk of various
types of litigation, which could affect the Group’s operations andoperating performance. In the event that litigation is filed against
the Group, developments in the subsequent legal case may require
additional costs and the booking of provisions, which could also
affect the Group’s operating performance.

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The JAL Group’s Growth Story

Management Strategies
Designed to Create Value

Ⅲ

Performance and Strategies
by BusinessⅣ

A Business Base that Supports
Value Creation

Financial / Data Section

CONSOLIDATED FINANCIAL STATEMENTS
Consolidated Balance Sheets
Japan Airlines Co., Ltd. and Consolidated Subsidiaries
Thousands of
U.S. dollars (Note 4)

Millions of yen
As of March 31

2017

2017

2016

ASSETS
Current assets:¥  392,075¥  420,333$ 3,494,741

Notes and operating accounts receivable (Note 7)

142,745

128,148

1,272,350

Securities (Notes 5, 7 and 8)

12,000—106,961Flight equipment spare parts and supplies

21,11820,314

188,234

Deferred tax assets (Note 12)

7,436

16,72566,280Other51,45044,429458,597

(493)

(709)

(4,394)626,332

629,242

5,582,779

Cash and deposits (Notes 5, 7 and 10)

Allowance for doubtful accounts
Total current assets

Non-current assets:
82,68084,931

736,964Flight equipment (Note 10)671,387

560,601

5,984,374

Ground property and equipment (Notes 10 and 16)

51,70851,142

460,896

Advances on flight equipment and other purchases

101,832

116,929

907,674

824,928

728,673

7,352,954

Investment securities (Notes 6, 7, 8 and 10)

Tangible fixed assets, net:

Total tangible fixed assets

Software

95,73879,866853,355

Long-term loans receivable (Note 10)

7,303

8,169

65,094

Deferred tax assets (Note 12)61,457

6,172

547,793

Net defined benefit asset (Note 11)

1,240

1,090

11,052Other (Note 10)29,35941,027

261,689

(264)

(245)

(2,353)

Total non-current assets

1,102,444

949,686

9,826,579

Total assets¥1,728,777¥1,578,928$15,409,368

Allowance for doubtful accounts

Thousands of
U.S. dollars (Note 4)

Millions of yen
As of March 31

LIABILITIESCurrent liabilities:
Operating accounts payable (Note 7)
Short-term loans payable (Notes 7 and 10)
Current portion of long-term loans payable (Notes 7 and 10)
Lease obligations (Notes 7 and 10)
Accounts payable—installment purchase (Notes 7 and 10)
Income taxes payable
Advances received
Deferred tax liabilities (Note 12)
Asset retirement obligations (Note 19)
Other
Total current liabilities
Non-current liabilities:
Bonds payable (Notes 7 and 10)
Long-term loans payable (Notes 7 and 10)
Lease obligations (Notes 7 and 10)
Long-term accounts payable—installment purchase(Notes 7 and 10)
Deferred tax liabilities (Note 12)
Reserve for loss on antitrust litigation
Net defined benefit liability (Note 11)
Asset retirement obligations (Note 19)
Other
Total non-current liabilities
Total liabilities

2017

2016

2017

¥  159,218
5,372
13,037
5,712
181
10,82996,453
173
249
73,372364,601¥  145,413
5,792
10,851
13,254
178
19,33383,3650234
90,128368,552$ 1,419,181
47,883
116,204
50,913
1,613
96,523859,7291,542
2,219
653,9973,249,852

20,00065,8025,300—
51,331
10,373

178,269
586,522
47,241

666
353
5,965
238,481
3,538
20,676
360,783
725,384

847
358
6,294
236,310
3,723
30,578339,818
708,371

5,936
3,146
53,1682,125,688
31,535
184,294
3,215,821
6,465,674

181,352
183,047
647,701

181,352
183,042557,905

1,616,472
1,631,580
5,773,250(531)
1,011,569(538)
921,761(4,733)9,016,570

13,828(667)
232(52,898)(39,504)
31,3281,003,393¥1,728,777

14,767(24,777)427(69,079)(78,662)
27,457
870,557¥1,578,928

123,255(5,945)2,067(471,503)(352,116)
279,240
8,943,693$15,409,368

Contingent liabilities (Note 17)
NET ASSETS (Note 13)
Shareholders’ equity:
Common stock:
Authorized: 700,000,000 shares in 2017 and 2016
Issued: 353,715,800 shares in 2017 and
362,704,000 shares in 2016
Capital surplus
Retained earnings
Treasury shares, at cost:
199,873 shares in 2017 and 203,395 shares in 2016
Total shareholders’ equity
Accumulated other comprehensive income
Valuation difference on available-for-sale securities (Note 8)
Deferred losses on hedges (Note 9)
Foreign currency translation adjustment
Remeasurements of defined benefit plans (Note 11)
Total accumulated other comprehensive income
Non-controlling interests
Total net assets
Total liabilities and net assets
The accompanying notes are an integral part of these consolidated financial statements.

98

JAL REPORT 2017

JAL REPORT 2017

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Ⅱ

The JAL Group’s Growth Story

Ⅲ

Management Strategies
Designed to Create Value

Ⅳ

Performance and Strategies
by Business

A Business Base that Supports
Value Creation

Financial / Data Section

CONSOLIDATED FINANCIAL STATEMENTS

Consolidated Statements of Income and Comprehensive Income

Consolidated Statements of Changes in Net Assets

Japan Airlines Co., Ltd. and Consolidated Subsidiaries

Japan Airlines Co., Ltd. and Consolidated Subsidiaries

Years ended March 31

Operating revenue:
Passenger:
Domestic
International
Incidental and other revenue
Total operating revenue
Operating expenses:
Wages, salaries and benefits
Aircraft fuelLanding fees and other rent
Aircraft maintenanceAircraft rent
Depreciation and amortization
Other
Total operating expenses
Operating income

2017¥  498,628
415,218
375,120
1,288,967

2016¥  501,274
448,780
386,606
1,336,661$ 4,444,495
3,701,025
3,343,613
11,489,143

249,999
228,162
82,25047,90623,471
88,528407,151
1,127,469
209,192

2,436,188
1,771,940
723,237
436,464
179,846
853,7033,569,489
9,970,888
1,518,245

Non-operating income (expenses):
Interest income
Dividend income
Interest expenses
Gain on sales of flight equipment
Loss on sales and disposal of flight equipment
Loss on sales and disposal of supplies
Share of profit of entities accounted for using equity method
Foreign exchange gains (losses)
Compensation income
Compensation expenses
Subsidy income for aircraft purchase
Settlement of facility restitution
Loss on reduction of aircraft
Impairment loss (Note 15)
Other
Total non-operating income (expenses)
Profit before income taxes

874
979
(843)
1,875
(8,458)(1,837)
2,180
203
1,381
(1,285)
6,692—(6,959)(505)(1,853)(7,553)
162,778887
1,556(1,172)
5,798(3,978)(1,121)651(3,837)
2,193
—
7,063
2,201
(6,972)(2,714)(2,366)(1,810)207,381

7,790
8,726
(7,514)
16,712(75,389)(16,374)
19,431
1,809
12,309(11,453)
59,648—(62,028)(4,501)(16,516)(67,323)1,450,913

Income taxes—current (Note 12)
Income taxes—deferred (Note 12)
Total income taxes
Profit23,570(31,657)(8,087)
170,865

26,834(436)
26,398
180,983

210,090(282,173)(72,083)
1,522,996

Profit attributable to
Owners of parent
Non-controlling interests

164,174
6,690

174,468
6,514

1,463,356
59,630(971)
23,923(257)
16,152(9,461)(9,005)
4,588(55,877)(8,654)
213,236(2,290)143,970308
39,155210,021(453)(70,209)110,773

2,745
349,006
1,872,011

203,331¥    6,689

104,323¥    6,449

1,812,380$    59,622

Comprehensive income attributable to
Owners of parent
Non-controlling interests

Shareholders’ equity

2017273,316
198,794
81,14048,967
20,177
95,777400,461
1,118,634
170,332

Other comprehensive income (Note 14)
Valuation difference on available-for-sale securities
Deferred gains (losses) on hedges
Foreign currency translation adjustment
Remeasurements of defined benefit plans, net of tax
Share of other comprehensive income of entities accounted forusing equity method
Total other comprehensive income
Comprehensive income

Millions of yen

Thousands of
U.S. dollars (Note 4)

Millions of yen

Balance at April 1, 2015
Changes of items during period
Dividends of surplus
Profit attributable to owners of parent
Net changes of items other thanshareholders’ equity
Total changes of items during period
Balance at March 31, 2016

Common stock

Capital surplus

Retained earnings

Treasury shares¥181,352¥183,042¥421,137¥(538)

Total
shareholders’ equity¥784,992(37,700)
174,468—¥181,352—¥183,042

136,768¥557,905(37,700)
174,468—¥(538)

136,768¥921,761

Accumulated other comprehensive income
Valuationdifference on
available-for-salesecurities

Balance at April 1, 2015
Changes of items during period
Dividends of surplus
Profit attributable to owners of parent
Net changes of items other thanshareholders’ equity
Total changes of items during period
Balance at March 31, 2016¥24,334

Deferred
losseson hedges¥(15,612)

Foreigncurrencytranslation
adjustment¥(4,101)

Remeasurements ofdefinedbenefit plans¥(13,136)

Total
accumulated
othercomprehensive
incomeNoncontrollinginterests

Total
net assets¥ (8,516)¥24,275¥800,751(37,700)
174,468(9,566)(9,566)¥14,767(9,165)(9,165)¥(24,777)

4,529
4,529
¥ 427

(55,942)(55,942)¥(69,079)(70,145)(70,145)¥(78,662)

3,182
3,182
¥27,457(66,962)
69,805¥870,557

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

100 J A L R E P O R T 2 0 1 7

J A L R E P O R T 2 0 1 7 101

I

Ⅱ

The JAL Group’s Growth Story

Management Strategies
Designed to Create Value

Ⅲ

Performance and Strategies
by BusinessⅣ

A Business Base that Supports
Value Creation

Financial / Data Section

CONSOLIDATED FINANCIAL STATEMENTS

Consolidated Statements of Cash Flows
Japan Airlines Co., Ltd. and Consolidated Subsidiaries
Millions of yen
Shareholders’ equity

Balance at April 1, 2016
Changes of items during period
Dividends of surplus
Profit attributable to owners of parent
Purchase of treasury shares
Retirement of treasury shares
Changes of scope of equity method, etc.
Net changes of items other thanshareholders’ equity
Total changes of items during period
Balance at March 31, 2017

Common stock

Capital surplus

Retained earnings

Treasury shares

Total shareholders’equity¥181,352¥183,042¥557,905¥   (538)¥  921,761

4(29,944)(934)(29,944)
29,944
7(43,500)
164,174(29,944)—(922)

4¥183,047

89,795¥647,7017¥   (531)

89,808¥1,011,569(43,500)
164,174—¥181,352

Accumulated other comprehensive income
Valuationdifference on
available-for-salesecurities

Balance at April 1, 2016
Changes of items during period
Dividends of surplus
Profit attributable to owners of parent
Purchase of treasury shares
Retirement of treasury shares
Changes of scope of equity method, etc.
Net changes of items other thanshareholders’ equity
Total changes of items during period
Balance at March 31, 2017¥14,767

Deferred
losseson hedges¥(24,777)

Foreigncurrencytranslation
adjustment¥ 427

Remeasurements ofdefinedbenefit plans¥(69,079)

Total
accumulated
othercomprehensive
incomeNoncontrollinginterests

Total
net assets¥(78,662)¥27,457¥  870,557(43,500)
164,174(29,944)
—
(922)

(938)
(938)
¥13,828

24,11024,110¥   (667)

(195)
(195)
¥ 232

16,181
16,181¥(52,898)

39,15739,157¥(39,504)

3,870
3,870
¥31,328

43,027
132,835¥1,003,393

Thousands of U.S. dollars (Note 4)
Shareholders’ equity

Balance at April 1, 2016
Changes of items during period
Dividends of surplus
Profit attributable to owners of parent
Purchase of treasury shares
Retirement of treasury shares
Changes of scope of equity method, etc.
Net changes of items other thanshareholders’ equity
Total changes of items during period
Balance at March 31, 2017

Common stock

Capital surplus

Retained earnings

Treasury shares

Total
shareholders’ equity$1,616,472$1,631,535$4,972,858$  (4,795)$8,216,070

35(266,904)(8,325)(266,904)
266,90462(387,735)
1,463,356(266,904)—(8,218)35$1,631,580

800,383$5,773,250

62$  (4,733)

800,499$9,016,570(387,735)
1,463,356—$1,616,472

Accumulated other comprehensive income

Balance at April 1, 2016
Changes of items during period
Dividends of surplus
Profit attributable to owners of parent
Purchase of treasury shares
Retirement of treasury shares
Changes of scope of equity method, etc.
Net changes of items other thanshareholders’ equity
Total changes of items during period
Balance at March 31, 2017

Valuationdifference on
available-for-salesecurities

Deferred
losseson hedges

Foreigncurrencytranslation
adjustment

Remeasurements ofdefinedbenefit plans

Total
accumulated
othercomprehensive
income$131,624$(220,848)$ 3,806$(615,732)$(701,149) $244,736

Total
net assets$7,759,666(387,735)
1,463,356(266,904)—(8,218)(8,360)(8,360)$123,255

214,903214,903$  (5,945)(1,738)(1,738)$ 2,067

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

102 J A L R E P O R T 2 0 1 7

Noncontrollinginterests

144,228
144,228$(471,503)

349,023
34,495
349,023
34,495$(352,116) $279,240

383,519
1,184,018$8,943,693

Thousands of
U.S. dollars (Note 4)

Millions of yen
Years ended March 31

Cash flows from operating activities
Profit before income taxes
Adjustments to reconcile profit before income taxes to
net cash provided by operating activities:
Depreciation and amortization
Loss on sales and disposal of non-current assets andimpairment loss
Decrease in net defined benefit liability
Interest and dividend income
Interest expenses
Foreign exchange gains
Share of profit of entities accounted for using equity method
Decrease (increase) in notes and operating accounts receivable
Increase in flight equipment spare parts and supplies
Increase in operating accounts payable
Other, net
SubtotalInterest and dividend income received
Interest expenses paid
Proceeds from settlement of facility reconstitution
Income taxes paid
Net cash provided by operating activities
Cash flows from investing activities
Payments into time deposits
Proceeds from withdrawal of time deposits
Purchase of non-current assets
Proceeds from sales of non-current assets
Purchase of investment securities
Proceeds from sales and redemption of investment securities
Proceeds from purchase of shares of subsidiaries resulting
in change in scope of consolidation
Payments of loans receivableCollection of loans receivable
Other, net
Net cash used in investing activities
Cash flows from financing activities
Net increase (decrease) in short-term loans payable
Proceeds from long-term loans payable
Repayments of long-term loans payable
Proceeds from issuance of bonds
Purchase of treasury shares
Cash dividends paid
Dividends paid to non-controlling interests
Repayments for lease obligations
Net cash used in financing activities
Effect of exchange rate change on cash and cash equivalents
Net increase (decrease) in cash and cash equivalents
Cash and cash equivalents at beginning of period
Increase in cash and cash equivalents resulting from merger
Decrease in cash and cash equivalents resulting from exclusionof subsidiaries from consolidation
Cash and cash equivalents at end of period (Note 5)

2017

2016

2017

¥ 162,778¥ 207,381$ 1,450,913

95,77788,528853,703

6,459(3,589)(1,854)843(8)(2,180)(14,609)(801)
13,952
27,974
284,742
2,312
(862)
—
(33,039)
253,1533,526(10,741)(2,444)
1,172
(421)
(651)
14,193(449)
731
21,152321,977
2,975(1,259)2,190(13,489)
312,394

57,571(31,990)(16,525)
7,514(71)(19,431)(130,216)(7,139)124,360
249,3442,538,033
20,607(7,683)—(294,491)
2,256,466(363,892)
411,381(233,125)
8,427
(342)
1,134

(400,309)
318,607(210,660)
7,642(6,345)273(3,243,533)
3,666,824(2,077,948)
75,113(3,048)
10,107

—
(386)
1,485
7,239
(168,077)

39
(319)
1,669
486
(288,915)—(3,440)13,23664,524(1,498,146)(360)
27,895(11,169)
19,875(29,992)(43,481)(2,807)(13,491)(53,531)(292)
31,251
92,951
58

5,686
19,002(7,952)——(37,695)(3,264)(25,411)(49,636)(141)(26,299)
119,287—(3,208)248,640(99,554)
177,154(267,332)(387,565)(25,020)(120,251)(477,145)(2,602)
278,554828,514516—¥ 124,261(36)¥ 92,951—$ 1,107,594

The accompanying notes are an integral part of these consolidated financial statements.
J A L R E P O R T 2 0 1 7 103

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The JAL Group’s Growth Story

Management Strategies
Designed to Create Value

Ⅲ

Ⅳ

Performance and Strategies
by Business

A Business Base that Supports
Value Creation

Financial / Data Section

CONSOLIDATED FINANCIAL STATEMENTS

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
and prepare their financial statements in accordance withaccounting principles generally accepted in Japan, which
are different in certain respects as to the application anddisclosure requirements of International Financial ReportingStandards. The accompanying consolidated financial statements have been compiled from the consolidated financial
statements filed with the appropriate Local Finance Bureauof the Ministry of Finance as required by the Financial
Instruments and Exchange Act of Japan and include certain
additional financial information for the convenience ofreaders outside Japan. Some supplementary information
included in the statutory Japanese language consolidated
financial statements, but not required for fair presentation,
is not presented in the accompanying consolidated
financial statements.
As permitted by the Financial Instruments and Exchange
Act of Japan, amounts of less than one million yen havebeen 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 theindividual amounts.
Certain amounts previously reported have been reclassified
to conform 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
the accounts of the Company and all significant subsidiaries
controlled directly or indirectly by the Company. Companies
over which the Company exercises significant influence interms of their operating and financial policies have been
included in the accompanying consolidated financial
statements on the equity basis.
The balance sheet date of 6 of the consolidated subsidiaries
is December 31. Any significant differences in intercompany
accounts and transactions arising from intervening intercompany transactions during the period between the balance
sheet date of each subsidiary and the consolidated balance
sheet date have been adjusted, if necessary. The differences
between the acquisition and the fair value of the net assets
at the respective dates of acquisition of the consolidated
subsidiaries and companies accounted for by the equity

104 J A L R E P O R T 2 0 1 7

method are recorded as goodwill amortized by the straight-line
method over a period of 3 to 5 years.
All significant intercompany accounts and transactions
and unrealized gain or loss on intercompany accounts andtransactions are eliminated in consolidation.
b. Securities
Securities, except for investment securities of non-consolidated
subsidiaries and affiliates, are classified as trading securities,
held-to-maturity securities, or other securities. Trading securities are carried at fair value. Held-to-maturity securities arecarried at amortized cost. Marketable securities classified asother securities are carried at fair value with any unrealized
gain or loss reported as a separate component of net assets,
net of taxes. Non-marketable securities classified as othersecurities are carried at cost. Cost of securities sold isdetermined principally by the moving-average method.
c. Inventories
Inventories are valued at the lower of cost and net
realizable value with cost determined principally by themoving-average method.
d. Tangible Fixed Assets (excluding leased assets)
Tangible fixed assets, excluding leased assets, are stated atcost, net of accumulated depreciation, and accumulated
impairment losses, if any, except as indicated in thefollowing paragraph.
Accumulated depreciation of tangible fixed assets on
March 31, 2017 and 2016 amounted to ¥395,080 million($3,521,525 thousand) and ¥364,355 million, respectively.
Depreciation of tangible fixed assets is computed
as follows:
Flight equipment: the straight-line method based on
its estimated useful life
Other: principally the straight-line method based on
the estimated useful lives of the respective assets
The estimated useful lives are principally as follows:
Flight equipment: from 12 to 20 years
Other: from 2 to 65 years
e. Software (excluding leased assets)
Computer software intended for internal use is amortizedby the straight-line method based on its estimated useful life
which is principally 5 years.

f. Leased Assets
Depreciation of leased assets is computed as follows:
Leased assets arising from finance lease transactions thattransfer the ownership of leased assets to the lessee aredepreciated by the same method applied to assets arisingfrom purchase transactions.
Leased assets under finance lease transactions that do
not transfer the ownership to the lessee are depreciated to aresidual value of zero by the straight-line method using thelease term as the useful life.
g. Allowance for Doubtful Accounts
General provision for doubtful accounts is provided byapplying a reserve percentage to receivables based on
experience from past transactions. When considered necessary, specific reserves are made based on the assessment of
individual accounts.
h. Accounting Method for Retirement Benefits
In calculating the retirement benefit obligation, the methodof attributing expected benefits to the accounting period
is principally based on the benefit formula.
Actuarial gain and loss are amortized by the straight-line
method over a period ranging from 5 to 17 years, which isless than the average remaining years of service of the active
participants in the plans. Amortization is computed from thefiscal 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 isamortized by the straight-line method over a period whichis less than the average remaining years of service of theactive participants in the plans.
i. Reserve for Loss on Antitrust Litigation
Estimated future loss is accrued in order to provide forpenalties and compensation potentially arising fromprice cartels..
j. Foreign Currency Translation
Revenues and expenses in foreign currencies are translated
at the rates prevailing at the time of the transaction. Except
as noted in k. Derivatives and Hedge Accounting, foreign
currency receivables and payables are translated into yen at
the applicable year-end foreign exchange rates and any gainor loss on translation is included in current earnings.

Differences arising from the translation of assets, liabilities,
revenues, and expenses of foreign consolidated subsidiaries
and entities accounted for using the equity method into
yen at the applicable exchange rates at the year-end arepresented as foreign currency translation adjustments andnon-controlling interests in a component of net assets.
k. Derivatives and Hedge Accounting
Derivatives positions are stated at fair value.
Gains or losses on derivatives designated as hedging
instruments are deferred until the gains or losses on theunderlying hedged items are recognized with any unrealized
gains or losses reported as a separate component of net
assets, net of taxes. Foreign currency receivables and payables
are translated at the applicable forward foreign exchange
rates if certain conditions are met.
l. Revenue Recognition
Passenger and cargo revenues are recognized when thetransportation services are rendered.
m. Income Taxes
Deferred tax assets and liabilities are recognized for
expected future tax consequences attributable to temporary
differences between the financial statement carrying
amounts of existing assets and liabilities and their respective
tax basis, and operating loss and tax credit carryforwards.
Valuation allowance is recorded to reduce deferred tax
assets to their net realizable value if it is more likely than notthat some portion or all of the deferred tax assets will not
be realized.
The Company and certain domestic consolidated subsidiaries file tax returns under the Japanese consolidated
corporate tax system.
n. Cash Equivalents
Cash equivalents are defined as highly liquid, short-term
investments with an original maturity of 3 months or less.
3. CHANGES IN ACCOUNTING POLICY/CHANGESIN PRESENTATION
For the fiscal year ended March 31, 2016
(Changes in accordance with the application of “Revised
Accounting Standard for Business Combinations” andother standards)
The presentation of profit was amended and the reference
to “minority interests” was changed to “non-controlling
J A L R E P O R T 2 0 1 7 105

IⅡThe JAL Group’s Growth Story

Ⅲ

Management Strategies
Designed to Create Value

Ⅳ

Performance and Strategies
by Business

A Business Base that Supports
Value Creation

Financial / Data Section

CONSOLIDATED FINANCIAL STATEMENTS

interests” in accordance with Article 39 of “Revised
Accounting Standard for Consolidated Financial Statements”(ABSJ Statement No. 22, September 13, 2013) and others. To
reflect these changes in presentation, consolidated statementsof the prior year presented herein were reclassified.
For the fiscal year ended March 31, 2017
(Changes in depreciation method)
Due to amendments to the Japanese Corporation Tax Act,
the Company and its consolidated domestic subsidiaries
adopted “Practical Solution on a change in depreciation
method due to Tax Reform 2016” (Practical Issue Task Force
No. 32, June 17, 2016) from the current fiscal year. According
to this adoption, some consolidated domestic subsidiaries of
the Company changed the depreciation method of facilities
attached to buildings and structures acquired since April 1,2016 from the declining-balance method to the straight-line
method. The impact on the consolidated statements
is immaterial.
4. U.S. DOLLAR AMOUNTS
Amounts in U.S. dollars are included solely for the convenience of the reader. A rate of JPY 112.19 = USD 1.00, theapproximate exchange rate prevailing on March 31, 2017,has been used in translation. The convenience translations
should not be construed as representations that the Japanese
yen amounts have been, could have been, or could in the
future be, converted into U.S. dollars at this or any otherrate of exchange.
5. CASH AND CASH EQUIVALENTS
The components of cash and cash equivalents in the accompanying consolidated statements of cash flows at March 31,2017 and 2016 were as follows:
Thousands of
U.S. dollars

Millions of yen
2017

2016

2017

¥392,075¥420,333$3,494,741

12,000—106,961

Time deposits with a maturityof more than three months(279,813)(327,382)(2,494,099)

Cash and cash equivalents¥124,261¥92,951$1,107,594

As of March 31

Cash and deposits
Securities

106 J A L R E P O R T 2 0 1 7

6. INVESTMENT SECURITIES OF NON-CONSOLIDATEDSUBSIDIARIES AND AFFILIATES
Investment securities of non-consolidated subsidiaries andaffiliates which were included in “Investment securities” in the
consolidated balance sheets on March 31, 2017 and 2016
amounted to ¥35,244 million ($314,145 thousand) and¥39,431 million, respectively. Bonds of affiliates which were
included in “Investment securities” in the consolidated balance
sheets on March 31, 2017 and 2016 amounted to ¥3,330
million ($29,681 thousand) and ¥3,330 million, respectively.
7. FAIR VALUES OF FINANCIAL INSTRUMENTS
The Company and its consolidated subsidiaries (the “JALGroup”) manage its financial instruments to raise funds,
principally for the purpose of flight equipment and facilities
in accordance with management plans for air transportation,utilizing loans from financial institutions, issuance of bonds,
finance lease transactions, and derivatives. Funds fromshort-term loans payable are utilized for ordinary operations.
Funds from long-term loans payable and finance lease transactions are utilized for flight equipment and facilities.
Derivatives are utilized for the purpose of reducing the riskof fluctuations of interest rates and foreign currency
exchange rates, not for the purpose of speculation.
With respect to operating accounts receivable, the JAL
Group exercises due date management and outstandingbalance management in accordance with internal policies.
The JAL Group makes its best efforts to identify and mitigate
risks of bad debt from major customers with financial difficulties by periodically monitoring their creditworthiness.
Securities and investment securities are composed mainly ofshares of companies with which the JAL Group has business
relationships. The JAL Group reviews the fair values of suchfinancial instruments and the financial position of the issuers
periodically in order to identify and mitigate risks of impairment. Most operating accounts payable are due within one
year. As for derivatives, the JAL Group believes that thecredit risks are extremely low, as it enters into derivativetransactions only with reputable financial institutions witha sound credit profile.
The Company utilizes derivatives in order to mitigate
the risks of fluctuations in interest rates and foreign currency
exchange rates on receivables and payables. The JAL Grouputilizes currency options to reduce the risk of foreign
currency exchange rate fluctuations for specific foreigncurrency-denominated receivables and payables, mainly forfuel purchase payables.

The JAL Group also utilizes commodity derivatives inorder to mitigate the risk of fluctuations in commodity
prices of fuel and stabilize such fuel costs.
There are internal policies for derivative transactions
which set forth authorization levels and upper limits ontransaction volumes and the JAL Group enters into derivative transactions in accordance with such policies. Moreover,monthly meetings are held with the attendance of board
members responsible for derivatives to determine methods
and ratios for minimizing risks as well as to report andconfirm results of derivative transactions.
The fair value of financial instruments is based on thequoted market price, when it is available. When there is nomarket price available, fair value is reasonably estimated.
Since various assumptions and factors are reflected in estimating the fair value, different assumptions and factors
could result in a different fair value.
The book value of financial instruments in the consolidated balance sheets, their fair value and the differences asof March 31, 2017 and 2016 were as follows:Book value

Fair value

Difference(1) Cash and deposits$3,494,741$3,494,741$—(2) Notes and operating
accounts receivable

1,272,350

1,272,350—

11,346

Assets(3) Securities and investment
securities(i) Investment securities
of non-consolidated
subsidiaries and affiliates

140,253

151,608(ii) Other investment securities

416,463

416,463—

5,323,825

5,335,181

11,346(1) Operating accounts payable

1,419,181

1,419,181—(2) Short-term loans payable

47,88347,883

—
115

Total
Liabilities(3) Bonds payable

178,269

178,384(4) Long-term loans payable

702,727

702,727—(5) Lease obligations

98,154

98,154—(6) Long-term accounts payable—
installment purchase

7,549

7,549

—

Total

2,453,783

2,453,899

115

Derivatives*$(5,241)$(4,902)$329* Derivatives assets and liabilities are stated on a net basis, and net liabilities are
enclosed in parentheses.

Millions of yen
As of March 31, 2017

Thousands of U.S. dollars
As of March 31, 2017

Book value

Fair value

Difference¥392,075¥392,075¥—

Assets(1) Cash and deposits(2) Notes and operating
accounts receivable

Millions of yen
As of March 31, 2016

Book value

Fair value

Difference(1) Cash and deposits¥420,333¥420,333¥—(2) Notes and operating
accounts receivable

128,148

128,148—(1,787)

Assets142,745

142,745—(3) Securities and investment
securities(3) Securities and investment
securities(i) Investment securities
of non-consolidated
subsidiaries and affiliates

15,73517,0091,273(ii) Other investment securities

46,723

46,723—

Total

597,280

598,5541,273(i) Investment securities
of non-consolidated
subsidiaries and affiliates

14,87813,090Liabilities(ii) Other investment securities

36,12936,129—599,490597,702(1,787)(1) Operating accounts payable

159,218

159,218—

Total(2) Short-term loans payable

5,372

5,372

—

Liabilities(3) Bonds payable

20,00020,013

13(1) Operating accounts payable

145,413

145,413

—

5,792

5,792

—

—

—

—

(4) Long-term loans payable

78,83978,839—(2) Short-term loans payable(5) Lease obligations

11,012

11,012—(3) Bonds payable(4) Long-term loans payable

62,18362,183

—

847

847

—

(5) Lease obligations

23,627

23,627—(6) Long-term accounts payable—
installment purchase(6) Long-term accounts payable—
installment purchaseTotal

275,290

275,303

13

Derivatives*¥(588)¥(550)¥37* Derivatives assets and liabilities are stated on a net basis, and net liabilities are
enclosed in parentheses.

1,025

1,025

—

Total

238,043

238,043—

Derivatives*¥(29,571)¥(29,672)¥  (100)* Derivatives assets and liabilities are stated on a net basis, and net liabilities are
enclosed in parentheses.

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The JAL Group’s Growth Story

Ⅲ

Management Strategies
Designed to Create Value

Ⅳ

Performance and Strategies
by Business

A Business Base that Supports
Value Creation

Financial / Data Section

CONSOLIDATED FINANCIAL STATEMENTS(i)

Methods of calculating the fair value of financial
instruments, including securities and derivatives
transactions
Assets(1) C ash and deposits and (2) Notes and operating accounts
receivable
The fair value equates to the book value due to theshort-term nature of these instruments.
(3) S ecurities and investment securities
The fair value of securities is determined mainly based on
the market price. These investment securities aredescribed further in “Note 8. INVESTMENT SECURITIES.”
Liabilities(1) O perating accounts payable and (2) Short-term loans
payableThe fair value equates to the book value due to theshort-term nature of these instruments.
(3) B onds payable
The fair value of bonds payable is determined based on
the market price.
(4) L ong-term loans payable, (5) Lease obligations, and (6)Long-term accounts payable—installment purchase
The fair value of long-term loans payable, lease obligations, and long-term accounts payable—installment
purchase with fixed interest rates is based on the present
value of future cash flows discounted using the current
borrowing rate for similar debt of a comparable maturity.
Derivatives
Derivatives are described further in “Note 9. DERIVATIVESAND HEDGING ACTIVITIES.”(ii) Financial instruments for which the fair value isextremely difficult to measure
Millions of yen

Thousands of
U.S. dollars

2017

2016

2017

Investment securities of
non-consolidated subsidiaries
and affiliates¥19,509¥24,552$173,892

Held-to-maturity securities

3,330

3,330

29,681Other securities

9,381

6,040

83,617

As of March 31

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 thefair value.

108 J A L R E P O R T 2 0 1 7(iii) Redemption schedule for monetary claims andsecurities with maturity date subsequent to theconsolidated balance sheet dateMillions of yen
More than
one year,withinfive years

More than
five years,
withinten years

More thanten years

As of March 31, 2017

Withinone year

Cash and deposits¥392,075

¥—

¥—

¥—

Notes and operating
accounts receivable

142,745———

Investment securities
Negotiable certificatesof deposit

Millions of yen
As of March 31, 2017

12,000

—

—

—

—

—

—

3,330

Held-to-maturity
securities

StocksMore than
five years,
withinten years

More thanten years

As of March 31, 2017

Withinone year

Cash and deposits$3,494,741

$—

$—

$—

Notes and operating
accounts receivable

1,272,350———

Investment securities
106,961

—

—

—

—

—

—

29,681¥15,410¥34,229¥18,819

15,41034,22918,819

499

493

(6)

12,00012,000—12,49912,493(6)

Total¥27,910¥46,723¥18,813

As of March 31, 2017

Acquisition
cost

Carrying
value

Unrealized
gain (loss)$137,356$305,098$167,742

137,356

305,098

167,742(53)

Thousands of U.S. dollars

Stocks
Unrealized loss:

4,447

4,394

106,961

106,961—

111,409111,355

(53)

Total

$248,774$416,463$167,688

As of March 31, 2016

Acquisition
cost

Carrying
value

Unrealized
gain (loss)¥15,870¥36,095¥20,225

15,87036,095

20,225

40

33

(6)

40

33

(6)

¥15,910¥36,129¥20,218

Stocks
Negotiable certificates of deposit

Millions of yen

As of March 31, 2016

Withinone year

Cash and deposits¥420,333
128,148More than
one year,withinfive years

More than
five years,
withinten years

More thanten years

¥—

¥—

¥—

—

—

—

9. DERIVATIVES AND HEDGING ACTIVITIES
Certain consolidated subsidiaries utilize forward foreignexchange contracts and currency options on a consistentbasis to hedge certain foreign currency transactions related
to foreign purchase commitments, principally for flightequipment and foreign accounts 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 theinternal guidelines and strategies established by management. The routine operations of the department which is
responsible for hedging transactions are examined by otherdepartments. Gains and losses on hedging instruments andthe assessment of hedge effectiveness, which are performed
both at inception and on an ongoing basis, are reported atmeetings of the related department managers on a timely
basis. Other consolidated subsidiaries have adopted procedures for hedging transactions which are more simplified
than those adopted by the Company.
The contract amount and the estimated fair value of theopen derivatives positions on March 31, 2017 and 2016,
which met the criteria required for the application of hedge
accounting, are summarized as follows:

Millions of yen

Unrealized gain:

Investment securities
Held-to-maturity
securities

Unrealized
gain (loss)

Unrealized gain:

Held-to-maturity
securities

Notes and operating
accounts receivable

Carrying
value

Unrealized loss:
Negotiable certificates of deposit

More than
one year,withinfive years

Acquisition
cost

Unrealized gain:

StocksThousands of U.S. dollars

Negotiable certificatesof deposit

8. INVESTMENT SECURITIESNo trading securities were held on March 31, 2017 and2016. Securities classified as other securities are included in“Investment securities” in the accompanying consolidatedbalance sheets.
The components of unrealized gain or loss on marketable securities classified as other securities on March 31,2017 and 2016 were summarized as follows:

Stocks
—

—

—

3,330
Unrealized loss:

The redemption schedule for short-term and long-term debt
subsequent to the consolidated balance sheet date is
described in “Note 10. SHORT-TERM LOANS PAYABLE AND
LONG-TERM DEBT.”

Stocks
Total

Proceeds from sales of securities classified as other securities
for the year ended March 31, 2016 amounted to ¥273
million. For the year ended March 31, 2016, the aggregate
gain realized on those sales totaled ¥265 million. Neither ofthem was applicable for the year ended March 31, 2017.

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The JAL Group’s Growth Story

Ⅲ

Management Strategies
Designed to Create Value

Ⅳ

Performance and Strategies
by Business

A Business Base that Supports
Value Creation

Financial / Data Section

CONSOLIDATED FINANCIAL STATEMENTS

As of March 31, 2017

Millions of yen

Thousands of U.S. dollars

Contract amountType of derivative

Major hedged items

Forward foreign currency exchange contracts:
Buy:
USD
Operating accounts payable
EUR
Operating accounts payable
OthersOperating accounts payable
Currencies options:
Buy:
Call option
Operating accounts payableSell:
Put option
Operating accounts payable
Commodity swap:
Received variable/pay fixed
Aircraft fuelMethod of hedge accounting: Special treatment (Note 2. k)
Forward foreign currency exchange contracts:
Buy:
USD
Operating accounts payable
EUR
Operating accounts payable
OthersOperating accounts payable
Total

Contract amount

Total

Maturing
after 1 year

Estimated
fair value

Total

Maturing
after 1 year

Estimated
fair value¥36,805
2,020
1,330

¥ 4,548——¥1,19744
84$328,059
18,005
11,854$ 40,538——$10,669
392
748

67,232

17,3181,918

599,269

154,363

17,09560,885

15,129(1,268)542,695

134,851(11,302)

68,35918,550(2,565)609,314

165,344(22,863)

593
305
80

—
—
—

40
(7)
4
¥  (550)

5,285
2,718
713

—
—
—

356
(62)
35
$ (4,902)

Millions of yen
Contract amount

Forward foreign currency exchange contracts:
Buy:
USD
Operating accounts payable
EUR
Operating accounts payable
OthersOperating accounts payable
Currencies options:
Buy:
Call option
Operating accounts payableSell:
Put option
Operating accounts payable
Commodity swap:
Received variable/pay fixed
Aircraft fuelMethod of hedge accounting: Special treatment (Note 2. k)
Forward foreign currency exchange contracts:
Buy:
USD
Operating accounts payable
EUR
Operating accounts payable
OthersOperating accounts payable
Total

Total

Maturing
after 1 year

Estimated
fair value¥53,335
3,176
1,182

¥ 1,801——¥ (3,146)
(149)
(62)

85,23823,6501,890

78,87521,322(3,089)77,531

21,620(25,013)

1,166
217
157

—
—
—

(75)
(11)
(13)
¥(29,672)

All derivative transactions were conducted as over-the-counter transactions. Fair value is estimated based on prices quoted byfinancial institutions and others.

110 J A L R E P O R T 2 0 1 7

Weightedaverageinterest rate
2017

2017

2016

2017

Current portion of
long-term loans
payable¥ 13,037¥10,851$116,204

0.8%

Long-term loans
payable (excluding
current portion) due
2018 to 2030

65,802

51,331

586,5220.5%

Current portion oflease obligations

5,712

13,25450,9130.8%

Lease obligations(excluding current
portion) due 2018
to 2026

5,300

10,37347,241

2.0%

Current portion of
long-term accounts
payable—installment
purchase

181

178

1,613

2.0%

Long-term accounts
payable—installment
purchase (excluding
current portion)due 2021

666

847

5,936

2.0%

20,000—178,269

0.3%¥110,699¥86,837$986,710

As of March 31

Lease obligations:

As of March 31, 2016

Major hedged items

Millions of yen

Thousands of
U.S. dollars

Long-term loans:

All derivative transactions were conducted as over-the-counter transactions. Fair value is estimated based on prices quoted byfinancial institutions and others.

Type of derivative

10. SHORT-TERM LOANS PAYABLE AND LONG-TERM DEBT
The weighted-average interest rate for short-term loans
payable outstanding on March 31, 2017 was 1.0%. Long-term
debt on March 31, 2017 and 2016 consisted of the following:

Long-term accounts
payable—installment
purchase:

Bonds payable
Bonds payable due
2021 to 2026
Total

The aggregate annual maturities of long-term debt within
5 years subsequent to March 31, 2017 are summarized
as follows:Year ending March 31

Millions ofyen

Thousands of
U.S. dollars

2018¥ 18,931$168,740

2019

11,888105,963

2020

10,87496,924

2021

8,870

79,0622022

17,835

158,9712023 and thereafter
Total

42,298377,021¥110,699$986,710

Assets pledged as collateral as of March 31, 2017 for longterm and short-term debt of ¥76,012 million ($677,529
thousand) are flight equipment and others totaling¥155,401 million ($1,385,159 thousand). Assets pledged ascollateral as of March 31, 2016 for long-term and short-term
debt of ¥58,333 million are flight equipment and others
totaling ¥145,192 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 derivative transactions.
The Company entered into loan commitment agreements
amounting to ¥50,000 million ($445,672 thousand) withthree banks. There were no loan payables outstanding on
March 31, 2017 under these loan commitment agreements.
11. RETIREMENT BENEFIT PLANS
Outline of Current Retirement Benefit System
An employee whose employment is terminated is entitled, inmost cases, to pension annuity payments or to a lump-sum
severance payment determined by reference to the employee’s
basic rate of pay, length of service, and the conditions underwhich the termination occurs.
The Company and certain significant domestic consolidated subsidiaries have established contributory defined
benefit pension plans such as corporate pension funds andlump-sum severance indemnity plans. In certain cases,
additional severance payments may be provided.
As of March 31, 2017, the Company and 39 consolidated subsidiaries had adopted a lump-sum severance
indemnity plan. Additionally, there were 3 corporate pension
funds, including the Japan Airlines Welfare Pension Fund.
Certain foreign subsidiaries have also established contributory
defined benefit pension plans.
The Japan Airlines Welfare Pension Fund also introduced
an option similar to a cash-balance plan as well as otheralternatives. The JAL Group Pension Fund, which was established by certain consolidated subsidiaries, introduced acash-balance plan option.
Some of the consolidated subsidiaries adopt the simplified
method for the calculation of retirement benefit obligations.

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Ⅲ

Management Strategies
Designed to Create Value

Ⅳ

Performance and Strategies
by Business

A Business Base that Supports
Value Creation

Financial / Data Section

CONSOLIDATED FINANCIAL STATEMENTS

For the years ended March 31, 2017 and 2016
a. Defined benefit plans(1) B alances of retirement benefit obligations, excluding plans
adopting the simplified method(4) Reconciliation from retirement benefit obligations andplan assets to net defined benefit liability (asset)

Millions of yen
2017

2016

2017

¥473,346¥424,673$4,219,146

Service cost

12,736

12,851

113,521

Interest cost

3,497

3,200

31,170

Actuarial loss

12,84058,524

114,448

Benefit paid

(26,125)(25,858)(232,863)

Year ended March 31

Balance at beginning of period

Reclassification of retirement
benefit obligations due to thechange from simplified method

1,512

—

13,477

Other

(223)

(45)

(1,987)

Balance at end of period¥477,584¥473,346$4,256,921

Thousands of
U.S. dollars

Millions of yen
2017Year ended March 31
Thousands of
U.S. dollars

2017

2016

¥389,708¥390,109$3,473,642

Plan assets(245,737)(244,800)(2,190,364)

143,971

145,308

1,283,278

93,269Total net defined benefit
liability (asset)

237,240

235,220

2,114,626

Net defined benefit liability

238,481236,310

2,125,688

Net defined benefit asset(1,240)(1,090)(11,052)

Total net defined benefit
liability (asset)¥237,240¥235,220$2,114,626

Thousands of
U.S. dollars

Millions of yen
Thousands of
U.S. dollars

Millions of yen
Year ended March 31

2017

2016

2017

Balance at beginning of period¥240,874¥238,110$2,147,018

Expected return on plan assets

3,669

3,646

32,703

Actuarial gain

1,126

653

10,036

Contributions paid by the employer

16,33818,012

145,627

Benefit paid

(19,666)(19,547)(175,291)

Reclassification of retirement
benefit obligations due to thechange from simplified method

280

—

2,495

Other

(221)

—

(1,969)¥242,402¥240,874$2,160,638

Balance at end of period

2017

2016

2017

Service cost

¥12,736¥12,851$113,521

Interest cost

3,497

3,200

31,170

Expected return on plan assets(3,669)(3,646)(32,703)

Past service costs amortization

(28)

(18)

(249)

Net actuarial loss amortization

6,442

1,366

57,420Year ended March 31

Retirement benefit cost basedon the simplified method

781

183

6,961

Other

(676)

(692)

(6,025)

Subtotal

19,083

13,244

170,095

70

—

623

¥19,153¥13,244$170,719

Reclassification of retirement benefit
obligations due to the change from
simplified method
Total(3) Reconciliation from retirement benefit obligations andplan assets to net defined benefit liability (asset), applying
the simplified method
Millions of yen
Year ended March 31

Balance at beginning of period
Retirement benefit cost¥(370)¥(399)$(3,297)

Actuarial losses that are yet
to be recognized

75,65670,385674,356

Total¥75,286¥69,986$671,058

Millions of yen(8) Plan assets
Year ended March 31

2017

2016

%

%

2017

2016

2017

Net defined benefit liability¥69,467¥71,370$619,190

Operating accounts payable

10,535

10,442

93,903

Non-recurring depreciation

3,918

3,148

34,922

Deferred liability on flightequipment

2,080

3,347

18,539Deferred losses on hedges

1,919

10,17017,104

1,788

1,885

15,937
11,970

As of March 31

Deferred tax assets:

General insurance fund90

91

Reserve for loss on antitrust
litigation

Bond

4

3

Lease obligations

1,343

4,323

Other

6

6

Asset retirement obligations

1,133

1,188

10,098

Total

100

100

176,161

197,977

1,570,202

Tax loss carryforwards

8,786

8,660

78,313

277,134

312,5132,470,220(197,685)(276,975)(1,762,055)

79,44935,538708,164

Valuation difference on
available-for-sale securities

5,722

6,167

51,002

Deferred gains on hedges

1,719

658

15,322

Leased assets

1,000

3,022

8,913

Other

2,638

3,150

23,513

Other

Current and target asset allocations, historical and expected
returns on various categories of plan assets have been considered in determining the long-term expected rate of return.
(9) Actuarial assumptions
Year ended March 31

2017

2016

%

%

Discount rate

0.4–1.2

0.6–1.2

Long-term expected rate of return

1.0–2.5

1.0–2.5

b. Defined contribution plans
The Company and its consolidated subsidiaries contributed
a total of ¥1,581 million ($14,092 thousand) and ¥1,564
million for the fiscal years ended March 31, 2017 and2016, respectively.

Valuation allowance
Deferred tax liabilities:

Net deferred tax assets

11,081

12,99898,769¥68,367¥22,539$609,385

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, 2017 and2016 were as follows:Year ended March 31

Thousands of
U.S. dollars

Thousands of
U.S. dollars

Millions of yen

2017

2016

%
Statutory rate

30.2

%
32.0

Year ended March 31

2017

2016

2017

¥2,748¥3,098$24,494

Past service costs¥   (28)¥    (18)$   (249)

Share of loss of entities accounted for using
equity method

(0.4)

(0.1)

781

183

6,961

Actuarial gains(5,271)(56,504)(46,982)

Changes in valuation allowance(36.6)(20.8)

Total¥(5,300)¥(56,522)$(47,241)

Decrease in deferred tax assets due to a change
in the tax rate

—

0.4

Other

1.8

1.2

Effective tax rate

(5.0)

12.7

(148)

(163)

(1,319)(235)(1,533)112 J A L R E P O R T 2 0 1 7

2017

2017

(172)

Balance at end of period

2016

2016

Contributions paid by the employer

Other

2017

12. INCOME TAX
The significant components of deferred tax assets andliabilities and the related valuation allowances on March 31,2017 and 2016 were as follows:

2017

Benefit paid
Reclassification of retirement benefit
obligations due to the change from
simplified method(6) Remeasurements of defined benefit plans in othercomprehensive income

Thousands of
U.S. dollars

Past service costs that are yet
to be recognized

831,348

89,911(5) Retirement benefit costs(2) Balances of plan assets, excluding plans adopting
the simplified method

Thousands of
U.S. dollars

Millions of yen
As of March 31

Funded retirement benefit
obligations

Unfunded retirement benefit
obligations(7) Remeasurements of defined benefit plans in accumulated
other comprehensive income(1,161)

—

11

(132)

(10,348)98¥2,059¥2,748$18,352

Income taxes in Japan applicable to the Company and its
domestic consolidated subsidiaries consist of corporation

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The JAL Group’s Growth Story

Ⅲ

Management Strategies
Designed to Create Value

Ⅳ

Performance and Strategies
by Business

A Business Base that Supports
Value Creation

Financial / Data Section

CONSOLIDATED FINANCIAL STATEMENTS

tax, inhabitants’ taxes, and enterprise tax. Income taxes offoreign consolidated subsidiaries are based generally on the
tax rates applicable in their countries of incorporation.
On March 29, 2016, amendments to the Japanese tax
regulations were promulgated. Based on the amendments,
the statutory income tax rates utilized for the measurementof deferred tax assets and liabilities expected to be settled orrealized from April 1, 2016 to March 31, 2018 and on orafter April 1, 2018 have changed from 31.5% to 30.2%
and 30.0%, respectively, as of March 31, 2016.
Due to these changes in statutory income tax rates, netdeferred tax assets (after deducting the deferred tax liabilities)
decreased by ¥963 million as of March 31, 2016, income
taxes—deferred expense recognized for the fiscal year
ended March 31, 2016 increased by ¥925 million, valuationdifference on available-for-sale securities increased by ¥308
million, deferred gains (losses) on hedges decreased by ¥327
million, and remeasurements of defined benefit plansdecreased by ¥20 million.
13. NET ASSETSThe Companies Act of Japan (the “Act”) provides that an
amount equal to at least 10% of the amount to be disbursed
as distributions of capital surplus (except for distributions
from additional paid-in capital) and retained earnings (except
for distributions from the legal reserve) be appropriated toadditional paid-in capital and the legal 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 a resolution of theshareholders, or by the Board of Directors if certain conditions are met, but neither additional paid-in capital nor thelegal reserve is available for distribution by resolution of theBoard of Directors.
A company may, by a resolution of its board of directors,
designate an amount not exceeding half of the price of newshares as additional paid-in capital, which is included in capitalsurplus. The maximum amount that a company can distributeas dividends is calculated based on its unconsolidated financial
statements in accordance with the Act.
At the annual shareholders’ meeting held on June 22,2017, the shareholders approved dividends of surplus
amounting to ¥33,236 million ($296,247 thousand). Suchappropriations have not been accrued in the Consolidated
Financial Statement as of March 31, 2017.

114 J A L R E P O R T 2 0 1 7The total number and changes in the total number ofshares of stock authorized and in issue and common stock intreasury for the year ended March 31, 2017 were as follows:

14. OTHER COMPREHENSIVE INCOME
Reclassification adjustments for each component of othercomprehensive income including tax effect for the years
ended March 31, 2017 and 2016 were as follows:

Thousands of sharesYear ended March 31, 2017

On April
1, 2016

Increase

Decrease

On March
31, 2017

Number of shares ofstock authorized:

Year ended March 31

Common stock

700,000——

Preferred stock

50,000——50,000750,000——

750,000

Total

700,000

Common stock
Total

Common stock2017

Unrealized holding gains arisingduring the period¥ (1,414)¥(14,159)$ (12,603)

—

—

—

—

8,988

353,715

Pre-tax amount(1,414)(14,159)(12,603)362,704—

8,988

353,715

Tax expense

443

4,697

3,948

Valuation difference on availablefor-sale securities, net(971)(9,461)(8,654)

203

8,988

8,991

199

203

8,988

8,911

199

The decrease in common stock of 8,988 thousand shares isdue to the retirement of treasury shares.
The increase in common stock in treasury of 8,988 thousand
shares is due to the purchase.
The decrease in common stock in treasury of 8,991 thousand shares consists of 8,988 thousand shares resulting
from the retirement of treasury shares and 3 thousand
shares due to the changes of scope of equity method, etc.
The total number and changes in the total number ofshares of stock authorized and in issue and common stock intreasury for the year ended March 31, 2016 were as follows:
Thousands of sharesYear ended March 31, 2016

2016

362,704

Number of shares of common
stock in treasury:
Total

2017

Valuation difference on availablefor-sale securities, net of taxes:

Less: Reclassification adjustment
included in profit

Number of shares of stockin issue:Thousands of
U.S. dollars

Millions of yen

On April
1, 2015

Increase

Decrease

On March
31, 2016

Number of shares ofstock authorized:

Deferred gains (losses) on hedges,
net of taxes:

Assets utilized in the Company’s andconsolidated subsidiaries’ operations

Deferred gains (losses) arisingduring the period

18,053

Less: Reclassification adjustment
included in profit(34,237)

160,914

13,59622,219121,187

Pre-tax amount

31,650(12,017)282,110

Tax expense (benefit)(7,726)

3,012(68,865)

Deferred gains (losses) onhedges, net of taxes

23,923(9,005)

213,236

Translation adjustment arisingduring the period

(257)

(247)

(2,290)Less: Reclassification adjustment
included in profit

—

4,836

—

Foreign currency translation
adjustment

(257)

4,588

(2,290)Foreign currency translation
adjustment:

Remeasurements of defined
benefit plans:Remeasurements of defined benefit
plans arising during the period(11,713)(57,871)(104,403)

Less: Reclassification adjustment
included in profit

6,413

1,348

57,161700,000——

700,000

Preferred stock

50,000——50,000750,000——

750,000

Pre-tax amount(5,300)(56,522)(47,241)Tax expense

21,453645

191,220362,704——

362,704

Remeasurements of defined
benefit plans

16,152(55,877)

143,970

362,704——

362,704

203

—

—

203

203

—

—

203

Number of shares of stockin issue:Common stock
Total
Number of shares of common
stock in treasury:
Common stock
Total

Assets to be soldShare of other comprehensive
income of entities accounted forby the equity method:
Share of other comprehensive
income of entities accounted
for by the equity method
arising during the period

308

(453)

2,745

Total other comprehensive income¥39,155¥(70,209)$349,006

Groups of assets

Locations

Flight equipment—

An impairment loss of ¥505 million ($4,501 thousand) was
recognized as non-operating expenses in the accompanying
consolidated statements of income and comprehensive
income for the year ended March 31, 2017.
The Company and certain consolidated subsidiaries haverecognized impairment loss on the following groups ofassets in the accompanying consolidated statements ofincome and comprehensive income for the year ended
March 31, 2016:
Assets utilized in the Company’s andconsolidated subsidiaries’ operations

Assets to be soldCommon stock
Total

15. IMPAIRMENT LOSS ON NON-CURRENT ASSETS
Assets are attributed or allocated to cash-generating units
which generated largely independent cash flows for calculating impairment loss. Assets to be sold and idle assets are
written down to their respective recoverable amounts.
The Company and its consolidated subsidiaries estimatedrecoverable amounts at the higher of fair value less costs tosell and value in use. Fair value is based on reasonable estimates made by the Company and its consolidated subsidiaries
in accordance with the contract amounts of sales for theperiods ended March 31, 2017 and 2016, respectively.
The Company has recognized impairment loss on thefollowing groups of assets in the accompanying consolidated
statements of income and comprehensive income for theyear ended March 31, 2017:

Groups of assets

Locations

Flight equipment—

An impairment loss of ¥2,714 million on flight equipment
was recognized mainly on flight equipment as non-operating
expenses in the accompanying consolidated statements ofincome and comprehensive income for the year ended
March 31, 2016.
16. LEASESAs Lessee
The following amounts represent the related lease expenses,
depreciation and interest expenses for the periods ended
March 31, 2016, which would have been reflected in theaccompanying consolidated balance sheets and the related
consolidated statements of income and comprehensive
income if finance lease accounting had been applied to the

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The JAL Group’s Growth Story

Ⅲ

Management Strategies
Designed to Create Value

Ⅳ

Performance and Strategies
by Business

A Business Base that Supports
Value Creation

Financial / Data Section

CONSOLIDATED FINANCIAL STATEMENTS

finance leases currently accounted for as operating leases
whose contracts were entered into prior to April 1, 2008:
Thousands of
U.S. dollars

Millions of yen
Year ended March 31

2017

2016

Lease expenses

¥—

¥2

2017

$—

Depreciation equivalent

—

2

—

Interest expenses equivalents

—

0

—

Depreciation equivalent is calculated by the straight-line
method on the assumption that the useful lives of therelated assets are the same as the lease term and the residual
value is zero.
Interest expenses equivalent is calculated on the assumption that the difference between aggregate lease rentals andthe acquisition cost of leased assets is deemed to be theinterest portion and is apportioned over the term of thelease by the interest method.
No impairment loss has been recognized on leased
property under finance leases accounted as operating leases
for the years ended March 31, 2017 and 2016.
Future rental expenses under noncancelable operatingleases outstanding on March 31, 2017 and 2016 wereas follows:

18. AMOUNTS PER SHARE
Basic earnings per share is computed based on the earnings
available for distribution to or allocable to the shareholdersof common stock and the weighted-average number ofshares of common stock outstanding during each year.
Diluted earnings per share are computed based on earnings
available for distribution to the shareholders and theweighted-average number of shares of common stock outstanding during each year after giving effect to the potentially dilutive securities to be issued upon the conversion of
convertible bonds. However, diluted earnings per share havenot been presented for the years ended March 31, 2017and 2016 since the Company had no equity instruments
issued that had a dilutive effect on earnings per share.
Yen
Year ended March 31

U.S. dollars

2017

2016

¥456.56¥481.29

Basic

Millions of yen
As of March 31

2017

2016

2017

Within 1 year

¥15,468¥19,015$137,873

Over 1 year

60,98377,900543,568

Total¥76,451¥96,915$681,442

17. CONTINGENT LIABILITIESOn March 31, 2017 and 2016, contingent liabilities forguarantees for bank loans of employees amounted to ¥150
million ($1,337 thousand) and ¥186 million, respectively.
On March 31, 2017, contingent liabilities for guarantees,
for lease obligations of Jetstar Japan Co., Ltd. amounted to¥4,400 million ($39,219 thousand).
The Company guarantees for damage resulting from a
breach of the obligation, assertion or guarantee on thecontract regarding stock transfer reservation concluded
between Fukuoka Airport Holdings Co., Ltd. (transferor) in
which the Company holds an investment and the Ministry ofLand, Infrastructure, Transport and Tourism Civil Aviation
Bureau (transferee), capped at ¥7,867 million ($70,122
thousand) on March 31, 2017.

116 J A L R E P O R T 2 0 1 7

Thousands of
U.S. dollars

Thousands of
U.S. dollars

2017

2016

2017

¥164,174¥174,468$1,463,356

Appropriations for payment ofpreferred dividend

—

—

—

¥164,174¥174,468$1,463,356

Thousands of sharesYear ended March 31

Weighted-average number of shares ofcommon stock outstanding

2017

2016

359,594362,500

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

Net assets per share of common stock

2016

2017

¥ 3,419$ 35,270

Increase due to purchases of tangible
fixed assets

10

484

89

Accretion due to the passage of time

55

54

490

Balance at beginning of period

Earnings (allocable to) available forshareholders of common stock:
Profit attributable to ownersof parent

2017¥ 3,957

Year ended March 31

The following table sets forth the computation of basic
earnings per share of common stock for the years ended
March 31, 2017 and 2016:

Year ended March 31

20. SEGMENT INFORMATIONThe reportable segments of the Company and its consolidated
subsidiaries are components for which discrete financial
information is available and whose operating results are
regularly reviewed by the Board of Directors to make decisions
about resource allocation and to assess performance. Air
transportation includes international and domestic passenger
operations, cargo operations and other transportation services.
The accounting policies of the segments are substantiallythe same as those described in the significant accounting
policies in Note 2. Inter-group sales are recorded under thesame conditions used in transactions with third parties.

$4.06
Millions of yen

Millions of yen
Thousands of
U.S. dollars

2017

Earnings per share of common stock:

19. ASSET RETIREMENT OBLIGATIONS
a. Asset retirement obligations recognized in the consolidated balance sheets on March 31, 2017 and 2016
The Company and its consolidated subsidiaries, in connection with some buildings and land, have entered into realestate lease contracts with terms ranging from 1 to 46 years
for the years ended March 31, 2017 and 2016. Asset retirement obligations have been recognized in light of the obligation of the Company and its consolidated subsidiaries tothe owners of the buildings and land to remove the facilities
from leased real estate at the end of those contracts. The
liabilities on March 31, 2017 and 2016 have been calculatedwith expected useful lives ranging from 1 to 46 years anddiscount rates ranging from 0.1% to 2.5%.
The following table summarizes the changes in theaggregate carrying amount of asset retirement obligations
for the years ended March 31, 2017 and 2016:

U.S. dollars

2017

2016

2017

¥2,749.71¥2,325.79$24.50Decrease due to settlement

(235)

(0)

(2,094)

Balance at end of period¥3,788¥3,957$33,764

b. Asset retirement obligations not recognized in the
consolidated balance sheets as of March 31, 2017and 2016
The Company and its consolidated subsidiaries have rented
lots and buildings from domestic service airports based on
permission for national property use and a real estate rental
contract for national property, and have an obligation toremove the facilities from leased real estate. The Company
and its consolidated subsidiaries have an important role inpublic traffic, and depend on the trends of the aviation
administration of each country. For this reason, the time ofbuilding removal and withdrawal cannot be determined at
the discretion of the Company and its consolidated subsidiaries alone in regard to rented airport-related facilities.
Moreover, since there is also no schedule for building
removal and withdrawal at present, asset retirement obligations cannot be reasonably estimated. Therefore, the asset
retirement obligations corresponding to the debt concerned
have not been calculated.

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The JAL Group’s Growth Story

Ⅲ

Management Strategies
Designed to Create Value

Ⅳ

Performance and Strategies
by Business

A Business Base that Supports
Value Creation

Financial / Data Section

CONSOLIDATED FINANCIAL STATEMENTS

Millions of yen
Year ended March 31, 2017

Air transportation

Other

Total

Eliminations

Consolidated¥1,044,915¥244,051¥1,288,967¥—¥1,288,967

114,476

29,440143,917(143,917)—

1,159,392

273,491

1,432,884(143,917)

1,288,967

Net sales
External
Intersegment
Total
Operating income
AssetsDepreciation and amortization
Impairment loss
Investments in entities accounted for using equity method
Capital expenditure

153,191

17,400170,591(259)

170,332

1,673,011

167,188

1,840,199(111,422)

1,728,777

93,397

2,386

95,784(7)

95,777

505

—

505

—

505

7,820

20,51028,331—

28,331¥  231,562¥  1,633¥  233,196¥—¥  233,196

Thousands of U.S. dollars
Year ended March 31, 2017

Air transportation

Other

Total

Eliminations

Consolidated

Net sales
External
Intersegment
Total$ 9,313,798$2,175,336$11,489,143$—1,020,376

262,411

1,282,797(1,282,797)$11,489,143—

10,334,183

2,437,748

12,771,940(1,282,797)

11,489,143

Operating income

1,365,460

155,094

1,520,554(2,308)1,518,245

Assets

14,912,300

1,490,221

16,402,522(993,154)

15,409,368

832,489

21,267853,765(62)853,703

4,501

—

4,501

—

4,501

Depreciation and amortization
Impairment loss
Investments in entities accounted for using equity method
Capital expenditure

69,703

182,814

252,526—

252,526$ 2,064,016$   14,555$ 2,078,580$—$ 2,078,580

Millions of yen
Year ended March 31, 2016

Air transportation

Other

Total

Eliminations

Consolidated¥1,090,787¥245,874¥1,336,661¥—¥1,336,661

114,415

28,734

143,149(143,149)—

1,205,202

274,6091,479,811(143,149)

1,336,661

Information by Geographical Area
Operating revenue from overseas operations, which include
international passenger and cargo services of domestic
consolidated airline subsidiaries rendered during the years
ended March 31, 2017 and 2016, export sales of domestic
consolidated subsidiaries, and sales of consolidated subsidiaries outside Japan, for the years ended March 31, 2017and 2016 were as follows:

21. RELATED PARTY INFORMATION
There are no material transactions that need to be presented
for the years ended March 31, 2017 and 2016.

Thousands of
U.S. dollars

Millions of yen
Year ended March 31

2017

2016

2017

Asia and Oceania¥214,298¥243,785$1,910,134

North America

186,398

197,552

1,661,449

Europe72,58679,997646,991

Total¥473,283¥521,334$4,218,584

Information about amortization and unamortized balancesof goodwill by segment for the years ended March 31, 2017and 2016 were as follows:
Millions of yen
Air
Year ended March 31, 2017 transportation

Other

Total

Amortization
during the year

¥—

¥455

¥455

¥—

¥455

Unamortizedbalance

—

—

—

—

—

Eliminations Consolidated

Net sales
External
Intersegment
Total
Operating income
AssetsDepreciation and amortization

190,811

18,466

209,277(84)

209,192

1,517,665

167,193

1,684,858(105,929)

1,578,928

86,4162,112

88,528(0)88,528

Impairment loss

2,504

209

2,714

—

2,714

Investments in entities accounted for using equity method

7,229

24,871

32,100—32,100¥  208,925¥  3,510¥  212,435¥—¥  212,435

Capital expenditure

118 J A L R E P O R T 2 0 1 7

Thousands of U.S. dollars
Air
Year ended March 31, 2017 transportation

Amortization
during the year
Unamortizedbalance

Other

Total

Eliminations Consolidated$—$4,055$4,055$—$4,055

—

—

—

—

—

Millions of yen
Air
Year ended March 31, 2016 transportation

Other

Total

Amortization
during the year

¥—

¥849

¥849

¥—

¥849

Unamortizedbalance

—

455

455

—

455

Eliminations Consolidated

J A L R E P O R T 2 0 1 7 119

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Ⅱ

The JAL Group’s Growth StoryCONSOLIDATED FINANCIAL STATEMENTS

Ⅲ

Management Strategies
Designed to Create Value

Ⅳ

Performance and Strategies
by Business

A Business Base that Supports
Value Creation

Financial / Data Section

CONSOLIDATED SUBSIDIARIES(As of March 31, 2017)

Independent Auditor’s Report

Corporate Name

Paid-in Capital(Millions of yen)

Ratio of Voting Rights
Direct(%)

Indirect(%)

Air Transport Business
Segment

Paid-in Capital

Ratio of Voting Rights(Millions of yen)

Direct(%)

Indirect
(%)

Total
(%)

315

66.6

3.4

70.0

HKD 1,000
1,960

46.4

4.6

51.0

JALPAK CO., LTD.*1

80

96.4

1.2

97.7

JAL SALES CO., LTD.

460

100.0

—

100.0

JAL JTA SALES CO., LTD.

30

16.7

83.3

100.0

USD 1,000
1,000

—

100.0

100.0

USD 1,000 600

—

100.0

100.0

EUR 1,000
1,600

—

100.0

100.0

Other Segments
Maintenance

Air Transport Business

JAL AIRTECH CO., LTD.

JAPAN TRANSOCEAN AIR CO., LTD.

4,537

72.8

—

72.8

JAPAN AIR COMMUTER CO., LTD.

300

60.0

—

60.0

J-AIR CO., LTD.

200

100.0

—

100.0

HOKKAIDO AIR SYSTEM CO., LTD.

490

57.3

—

57.3

RYUKYU AIR COMMUTER CO., LTD.

396

—

74.5

74.5

JAL SKY CO., LTD.

100

100.0

—

100.0

OKINAWA AIRPORT SERVICE CO., LTD.

33

66.7

33.3

100.0

JALSKY OSAKA CO., LTD.

30

100.0

—

100.0

JALSKY KYUSHU CO., LTD.

30

100.0

—

100.0

JALSKY SAPPORO CO., LTD.

30

100.0

—

100.0

JALPAK INTERNATIONAL (EUROPE) B.V.

JALSKY KANAZAWA CO., LTD.

10

100.0

—

100.0

JALPAK INTERNATIONAL (FRANCE) S.A.S.

EUR 1,000 160

—

100.0

100.0

JALSKY SENDAI CO., LTD.

10

100.0

—

100.0

EURO-CREATIVE TOURS (U.K.) LTD.

GBP 1,000 100

—

100.0

100.0

USD 1,000 100

100.0

—

100.0

JALPAK INTERNATIONAL ASIA PTE. LTD.

SGD 1,000 146

—

100.0

100.0

JAL SATELLITE TRAVEL CO., LTD.

HKD 1,000
750

—

100.0

100.0

PT. TAURINA TRAVEL DJAYA*2

IDR 1,000
500,000

—

49.0

49.0

OKINAWA FUELING FACILITIES CO., LTD.*3

100

40.0

20.0

60.0

JAL ABC, INC.

100

51.0

—

51.0

JAL INFORMATION TECHNOLOGYCO., LTD.

702

100.0

—

100.0

AXESS INTERNATIONAL NETWORK, INC.

700

100.0

—

100.0

JAL CARD, INC.

360

50.6

—

50.6

JAL FACILITIES CO., LTD.

180

85.0

—

85.0

JAL BRAND COMMUNICATIONS CO., LTD.

100

100.0

—

100.0

JTA INFORMATION & COMMUNICATION
CO., LTD.

50

—

100.0

100.0

—

100.0

Airport Passenger Handling

JAL HAWAII, INCORPORATED

Ground Handling
JAL GROUND SERVICE CO., LTD.

100

99.8

0.2

100.0

JAL GROUND SERVICE OSAKA CO., LTD.

10

—

100.0

100.0

JAL GROUND SERVICE KYUSHU CO., LTD.

10

—

100.0

100.0

JAL GROUND SERVICE SAPPORO
CO., LTD.

10

—

97.7

97.7

Maintenance
JAL ENGINEERING CO., LTD.

80

100.0

—

100.0

JAL MAINTENANCE SERVICE CO., LTD.

10

100.0

—

100.0

Cargo
JAL KANSAI AIRCARGO SYSTEM
CO., LTD.
JAL CARGO SERVICE CO., LTD.

100
50

69.2
100.0

—
—

69.2
100.0

Cargo
JUPITER GLOBAL, LTD.

Passenger Sales

JALPAK INTERNATIONAL HAWAII, INC.
JALPAK INTERNATIONAL (CHINA) CO., LTD.

Airport-Related Business

OthersJAL CARGO HANDLING CO., LTD.

50

—

100.0

100.0

JAL CARGO SERVICE KYUSHU CO., LTD.

20

40.0

40.0

80.0

JAL SUNLIGHT CO., LTD.

20

100.0

JAL NAVIA CO., LTD.

50

100.0

—

100.0

OFFICIAL FILING CO., LTD.

10

50.0

4.0

54.0

JAL MILEAGE BANK CO., LTD.

40

100.0

—

100.0

JPRO CO., LTD

10

—

100.0

100.0

USD 1,000 205

100.0

—

100.0

JLC INSURANCE COMPANY LIMITEDUSD 1,000
2,000

100.0

—

100.0

2,700

51.0

—

51.0

Passenger Sales

JAL PASSENGER SERVICES AMERICA
INCORPORATED

Airport-Related Business
JAL ROYAL CATERING CO., LTD.

120 J A L R E P O R T 2 0 1 7

Corporate Name

Total
(%)

*1 Operating revenue (excluding operating revenue between consolidated subsidiaries)
of JALPAK CO., LTD accounts for over 10% of consolidated operating revenue.
*2 Although JAL’s ownership is 50% or less, the company is considered a subsidiarybecause JAL has substantial control.
*3 Effective June 2, 2017, OKINAWA FUELING FACILITIES CO., LTD. became an
equity-method affiliate due to a decline in the Company’s equity stake following
the sale of shares.

J A L R E P O R T 2 0 1 7 121

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Ⅱ

The JAL Group’s Growth Story

Ⅲ

Management Strategies
Designed to Create Value

Ⅳ

Performance and Strategies
by Business

A Business Base that Supports
Value Creation

Financial / Data Section

ESG DATA

Environmental Data (E)Governance Date (Japan Airlines Co., Ltd.) (G)FY2013

Environment
CO2 Emissions
Scope 1
Scope 2CO2 Emissions/RTK(Comparison with FY 2005)
NOx (LTO cycle)
CO (LTO cycle)
HC (LTO cycle)

FY2014FY2016FY2015

Unit

820
8.07

840
7.88

854
7.60

875
7.15

10,000 tons
10,000 tons

89.6

86.6

85.1

84.6

%

6.26
4.39
0.72

6.12
4.38
0.7

5.78
4.43
0.72

5.30
4.24
0.71

1,000 tons
1,000 tons
1,000 tons

Electricity Use*1
Heat Use (crude oil equivalent)*1
Water Use

129
49,633452

125
48,494445

120
46,770430

11344,936426

Million kWh
1,000 liters
1,000 m3

Industrial Waste
Ratio of Final Disposal

3,720
1.2

3,415
1.2

3,475
1.2

3,436
1.1

Tons
%

*1 Airports, Offices, Maintenance Centers (Japan)(As of July 1, 2017)

Corporate governance-related items

Topics discussed

Formulation of Fundamental Policies of Corporate Governance
Organization Form
Directors
Term of Office Stipulated
Chairperson of the Board
Number of Directors (of which, External Directors)
Number of Board of Directors meetings
External Director attendance at Board of Directors meetings
Audit & Supervisory Board Members
Number of Audit & Supervisory Board Members (of which, External Members)
External Audit & Supervisory Board Member attendance at Board of Directors meetings
Key meetings attended by Audit & Supervisory Board Members

Number of Audit & Supervisory Board meetings
External Audit & Supervisory Board Member attendanceat Audit & Supervisory Board meetings

Yes
Company with companies with Audit & Supervisory Board
1 yearChairman
10 (of which, three External Directors)
18 (Fiscal year 2016)
94% (Fiscal year 2016)
Five (of which, three External Members)
92%(Fiscal year 2016)
Management Committee, Group Earnings Announcement Session,
Group Council for Safety Enhancement General Meeting,Management Liaison Committee, Risk Management Committee
13 (Fiscal year 2016)
100% (Fiscal year 2016)

Appointment of independent External Directors andExternal Audit & Supervisory Board Members

Six (three External Directors, three External Audit & Supervisory
Board Members)

Accounting Auditor
Internal Auditing

KPMG AZSA LLC
Audit

Social Data (S)FY2013

Human Resources
Consolidated Staff Headcount*2
Ground Staff
Flight Crew
Cabin Attendants

FY2014FY2016FY2015

Unit

31,472
23,084
2,405
5,983

31,53423,093
2,446
5,995

31,98623,3672,519
6,100

32,75324,0552,570
6,128

Persons
Persons
Persons
Persons

Average age*2
Ground Staff
Flight Crew
Cabin Attendants

37.4
37.5
42.1
35

38.3
38.7
42.7
35.1

37.4
37.7
41.1
35

38.2
38.6
43.8
34.9

Years
Years
Years
Years

Ratio of Men*2
Ratio of Women*2

53.3
46.7

53.2
46.8

52.3
47.7

52.5
47.5

%
%

Managerial Staff*2
General Staff*2
Ratio of Disabled Staff*3
Ratio of Female Managers*2

15.6
84.4
2.00
14.1

15.9
84.1
2.04
15.1

16.0
84.0
2.28
15.6

15.9
84.1
2.56
16.3

%
%
%
%

Training Period per Person*4
Training Cost per Person*4

62.5
311,70460.2
318,24962.8
380,997

66.4
403,519

Childcare Leave ApplicantsNursing Care Leave Applicants

702
62

779
51

782
42

Ratio of Local Hires at Overseas Offices*2
Ratio of Locally Hired Managerial Staff at
Overseas Offices*2

92.0

90.8

62.1

Average Years of Continuous Service
Community Contribution
Participation in Voluntary Activities
Total Hours of Voluntary Activities

Establishment of Committee

Corporate Governance Committee
Nominating Committee
Compensation Committee
Personnel Committee
Officers Disciplinary Committee

The Chairperson

Numberof meetings

4
5
5
5
5

1
3
10
4
2

Kimie Iwata (Lead Independent External Director)
Masatoshi Ito (External Director)
Eizo Kobayashi (External Director)
Yoshiharu Ueki (Representative Director, President)
Kimie Iwata (External Director)(FY 2016)
Bodies directly controlled
by the PresidentManagement
Committee

Hours/Person
Yen/Person

Group Earnings
Announcement Session

781
65

Persons
Persons

JAL Philosophy Council

90.4

89.9

%

62.8

60.8

61.9

%

13.5

14.4

13.9

14.2

Years

915
3,144

1,044
4,436

909
3,182

1,506
5,271

Persons
Hours*2 As of the fiscal year-end*3 As of June 1 of the year following each fiscal year. Combined data for Japan Airlines Co., Ltd. and its special subsidiary JAL Sunlight Co., Ltd.
*4 Past data have been revised in accordance with improvements made in the accuracy of data collection.

122 J A L R E P O R T 2 0 1 7(FY 2016)
Composition(number of members)Group Council for
Safety Enhancement
General Meeting

Corporate Brand
Promotion Council

Management Liaison
Committee

Topics discussed
The Management Committee is a body established by the Company
for the purpose of contributing to appropriate and flexible decisionmaking by the Board of Directors and the President. The Committee
deliberates important issues requiring a resolution of the Board of
Directors and matters requiring approval by the President that must be
confirmed by the Management Committee before they are presented
to the Board or to the President.
The Group Earnings Announcement Session is attended by the
management teams of Japan Airlines and all its major subsidiaries toshare the status of the JAL Group earnings and consider ways toimprove business performance.
This body is tasked with promoting the JAL Philosophy. It is responsiblefor developing basic policies for initiatives, planning and implementing
related measures and evaluating the impact of those measures.

This body is tasked with ensuring safe flight operations across theGroup and promoting safety management, in line with the Group’s
principles and policies.
• Determines key policies related to safety management• Clarifies the status of management systems and regularly overhauls
those systems• Addresses day-to-day flight safety issues, etc.
The Corporate Brand Promotion Council establishes important policies
on the corporate brand (corporate value) based on the JAL Group
Corporate Policy and strategies, clarifies the status of corporate
activities, and where necessary, overhauls related organizations,systems and policies to strengthen the corporate brand.
The Management Liaison Committee monitors the progress ofmanagement projects and shares information. The Management
Liaison Committee checks the progress of matters related to
management and shares information.

Numberof meetings

Composition
A forum for discussion attended by the President, Vice President,
Senior Managing Executive Officers, Managing Executive Officers,
Full-time Directors, other Directors, and Audit & Supervisory
Board Members.

35

Chairman, President, Directors, Executive Officers, Area Managers,
Presidents of major subsidiaries, Audit & Supervisory Board Members

12

Chairman, President, Vice President, General Manager of Managing
Division Route Marketing, General Manager of Managing Division
Passenger Sales, General Manager of Cargo & Mail, General Manager
of Flight Operations, General Manager of Engineering & Maintenance,
General Manager of Cabin Attendants, General Manager of Airport
Operations, General Manager of General Affairs, General Manager of
Human Resources, General Manager of Corporate Control, General
Manager of Communication Division
President of Japan Airlines, Safety General Manager for Japan
Airlines, Executives nominated by the chairperson, Presidents ofGroup airlines

4

12

President, Vice President, Senior Managing Executive Officers,
Managing Executive Officers, Executive Officers nominated by thechairperson, Presidents of Group airlines

12

President, Vice President, Senior Managing Executive Officers,
Managing Executive Officers, Directors, Executive Officers,
Audit & Supervisory Board Members

24

J A L R E P O R T 2 0 1 7 123

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Ⅱ

The JAL Group’s Growth Story

Ⅲ

Management Strategies
Designed to Create Value

Ⅳ

Performance and Strategies
by Business

A Business Base that Supports
Value Creation

Financial / Data Section

INTERNATIONAL ROUTE MAP(As of June 28, 2017)

Newcastle
DublinManchester
BelfastGlasgow
Edinburgh
Aberdeen

Hamburg
BillundDusseldorf
Amsterdam
Brussels

Stockholm

Copenhagen
Gothenburg
Oslo

Kaliningrad

KittilaIvalo

Rovaniemi
Oulu
Moscow
Helsinki
Riga
Vilnius

Tallinn
St. Petersburg

Yellowknife
ToledoAnchorage

Cleveland
Detroit
Buffalo
TorontoOttawaRochesterMontreal

Whitehorse

Khabarovsk
Nizhny Novgorod

BerlinHannoverPragueBudapest

London
Paris
Basel
Lyon
A Coruna
Santiago deCompostela
Vigo

ViennaFrankfurt
MunichUfa Chelyabinsk

SamaraPerm

Volgograd
Rostov
Sochi

Yekaterinburg
Novosibirsk
Omsk

Krasnodar

MadridMalta

Athens
VeniceTenerife

Milan
Nice
GenevaMarseille
Barcelona
Toulouse

Rome

Gran Canaria
SevillaSao Paulo
MalagaDalianPortland

Seoul

Chongqing

Stuttgart
Dubrovnik

Chiang Rai
Mandalay
Chiang Mai
Dhaka
Nay Pyi Taw
Delhi
Dubai

Doha

KunmingChengduColomboMale
Langkawi
PenangNanjing
Wuhan

Busan
Jeju

Monterey

Singapore

Albuquerque
El PasoLong Beach

Guam
ManilaLuang Prabang
Siem Reap
Vientiane
Phnom Penh
Ho Chi Minh CitySan Diego
Honolulu
Kona

Kota Kinabalu

Phoenix
TucsonDenpasar
Kuching

Brisbane

PapeeteGold Coast

Perth

SydneyAuckland

St. Louis
MemphisKnoxville

Norfolk
Indianapolis

Huntsville

Cincinnati
Raleigh Durham

Nashville

EvansvilleJacksonville
Dallas
HoustonAustinSan Antonio
Monterrey

OrlandoWest Palm Beach
Fort Lauderdale
Miami

Tampa

Greensboro
Charlotte
Greenville
Columbia
AtlantaParis

CancunFort Myers

Frankfurt
San Juan

Mexico City

CairnsOklahoma City

Washington
Richmond

LouisvilleLittle Rock

Queretaro
DarwinBloomington

North West
Arkansas

Aguascalientes
Guadalajara
Leon
San Luis Potosi

JakartaSurabaya

Johannesburg

FresnoDenver
Wichita
Tulsa
Las Vegas

Los Angeles

Kaohsiung
Hong Kong

PeoriaDes Moines
Kansas CitySan Francisco
San Jose

Taipei

Kuantan
Kuala Lumpur

Salt Lake City

Santa Rosa

TainanPhuketChicagoSacramento

ShanghaiNewarkHartford
New York
Philadelphia
Harrisburg
Baltimore
DaytonLexington

Omaha

Reno

Hanoi

BangkokColumbus
PortlandPittsburgh
BostonBoise
EugeneShenzhen

Chennai

Syracuse

Winnipeg

Jackson Hole

Guangzhou

YangonMumbaiHyderabadBangalore
Koh Samui

SeattleJapan
Tianjin
Qingdao

Burlington

MadisonYantai

Xi'an

Grand Rapids
Milwaukee
Kalamazoo

Edmonton

Calgary
Kelowna
Vancouver

Vladivostok

Beijing

ZurichBilbaoTerrace

PrinceGeorgeVictoria

Shenyang

Nizhnekamsk
Kazan

Bucharest
Istanbul

OviedoLisbonMinneapolis

TyumenWarsaw

Fortaleza

LondonNew Orleans
Pensacola
Salvador

Birmingham

RecifeBrasilia

ManausBelo Horizonte
Lima
Campo Grande
IguazuSantiago

MelbournePort Alegre
Curitiba
Sao Paulo
Rio De Janeiro● The routes above include code-share flights.
● The map has been altered to highlight the cities on JAL’s route network.

124 J A L R E P O R T 2 0 1 7

J A L R E P O R T 2 0 1 7 125

I

Ⅱ

The JAL Group’s Growth StoryDOMESTIC ROUTE MAP● The routes below are operated as code-share flights
with Fuji Dream Airlines Co., Ltd. (FDA) using FDA
aircraft and crew: Shizuoka–Sapporo (New Chitose),
Shizuoka–Fukuoka, Matsumoto- Sapporo (New
Chitose), Matsumoto–Fukuoka, Nagoya (Komaki)Fukuoka, Nagoya (Komaki)-Yamagata, Nagoya(Komaki)-Niigata, Nagoya (Komaki)-Izumo, Nagoya(Komaki)-Kochi, Nagoya (Komaki)-Kitakyushu, Nagoya(Komaki)-Kumamoto, and Niigata-Fukuoka.

Rishiri

Asahikawa
Sapporo (Okadama)
Sapporo (New Chitose)● The routes below are operated as code-share flights
with Hokkaido Air System Co., Ltd. (HAC) using HAC
aircraft and crew: Sapporo (Okadama)-Rishiri, Sapporo(Okadama)-Kushiro, Sapporo (Okadama)-Hakodate,
Sapporo (Okadama)-Misawa, Hakodate-Okushiri, andHakodate-Misawa.

Memanbetsu

Obihiro(Tokachi Obihiro)

ASK

Abbreviation for Available Seat Kilometer. A unit
for passenger transport capacity. Total number ofseats × distance travelled (in kilometers)

LCC

Abbreviation for Low Cost Carrier. An airline
operating at reduced fares by cutting costs
through simplified services and limited baggage
allowance. LCCs have emerged in many
countries since airline deregulation.

Kushiro (Tancho Kushiro)

ROA
Aomori
MisawaAkita● The routes below are operated as code-share flights
with Amakusa Airlines Co., Ltd. (AMX) using AMX
aircraft and crew: Fukuoka-Amakusa andKumamoto-Amakusa:

ROE
Hanamaki (Iwate Hanamaki)

Yamagata(Oishii Yamagata)
Sendai

RPK

Niigata* Some flights on the Osaka (Itami)-Kumamotoroute are also code-share flights with AMX.
* Some routes are not operated in certain seasons.

Oki(Oki Island Global Geopark)
Izumo(IzumoEnmusubi)

Komatsu

Okayama
Hiroshima
Yamaguchi Ube
Kitakyushu
Oita

Matsumoto(Shinshu
Matsumoto)TajimaOsaka (Itami)

Nagoya(Komaki)Nagoya(Chubu)Tokyo(Haneda)Tokyo(Narita)

SMS (Safety
Management
System)Shizuoka(Mt. Fuji Shizuoka)

Osaka (Kansai)

Takamatsu
Tokushima(Tokushima Awaodori)Matsuyama
Kochi(Kochi Ryoma) Nanki Shirahama

Alliance

Kumamoto(Aso Kumamoto)AmakusaMiyazaki(Miyazaki Bougainvillea)

Kagoshima

Ⅳ

Performance and Strategies
by Business

A Business Base that Supports
Value Creation

Tanegashima

An occurrence which did not result in an aircraft
accident, but had the risk of causing an accident,
as rated by the Ministry of Land, Infrastructure,
Transport and Tourism, such as deviation from a
runway, emergency evacuation, fire, smoke andabnormal cabin decompression, andencountering abnormal weather conditions.

Diversity

A management approach which provides equal
opportunity in employment regardless of gender,
age, race, nationality, belief, values or disability
to enable everyone to reach his or her potential.

Abbreviation for Return on Assets. Calculated by
dividing operating income by total assets (netassets + liabilities). Indicates how much profit isearned from assets invested in the business.

Normal line
operation
monitoring

A proactive preventive program to identify latentrisks in daily operations and normal operations,and implement preventive measures.

Abbreviation for Return on Equity. Calculated by
dividing current net income by shareholders’equity. Indicates the rate of return on
shareholders’ investment.

Fleetmanagement

A management approach to manage aircraft
flexibly according to demand trends in order tomaximize revenues and minimize expenses.

Abbreviation for Revenue Passenger Kilometers.
The total distance flown by each revenue
passenger. Number of revenue passengers ×
distance flown (in kilometers).

Full-service carrier

An airline which has an extensive route networkand provides conventional services. It offers
several classes of seats (First, Business, Economy,etc.), and includes services such as meals, drinks,
and entertainment in the fare. It is also called a
network carrier or legacy carrier.

A system to proactively prevent accidents byidentifying and managing accident risk factors inevery sector of the airline. Activities should be
conducted organizationally based on mutual
trust, in which safety policies and safety
information are shared by everyone from top
management to frontline staff.

Marshaller

A specialist who uses hand signals to guideaircraft on the ground to a specified position.

Unit cost

Consolidated air transport costs (excluding fuelcosts and transactions with affiliated companies
in which revenues and expenses are settledinternally) / ASK.

Member airlines of an alliance promote business
partnership by such means as operating codeshare flights to their respective airports,
simplifying procedures at connecting airports,
participating in frequent-flyer programs of all
members, and sharing airport lounge services for
top-tier members. The three major airline
alliances are the oneworld alliance, Star Alliance,
and Sky Team.

Unit revenue

Revenue from passenger flights / ASK.

Revenuemanagement
system

A method of forecasting changes in demand andcontrolling inventory to maximize revenues, forexample, setting advance discount fares inphases to secure the optimum number ofrevenue passengers.

Load control

To control aircraft weight. Cargo and passengers
are loaded taking into account the center ofgravity, loading weight limitations, and loading/unloading sequences.

Load factor

The usage rate of revenue passenger seats.
It represents how many revenue passengers
boarded against the total number of seatsavailable. An indicator for measuring sales ofseats. Calculated by RPK (Revenue Passenger
Kilometers) / ASK (Available Seat Kilometers).
Different from seat occupancy rate, because
nonrevenue passengers are excluded.

Yakushima

Irregular
operation

An occurrence in which the aircraft diverts due
to aircraft system malfunction, etc., but with noimmediate effect on flight safety.

Incident

An occurrence with risks of an aircraft accident
according to the Civil Aeronautics Act, Article
76-2. Sixteen items and equivalent situations
such as engine damage and fire inside an aircraft
are defined in the Ordinance for Enforcement of
the Civil Aeronautics Act.

Amami-Oshima
Kikaijima
Tokunoshima (Tokunoshima Kodakara)

Okinoerabu (Erabuyurinoshima)
Yoron

Kita-Daito

Kumejima
Okinawa(Naha)

Minami-Daito

Open Skies
Agreement

An agreement signed by countries or regions
allowing the free movement of people andgoods. Airlines are given more freedom in
selecting the number of flights, destinations andother conditions.

Code-share

To place the flight number of an airline on aflight operated by another airline, indicating thatthe flight number on reservations systems andtimetables, and operating the flight as if it wereits own flight. A flight undertaken jointly.

TaramaYonaguni

MiyakoIshigaki(Painushima Ishigaki)

126 J A L R E P O R T 2 0 1 7

Financial / Data Section

Serious incident

Hakodate

Okushiri

NagasakiⅢ

GLOSSARY(As of June 28, 2017)

Fukuoka

Management Strategies
Designed to Create ValueJ A L R E P O R T 2 0 1 7 127

I

Ⅱ

The JAL Group’s Growth Story

DATA ON INCIDENTS

Ⅲ

Management Strategies
Designed to Create Value

Ⅳ

Performance and Strategies
by Business

A Business Base that Supports
Value Creation

Financial / Data Section

STOCK INFORMATION / CORPORATE INFORMATION(As of March 31, 2017)

Stock Information

Safety issues occurring in fiscal year 2016
and countermeasures
The JAL Group undertakes active disclosure of safety data sothat customers can put their confidence in our services.
In fiscal year 2016, there were no serious incidents,*1 but
one aircraft accident*2 occurred. In other safety indicators,
there were eight cases of customer injury on board or at the
airport,*3 66 irregular operations due to aircraft system
malfunctions or other causes,*4 and 48 irregularities*5 due
to human error. These figures showed little change from theprevious year. We apologize once again for the inconvenienceand concern caused.
In response to the aircraft accident reported below, the JAL
Group is committed to cooperating fully with the investigative
body and implementing the necessary countermeasures.

*1 Serious incident: An incident not amounting to an aircraft accident, but where arecognized danger of an accident occurring was present, such as runway
excursion, an emergency evacuation, fire or smoke on board, abnormal depressurization, encounter with abnormal weather conditions, or other situation classified
as a serious incident by the Ministry of Land, Infrastructure, Transport and Tourism.
*2 Aircraft accident: A situation arising from the operation of an aircraft and resulting
in fatal or serious injury, an aircraft crash, collision, or fire, damage to the aircraft
during flight requiring major repair, or other situation classified as an aircraft
accident by the Ministry of Land, Infrastructure, Transport and Tourism.
*3 Customer injury: A case where a customer sustains an injury on board or at the
airport and is examined at a medical institution (in-house statistics).
*4 Irregular operation: A situation where an aircraft diverts from its destination due
to an aircraft system malfunction or other cause, but with no immediate impact
on flight safety.
*5 Irregularity due to human error: An irregularity caused by human error of a kindwhich needs to be eliminated by the relevant department (Flight Operations,
Maintenance, etc.) in view of its impact on overall flight safety (in-house statistics).

Fiscal year 2016 management indicators and results
Indicator

Aircraft accidents
Cabin attendant injury due to turbulence on JAL flight
646 (November 10, 2016)
On November 10, 2016, while JAL flight 646 (KagoshimaHaneda) was on its ascent from Kagoshima Airport and theseatbelt sign was illuminated, a cabin attendant who left her
seat in order to ensure the safety of a child moving around in its
seat was affected by sudden turbulence and sustained an injury.
Medical examination resulted in the diagnosis of a sacral bone
fracture and the incident was therefore recognized as an aircraft
accident on November 11, 2016 by the Civil Aviation Bureau of
the Ministry of Land, Infrastructure, Transport and Tourism.
Investigation of the case was referred to the Japan Transport Safety Board of the Ministry of Land, Infrastructure,
Transport and Tourism. JAL is cooperating fully with the activities of the investigative body and will implement the necessary
countermeasures.
As interim measures, all organizations have been informedin writing of the circumstances of the accident, and cabin attendants have been reissued with a document listing precautions
to follow when leaving a seat as an extraordinary measure to
respond to an urgent situation. As a further measure, customers
accompanied by children are being assisted with a stepped-up
level of announcements and direct staff contacts at the airportand on board. Going forward, we will continue to takecross-departmental preventive action through hardware andsoftware measures.

ResultSummary

Aircraftaccidents

1

Serious incidents

0November 10, 2016
JAL flight 646
Injury to cabin attendant due to turbulence—

In fiscal year 2017, we will be working toachieve the following goals:
1. Realize zero aircraft accidents and zero serious incidents
We will take preventive action by detecting precursors toaircraft accidents and serious incidents.
2. Evolve the safety management system to the world’s highest
standard
In addition to preventing recurrences of aircraft accidents andserious incidents, we will integrate and analyze safety data tofacilitate preventive action by detecting precursors to serious
irregularities, thus intercepting accidents before they happen.
3. Evolve the security management system to the world’s
highest standard
In response to the increasing terrorism threat worldwide,
we will strengthen security systems and develop staff
awareness of security protection to protect customers fromthe threat of terrorism.
4. Ensure that lessons learned from past accidents are passed onMore than 30 years have passed since the JAL flight 123
accident and staff with direct experience of the accident are
now reaching retirement. We will ensure that lessons learnt
from past accidents are passed on securely so that we continue to give absolute priority to safety.

JAL Group Safety Report
The JAL Group Safety Report is published yearly in accordance with the Civil Aeronautics Act (Article 111-6:
Publication of Safety Reports by Domestic Air Carriers). The report presents safety initiatives and other relevant datafrom the six companies of the JAL Group in a readily accessible form.

● Stock Exchange The First Section of the Tokyo Stock Exchange● Stock Code9201

● Number of Shares Per Unit

100 shares● Account closing date

March 31

● Ordinary General Meeting of Shareholders

June each year

● Date of Finalizing Shareholders Eligible to
Exercise Voting Rights at the Ordinary
General Meeting of Shareholders

March 31

● Date of Finalizing Shareholders to Receive
Year-end Dividends● Total number of shares to be issued 750 million(Common stock) (700 million)(Class 1 Preferred stock) (12.5 million)(Class 2 Preferred stock) (12.5 million)(Class 3 Preferred stock) (12.5 million)(Class 4 Preferred stock) (12.5 million)● Outstanding Issued Shares
Common stock 353,715,800 (Number of shares per unit: 100)
Number of Shareholders 127,583● Major Shareholders

March 31
* We do not apply the interim
dividends system.

● Contact
Stock Transfer Agency Department
Mitsubishi UFJ Trust and Banking Corporation
10-11, Higashisuna 7-Chome, Koto-ku, Tokyo 137-8081, Japan
Phone: 0120-232-711(toll free (Only within Japan))
Open: 9:00 am to 5:00 pm (Japan time)
Website: www.tr.mufg.jp/daikou/● Method of official announcement
Electronic public notice at:
URL www.jal.com/ja/corporate/publicnotices/
Provided, however, that if the electronic notice cannot be made due toan accident or any unavoidable reason, the public notice shall be
published in the Nihon Keizai Shimbun.
● Limitation on listing or recording of Citizens of Foreign Countries andOther Persons in Register of Shareholders and Register of Beneficial
Shareholders
The Articles of Incorporation lay down the following provision concerning
the Civil Aeronautics Act, Article 120-2.
Article 12. Limitation on listing or recording of Citizens of Foreign Countries and Other Persons inRegister of Shareholders and Register of Beneficial Shareholders 12.1 If the Company
receives from a person, who falls into one of the categories listed in the items below,
a request for listing or recording his or her name and address in the register ofshareholders (including the register of beneficial shareholders; hereinafter the same), andif the acceptance of such request causes the total voting rights owned by persons, whofall into one of the categories listed in the items below, to represent one-third or more of
the Company’s total voting rights, the Company shall refuse such listing or recording.
		 (1) A person who does not have Japanese citizenship		 (2) A foreign country, foreign public body or similar entity		 (3) A corporation or other organization established under foreign laws and regulations
2. When the Company intends to list or record all shares held by any of the shareholders
listed in the items of the following paragraph, upon notification from a book-entry
institution in accordance with Article 151. Paragraph (1) or (8) of the Act on Book-Entry
Transfer of Company Bonds, Shares, etc., and thereby the total number of voting rights
held by such persons listed in the items of the preceding paragraph will account for
more than a third of the Company’s voting rights, the Company shall list or record suchshareholders in the register of shareholders in accordance with measures provided forin the Ordinance of the Ministry of Land, Infrastructure, Transport and Tourism to list orrecord only a part of the shares so that the total number of voting rights held by suchshareholders in the items of the preceding paragraph accounts for less than a third of
the Company’s voting rights.

(Yen)(Million shares)
Trading volume (Right axis)

100

4,000

80

3,000

60

2,000

40

1,000

20

0

September April
2012
2013

128 J A L R E P O R T 2 0 1 7

Japan Trustee Services Bank, Ltd.
(Trust account)

17,606,000

4.97

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

15,938,000

4.50

Kyocera Corporation

7,638,400

2.15Japan Trustee Services Bank, Ltd.
(Trust account 5)

6,619,600

1.87Japan Trustee Services Bank, Ltd.
(Trust account 9)6,568,000

1.85

Daiwa Securities Group Inc.

5,000,000

1.41Japan Trustee Services Bank, Ltd.
(Trust account 1)

4,907,800

1.38Japan Trustee Services Bank, Ltd.
(Trust account 2)

4,852,900

1.37

STATE STREET BANK AND
TRUST COMPANY

4,425,900

1.25Japan Trustee Services Bank, Ltd.
(Trust account 7)

4,179,100

1.18

Company Profile● Transition of share price and trading volume
Share price (Left axis)

Percentage ofShares Against
Total Numberof Issued
Shares (%)

Mitsubishi UFJ Trust andBanking Corporation● Shareholder Registry Administrator

5,000

Shareholders Name

Number ofsharesCorporate NameJapan Airlines Co., Ltd.

Headquarters

Nomura Real Estate Bldg., 2-4-11
Higashi-Shinagawa, Shinagawa-ku, Tokyo
140-8637, Japan
Phone: +81 (0)3-5460-3121
Website: www.jal.com/jp

Established

August 1, 1951

Representative
Yoshiharu Ueki
Director, President
Capital181,352 million yen

Employees

Consolidated Employees 32,753 people
Employees 11,449 people

Capital andPaid-in Capital

355,845 million yen(Amount is rounded down to the nearest million yen)

Businesses

1. Scheduled and non-scheduled air transport services
2. Aerial work services
3. Other related business

0

April
2014

April
2015

April
2016

April
2017
J A L R E P O R T 2 0 1 7 129

Japan Airlines Co., Ltd.
Finance Department, Corporate Brand Promotion Department
Nomura Real Estate Building, 2-4-11 Higashi-Shinagawa, Shinagawa-ku, Tokyo 140-8637, Japan
Tel.: +81 (0)3-5460-3068 (Finance) +81 (0)3-5460-6837 (Corporate Brand Promotion Division)
Corporate website
Corporate information
CSR information
Investor Relations

www.jal.com/en/
www.jal.com/en/outline/corporate/www.jal.com/en/csr/
www.jal.com/en/investor/