Japan Airlines Will Trim Spending by $1.6 Billion

Japan Airlines Co. said Thursday that it will trim expenses and investments by a total of $1.6 billion to counter the one-two punch of a heavy debt load and declining revenue from international flights.

Japan’s largest carrier has been expanding its fleet in preparation for a new international airport in Japan, only to get hit by increasing competition for international flights during a global economic slowdown.

To cope with mounting losses, Japan Airlines will undergo its second reorganization in six months. The airline said it will cut costs by reducing salaries, cutting advertising and hiring lower-paid, non-Japanese cabin attendants. The airline said the cuts, along with reduced investment, will save it $800 million by March, 1994.

The aggressive restructuring plan is a positive step for the troubled carrier, analysts said, but won’t be enough to help JAL meet its forecast of breaking even in the year ending March, 1994. The cost cutting itself might prove too ambitious, they said.

JAL’s main competitor, All Nippon Airlines Co., faces most of the same financial pressures. Both need to beef up fleets to ensure slots at the new Kansai airport, scheduled to open next year. Both face rising labor costs in an industry that has been loath to lay off employees. Both are suffering from heavy losses in international flights.

Unlike JAL, ANA is blessed with half of all flights inside Japan. About 85% of ANA’s revenue comes from domestic flights, according to Victoria Melendez, an analyst at Jardine Fleming Securities. The Japanese government has kept domestic air fares high, while competition from foreign carriers has sent international fares down.