JAL's turnaround plan features huge cost cut - report

Japan Airlines, which is undergoing a state-backed rehabilitation process, plans to reduce its annual operating costs by 440 billion yen ($5 billion) in five years, a report said on Friday.

The turnaround plan, which includes around 16,000 job cuts, was scheduled to be submitted to the Tokyo District Court in late August, the business daily Nikkei reported in its evening edition.

The plan also calls for raising the airline's annual operating profit from the 25.3 billion yen forecast for the current business year to 133.1 billion yen for the year to March 2015, the report said.

It has been jointly drafted by JAL and its court-appointed administrator, the Enterprise Turnaround Initiative Corporation of Japan (ETIC).

Assuming that the court approves the plan by the end of November, ETIC will inject 350 billion yen in new capital into JAL in December, the report said.

JAL, which posted a $2 billion loss for the nine months to December, has said it will scrap 28 international routes and close 11 international bases, while 50 domestic routes will be terminated, along with eight offices.

Under the plan, JAL will absorb its two core units - Japan Airlines International Co. and JAL Capital Co. - in December as part of its streamlining effort, the daily said.

JAL allocated 1.62 trillion yen as operating expenses in the last business year and plans to cut operating costs to 1.28 trillion yen in the current business year, the daily said.

It will try to further trim the cost to 1.18 trillion yen in the year to March 2015 by reducing its personnel and jet fuel expenses by more than 100 billion yen each.

The plan to boost the carrier's profitability centres on its international routes, the daily said.

JAL forecasts 412 billion yen in annual revenue from the routes in the current business year and aims to raise it to 460 billion yen in five years, the report said.