Pensioners feel the pinch

TOKYO: Takahiro Fukushima gets a pension of 2.7 million yen ($29,000) a year from Japan Airlines Corp, where he worked for 35 years. Two months ago, the unprofitable airline sent the former cabin attendant a letter asking his permission to cut it by more than 50 percent.

"The shock was huge," said Fukushima, 67, who joined the carrier in 1966. "In the beginning, JAL even didn't want to hold meetings to explain it."

Fukushima joined with other retirees to oppose the cuts, which need approval by two-thirds of the pensioners to be enacted. The Tokyo-based airline has already factored in a one-time gain of 88 billion yen from reducing the pensions into its annual forecast, and failure to cut the payouts may more than double its loss this year.

"Without the gain from a revision of the pension fund JAL will have a loss of more than 150 billion yen," said Yasuhiro Matsumoto, an analyst in Tokyo at Shinsei Securities Co. "It has little room for further cost cutting."

A total of 2,940 retirees out of approximately 9,000 ex- employees have said they are against Japan Air's proposed pension reduction, according to a website run by the carrier's pensioners. The objections of 3,000 pensioners would be enough to scuttle the plan.

The airline is focused on getting the necessary two-thirds support, said spokeswoman Sze Hunn Yap. She declined to comment on the impact of a failure to gain approval for the pension cuts on the company's earnings.

The carrier had 95 billion yen in accrued pensions and severance cost liabilities outstanding at the end of March, according to its financial results.

JAL's President Haruka Nishimatsu has slashed more than 5,500 jobs from the company since taking over as head in 2006 by selling stakes in subsidiaries and offering early retirement. The reductions exceed the 4,300 jobs targeted in the carrier's mid-term plan announced in February 2007.

"The retirees need to stomach a cut in pensions," said Shinya Izumi, a member of the Japanese parliament and chairman of the Liberal Democratic Party's aviation panel. "Nishimatsu has done a good job managing JAL."

The airline is predicting a loss of 63 billion yen this fiscal year as sales plummet amid a global recession. The carrier has announced plans to cut operating costs by 195 billion yen. The cost cuts aren't enough to make up for its predicted 203 billion yen drop in revenue.

JAL last month won a loan of 100 billion yen from the state-owned Development Bank of Japan and other Japanese lenders after it laid out plans to reduce costs to cope with the biggest slump in international travel since SARS and bird flu led people to shun overseas travel in 2003.

Bloomberg News

(China Daily 07/20/2009 page11)