How Kazuo Inamori Turned CEO Bounced Back Japan Airlines from Bankrupt

Kazuo Inamori is tasked with overhauling Japan Airlines’ money-hemorrhaging operation

Kazuo Inamori’s way of bouncing back

Japan Airlines (JAL) was its nation for Flagship carrier and emblem of good service. But then it became a textbook example of what could go wrong in an airline.

When JAL was state-owned and insulated from real-world pressures by its government overseers, it picked up some bad habits. After privatization, it lacked the instinct for survival in the open market and the experience required to handle sudden turbulence.

Lurching from one self-inflicted problem to another, and then rocked by a string of global events, it took a nosedive less than a decade ago with debts of ¥2.32 trillion ($28 billion), more than 100 times its valuation.

Its bankruptcy in 2010 was the largest in Japan outside the financial industry. Its savior was a 77-year-old retiree and ordained Buddhist monk Kazuo Inamori, who became its chief executive officer and chairman with no previous experience in the aviation industry.

Divine intervention or otherwise, he performed a miracle in making JAL the world’s most profitable airline within two years.

He agreed, and now says he’ll take on the job without pay. True, he doesn’t need the money. Inamori is Japan’s 28th-richest man, according to Forbes Asia.

Former the Enterprise Turnaround Initiative Corporation of Japan (Etic) committee chairman Hideo Seto explained why: “The airline had been running on a semi-government style of management, despite minor changes made. So, the leader had to come up with something to break that mold.

“We required a different kind of leader … who could instill a new set of values – someone who had the power and would augur well for the people on the ground.”

His “first and foremost” priority, according to Seto, was the employees’ welfare, and “this is Mr. Inamori’s management philosophy – the idea is the employees do their best, and as a result, they contribute to society”.

“He also had confidence, and the most important thing was that he was very thorough with figures. That’s one of the reasons that the company could change so fast. So, it was a matter of brains and commitment,” he added.

To overcome JAL’s problems, Inamori used the Amoeba management system he had devised in Kyocera which he founded in 1959, making ceramic electronic components, solar panels, and cellphones.

Instead of top-down decisions always being taken, the airline’s workforce was divided into small units, each with a leader given a degree of freedom that flew in the face of Japanese tradition.

Inamori scrutinized each department’s figures and the movement of the figures each month, said Seto, adding: “If there were no improvements, he’d ask why.”

There was to be no more passing the buck or hiding poor performance within a rigid hierarchy, with customer service and safety remains the airline’s top priorities while costs were cut.

For the fiscal year 2011/12, JAL was recognized as the world’s most profitable airline. Its profit of ¥186.6 billion ($22.39 million) seemed “a miracle”, said Seto, given that “we aimed for and expected a profit of ¥60 billion ($7.2 million)”.

How A Former Monk Saved Japan Airlines | Inside The Storm | CNA Insider

The final proof that Inamori had turned things around came when JAL’s initial public offering in September 2012 raised ¥663 billion ($80 million) as it relisted on the Tokyo Stock Exchange – the second-largest IPO worldwide that year after Facebook’s.

The company has since acquired new aircraft – namely the more fuel-efficient Boeing 787 series – and has offered its customers more routes, including to North America, the Middle East, Africa, and Central Asia.

With its workforce reorganized and its finances settled, Inamori stepped down from the JAL board in 2013 and became an honorary adviser in 2015.

When asked during a 2002 interview with the New Sun to describe his future goals, Inamori answered, “As long as I live, I would like to continue to contribute to the material and spiritual happiness of humanity and society.”

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