- When it comes to corporate turnarounds, there’s none that shines like the Japan Airlines (JAL).
- Everything from its spectacular collapse in 2010, then its massive turnaround into one of the world’s most profitable carriers to its successful relisting is simply phenomenal.
- Interestingly, its story bears striking pre and post-crisis similarities to Kenya Airways (KQ) unfolding crisis story.
When it comes to corporate turnarounds, there’s none that shines like the Japan Airlines (JAL). Everything from its spectacular collapse in 2010, then its massive turnaround into one of the world’s most profitable carriers to its successful relisting is simply phenomenal.
Interestingly, its story bears striking pre and post-crisis similarities to Kenya Airways (KQ) unfolding crisis story. For instance, both suffered from poor financial management practices, ill-timed expansion strategies and crippling debt loads.
What’s interesting is that they all became publicly listed and then fell into insolvency within 10 years apart from each other. Expectedly, to deal with the crisis, all laid off staff, cut unprofitable routes, trimmed employee benefits and called for huge injection of public funds.
The only difference is that while one bounced back after two years, the other is still stuck in corporate restructuring confusion five years on. The question is; how did Inamori (the turnaround chief executive at JAL and founder at Kyocera) manage to do it?
First of all, corporate turnarounds are no kids play. It’s hard, folks. Really, really, hard. In fact, Inamori is reported to have declined the job offer several times before agreeing to join the airline.
Quick analysis of his efforts reveal three major points. One; re-ordering a company needs a powerful management philosophy. Simply, for any successful reconstruction to happen, company’s need a change of attitude throughout its workforce.
Inamori exercised this by urging employees to change their thinking and see things in terms of a shared ideal vision. By contrast, in my observation, a shared vision seems to be missing at KQ.
The fragile consensus (or the lack thereof) between pilots, unions, management and government testify that each of them see different visions. Moreover, the current leadership appears distanced, combative and seems not to elicit respect from its workforce.
Two; Inamori bet on culture. He believed that without a change of awareness among employees who had immediate contact with customers at the front lines of the workplace, the airline would never improve. As a result, he would often visit workplace locations and speak directly with the workers. The resulting effect is that he was able to rebuild a sense of accountability, creativity and trust.
Finally, Inamori believed that all success is providential. Stated explicitly, he believed that divine intervention gave his team the impetus and guidance through the revival of JAL.
Understandably this may sound odd considering that success in the corporate world rarely acknowledges divine help. Be that as it may, his unconventional approach speaks for itself – he helped revive the struggling airline and brought it back from the brink.
In closing, JAL’s experience answers a lot of KQ investor questions. Is a dramatic recovery possible? Is a swift government-led restructuring possible? Can KQ successfully transition from a basket-base to a profit leader? The cautious answer is yes.
But the odds are stacked up against it. Hence the list of successful turnarounds remains shorter than the list of failed ones. The truth is turnarounds are often hard to execute and that companies are complex entities with lots of moving parts.
Mr Mwanyasi is the managing director at Canaan Capital