Japan airlines company, LTD, was established on the 1st of August 1951.

In 1952
they were in urgent need of capital, which is when the government got involved and doubled
their capital in exchange for 50% interest on the company. Thanks to that investment, the
company was soon able to launch their first international flight in 1954 and issued their first
public stock in 1956​. ​After many years of being the main Japanese airline, JAL came very
close to the worst when they suffered steep financial losses. Indeed, after the financial crisis
the airline went on staff cuts and route cutbacks in order to reduce cost. To help them get
their neck out of the water they received ​¥100 billion through capital injection and credit
from the Japanese Government. Shares of JAL were delisted from the Tokyo stock
exchange on the 20th February 2010. ​Since relisting in 2012, the share price has
fluctuated throughout the years and reached its optimum of 4,710 JPY on the 7th
August 2015. ​They now have over 35’000 employees and over 13 billion$ revenue in 2019.

Favourable demand for JAL flights increased in 2019 with Japan hosting the
Rugby World Cup, which attracts approximately 600,000 visitors from worldwide
destinations. With the first Covid-19 case being reported in Japan in January 2020,
the share price has continually shifted downward.

Japan Airlines revenue for the twelve months ending June 30, 2020 was $7.095Bn, a
36.46% decline year-over-year. We can see this further by looking at the quarterly figure of
revenue from the 1​st​ of April 2020 to the 31​st​ of June 2020, the revenue for this quarter is
$0.71Bn which is 74.93% lower than the same quarter in the previous year. This vividly
illustrates the impact Covid-19 has had on Japan Airlines. One of the factors as to why the
revenue had decreased drastically was because Japan Airlines cut domestic flight capacity
between April 23 and May 6 by 48% With worldwide restrictions on travel, airlines in general
have been adversely impacted with the diminishing level of demand which in turn, affects the
revenue. To attempt to counteract the reduction in revenue,​ JAL has shown strength by
diversifying their main use of ferrying passengers to transporting much needed
supplies.

The return on assets for Japan Airlines in the year ending 30​th​ of June 2020 is -3.3%
which is a decline of over 6% from the previous year. This may not seem like a good return
but given the current external factors impacting the airline industry, Japan Airlines is faring
better than other airlines that hold a similar market cap. When comparing this decrease of
return on assets with American Airlines Group (AAL), we can see that AAL has had a
decrease of over 12% from the previous year which is double that of Japan Airlines. We can
observe on the graph that the general trend for airlines operating from Japan isn’t as bad
as America. Indeed, we can see ANA and JAL who are the two major Japanese airlines
having a ROA which is more or less 3% higher than American airlines. Which is mainly due
to the fact that Covid has been of greater impact in the US than in Japan. This is ​Return on 
assets for the 12 months ending June 30th for each year. 
The current ratio for the year ending 30​th​ June is 1.37, this means the company seems to be
in a good liquidity situation. However, comparing the ratio to the previous year (1.61), we can
see there has been a decline of almost 15%. The issue here lies with the decrease of current
assets because the current liabilities had not increased by a great amount compared to the
decrease of the current assets – from $6.06Bn to $5.12Bn. From the balance sheet, we can
see there has been a significant reduction in annual receivables of 41.05% from the previous
year. This can be linked to the fact that at the low point in April, global air travel was roughly
95% below 2019 levels. This explains why the passenger revenues for all airline companies
have decreased drastically.

Further to this, there are some non-financial factors that impact JAL. Over a
long dispute, Japan has built-up political tensions with China over a number of
Islands and waters that are currently under Japan's control. China has developed an
interest in this particular area due to the untapped oil, natural gas, fishing grounds
and shipping port potential. The disputes between the countries further challenges
JAL with threatening to impact flight passageways over the East China sea. The
result of this will see JAL needing to raise the prices of flights in order to turnover a
profit and compete with competitors such as ANA. This is especially difficult given
the current economic climate which has led to numerous job losses and reduced
income.

From the perspective of corporate development, the strategic outlook can be divided into two
segments: ​financial and environmental.

JAL aims to be an international airline with more than 500 destinations and over half of
revenue from foreign routes with the following key ratios and measures as targets:
- Efficiency​: Return on equity = 10%; Increase Return on invest capital through
sustainable profit growth
- Capital:​ Maintain 2.6 months revenue as cash, Injection corporate pension fund,
- Investor​: Raise dividend payout ratio
About ⅔ of the total investment will be used for growth investment. They have to flexibly
adjust the flight numbers to save operational costs such as fuel or landing fees. Fixed cost is
also reduced by changing personnel allocation or through company-wide cost management.
The firm’s proactive measures include financing through loans(300 billion Yen).

Besides operating data, JAL also focuses on the environment. Since the concept of
Sustainable Development Goal (SDG’s)​ was adopted in September 2015, the business has
submitted over 420 initiatives under four key areas of action: Environment, People, Regions
and Governance. It can be foreseen that future issues will be added to the list. On June
19th, JAL launched the third stage of​ Zero emission of CO2 project​, which targets to achieve
growth without increasing CO2 emission after 2035 and zero emission by 2050. Since 2005,
the firm had reduced CO2 emissions by 19.4% by the end of 2018. The methods include
using fuel efficient fleets and optimising fleet plans.
Japan airlines faces various risks as a multinational company. First of all operational
risks are always an area of main concern for Japan airlines, since they mainly
consist of safety risks including issues such as the possibility of ​aircraft accidents
and safety issues on specific aircrafts.This is evident in the fact that in 1985 the
deadly crash of one of the airlines planes resulted in a ​25% decrease in domestic
traffic as most passengers considered a switchin to All Nippon Airways as a safer
choice and also there was the need to pay a large amount of money as
compensation to the families,emphasizing the huge impact that the fulfillment of such
risks can create

The company is trying to deal with such risks through its Risk management system
and its Group operational safety promotion committee which aims to analyse assess
and respond to expected risks on safety of flights as well as to make sure that safety
processes and controls are carried out properly before each flight.

Accounting risks are also key for the airline and its industry and are more prominent
specifically in 2020 where the pandemic has resulted in severe obstruction to the
operations of the firm. The ​ need to appropriately assess possible changes on fleet
groundings, travel bans, economic uncertainties and market volatility becomes more
important than ever as accounting conclusions may be affected so accounting
standards must be followed through adjustments to truthfully assess the financial
performance for the year

Thus the expected reaction to risk of the firm may be to change or revise
depreciation methods as aircraft maintenance levels may change and re-assess
existing operating leases such as payment schedules, options to purchase or
sub-lease etc. All these adjustments are expected to create a significant change in
the financial statements of the firm for the next year.

Finally, external unforseen risks caused by outside factors such as emergency

situations can affect the firm. Such risks can include wars, disasters or pandemics
where the airline may face distractions to the smooth running of its operations. Such
risks are more relevant than ever during the next financial period given the 2020
coronavirus pandemic.
To deal with such risks the firm has introduced its ​Business continuity plan a plan
designed to allow the firm to continue business as regular even in emergency
situations through collaborating with regulatory bodies to follow guidelines ensuring
both staff and crew protection while maintaining the transportation. During the
coronavirus pandemic the plan was put into action creating the JAL flysafe hygiene
measures consisting of hand sanitizing stations, the compulsory wearing of face
masks. Therefore, although such unforeseen risks can reduce the operations of the
firm up to a great extent as the quick and easy spread of the disease has led to
airport closures and lower willingness to travel;the plan is trying to eliminate the
impact of this fear by making customers feel more safe and thus can contribute to
allow the firm to continue its operations with greater confidence and thus although
incomes fall to a great extent,the plan can help for a less severe reduction.