In March 2005, the JAL Group received a Business Improvement Order requiring steps to ensure safety from Japan's Minister of Land, Infrastructure, Transport and Tourism. Since that time, the Group has undertaken initiatives to strengthen safety measures and to reform its corporate culture. In this way, we have been working to raise safety awareness among employees.

One such effort is the elimination of disciplinary action for human errors. We established a policy to exempt human errors from disciplinary action when it is determined that the error occurred despite sufficient attention being paid. The aim of this policy is to place priority on discovering causes and preventing reoccurrence of errors. Furthermore, we have been striving to strengthen cooperation between different workplaces and occupations in order to improve communication, notification and reporting systems. As a result, the trust shared by employees and the company is deeper now, and the quality of problem and error reporting has improved significantly. I was able to sense a sincere improvement in the safety awareness among employees.

Then, at the end of fiscal 2007, there was a series of problems at Shin-Chitose and Komatsu Airports involving violations of control-tower instructions. These problems happened despite our ongoing efforts to build new systems and reform awareness throughout the Group. This made it all too clear to me that we can never be satisfied with human error prevention initiatives to prepare for future problems, but must maintain a sense of urgency about safety every single day.

The air transportation business is one that is highly dependent on human resources, not only flight crew, but also cabin crew, maintenance staff, and other positions. In order to ensure safety in the air, the safety awareness of every employee, and the pride and satisfaction in their work, are all extremely important. I believe that when employees carry out their work with initiative and enthusiasm, this leads to an improvement of safety, and it can also result in better on-time performance and customer satisfaction. These days, more people outside the company are telling me that JAL employees have improved, which is very encouraging. We intend to continue making concerted efforts to provide customers with even greater safety and reliability.

I have always thought that there are two jobs that the top management of a company must perform. One is to carefully prepare management strategies. The most important role of the top management is to get a clear picture of a company's future and the direction the business should take, and then create a strategy to achieve targets.

The other job of the top management is to ensure that people on the front lines are fully aware of the business strategy, and that the necessary environment is created for employees to achieve their targets. Otherwise, a business strategy can become just a pie in the sky.

I believe that a company is the sum total of its individual workplaces. Hideto Kawakita, the Representative of the International Institute for Human Organization and the Earth (IIHOE), always advocates the strengthening of workplace abilities. He said that, "Companies with active employees on the front lines are able to address multiple issues including CSR, quality control, and cost reduction, all at the same time."

This is what the JAL Group is striving for. When frontline employees notice a problem and take the initiative to resolve the problem, this can help strengthen the company in various ways including safety, quality control, customer satisfaction and CSR. Management needs to carry out decision making in a timely manner in order to support an environment where frontline employees can really make a difference.

In other words, strengthening workplaces is not something that can be done entirely from the top down. Currently, an employee-proposed and led initiative called "JAL Tomorrow" is being carried out in order to create a vision for JAL's future. By the end of fiscal 2007, Group employees had submitted 11,596 proposals and comments concerning the kind of company they want JAL to become, the kind of airline they want to work for. I was very surprised by the number of responses. It is fantastic that employees created their own initiative to help JAL become a company that will be more trusted by customers. The management team and I will continue to support this initiative in every way possible.

The aviation industry reportedly is responsible for some 2% of global emissions of carbon dioxide. As a member of this industry, we feel that the percentage is too high. Naturally, we have to think differently about CO2 emissions than companies involved in businesses with low CO2 emissions. Irrespective of the level of attention being paid to the environment by the public, at the JAL Group, environmental initiatives must be a core management issue, not a peripheral one.

While the level of CO2 emissions may be high, any reduction measures taken will have a big impact. In 2002, we announced a target to reduce our CO2 emissions by 20% by 2010 (compared with 1990 levels), and in fiscal 2007, we had already reduced them by 16%. Moreover we reduced total emissions by about 20 million tons in the last three years. Going forward, we will continue to strive for emissions reduction by increasing daily efforts for fuel efficiency improvement and energy saving. However, I think that more fundamental initiatives will need to be taken by the aviation industry in order to reduce our environmental impact.

One such initiative involves aviation hardware. The International Air Transport Association (IATA), together with aircraft and engine manufacturers, as well as airlines, has now begun an effort to promote the development of environmental technology for aircraft, by focusing on bio-fuels and lighter aircraft.

Another initiative that we are investigating is using smaller aircraft. By carefully selecting the aircraft model according to the number of passengers, we can improve the passenger load factor. The passenger load factor for the JAL Group is currently around 65% on routes inside Japan, and 70% on international routes. As the factor goes up, passengers will have to get used to seeing more people in the cabin, but I expect that these kinds of initiatives will have a major impact when it comes to reducing CO2 emissions.

Meanwhile, the JAL Group has already carried out initiatives not seen anywhere else in the aviation industry, including participating in global warming studies by spotting and reporting wildfires, and by taking atmospheric measurements using our aircraft. In fiscal 2008, JAL put a Senior Managing Director in charge of promoting environmental protection activities in our business activities, and also established a Global Environment Committee, which I chair. We also announced the Sky Eco declaration in April 2008 to strengthen our environmental initiatives. As a symbol of our commitment to the environment, we operate an airplane with a green tail, and all employees are sharing in the effort to accelerate and carry out specific environmental activities.

We have established a Commitment to Society (JAL Group Code of Conduct). It reflects the determination of all JAL Group employees to carry out activities as a corporate citizen that earns the confidence of society and the market, based on fair and transparent competition. Nevertheless, we have been investigated by the anti-monopoly authorities of several countries on suspicion of playing a role in a cartel to fix rates for international air cargo. In April 2008, JAL reached a plea agreement for a criminal fine with the U.S. Justice Department. We also set up an allowance to pay for any fine to be imposed by the EU authorities. It is very regrettable that this situation was allowed to happen, and I offer my deepest apologies to our customers and to society.

Compliance is more than merely adhering to the law, it also involves following internal rules and public expectations, as well as meeting the demands of society. We take the recent rulings very seriously, and believe very strongly in adhering to the antimonopoly and related laws. Therefore, I promise to further strengthen compliance efforts at JAL.

Since Japan is an island country, the people who live here find it convenient to travel by air when going overseas. Today, amid the globalization of economies, airlines have an important social mission as a means of transportation for a portion of economic activities and as part of daily life for many citizens. The JAL Group is very thankful to be entrusted with such a social mission. This is because by ensuring safety, reliability, on-time performance, and comfortable air travel, JAL is contributing to the smooth development of society, and thereby fulfilling its social responsibilities as a company. In fact, this is the social reason for JAL's existence, and it is the motivating force behind our employees.

With the development of the Asian economic region in recent years, the number of people traveling from South Korea to Japan rose to 2.6 million, surpassing the number of people traveling in the opposite direction (2.2 million) for the first time. The number of passengers flying from Taiwan to Japan was 1.3 million, and has exceeded the opposite flow of travelers since 2003. After the expected easing of visa requirements for Chinese visitors to Japan, a rapid increase in visitors from China is anticipated in the near future.

Past economic development in Japan has allowed the Japanese to enjoy more opportunities for overseas travel. Now, with rapid economic development in other parts of Asia, Japan is in the position to welcome more Asian visitors. This means that the nature of Japan's internationalization is slowly changing. Naturally, harmonious international exchange in the private sector helps lay the foundation for peace between nations. This is why I believe that the JAL Group needs to further internationalize its air transport services, and promote new systems for welcoming overseas visitors to Japan.

Companies cannot exist unless they are needed by society, and they must live up to the standards society expects them to fulfill. With our continuous commitment to safety and quality, and the confidence and pride in the quality that we provide as the wings that join Japan with the rest of the world, the JAL Group will strive even harder to become a company that earns the confidence and fulfills the expectations, not only of customers in Japan, but in the rest of Asia and around the world.