Annual Report Japan Airlines Corporation at a Glance Consolidated Financial Highlights Consolidated Operating Highlights Message from the Management Interview with the Group CEO Dream Skyward II: Stepping-stone to become "the world' s No.1 airline group" Review of Operations Corporate Social Responsibility (CSR) Activities Management's Review and Analysis of Financial Position Consolidated Balance Sheets Consolidated Statements of Operations Consolidated Statements of Stockholder' Equity (Note8) Consolidated Statements of Cash Flows Notes to Consolidated Financial Statements Report of Independent Auditors Consolidated Subsidiaries JAL and Its Subsidiaries and Affiliates Directory JAL Group Route Network Board of Directors Investor Information

Dream Skyward II: Stepping-stone to become “the world’s No.1 airline group”

Increasing the soundness of the Group’s financial condition

Concrete measures in the medium-term business plan 3

The restoration of the Group’s financial soundness is a pressing issue for ensuring that corporate value is maximized. This entails securing better returns on investment, reducing investment, and cutting interest-bearing liabilities, and it is on these three points that the JAL Group will focus the improvement of its balance sheet. In the medium-term business plan, concrete measures are set out under such categories as increasing aircraft operating efficiency, restricting investment, and reducing unrecognized retirement benefit obligations, and corporate value will be maximized by achieving the targets in these areas.

Increase in aircraft operating efficiency

In domestic passenger operations, by enhancing the efficiency of crew training and aircraft maintenance, the operation of aircraft will be increased substantially, with the aim of increasing operating efficiency in fiscal 2006 by 5% compared with fiscal 2003.

Restriction of investment

The amount of investment will be reduced substantially, including a ¥100 billion reduction in fiscal 2004, a ¥48 billion reduction in fiscal 2005, and the minimization of investment in aircraft. However, investment in items that will enhance competitiveness, such as Class-J seats, and in IT, is planned to be continued.

Reduction of unrecognized retirement benefit obligations

The revision of the JAL International discount rate from 3.5% to 2.7% caused unrecognized retirement benefit obligations at the end of fiscal 2003 to rise by ¥78 billion. To improve that situation, a new retirement benefit scheme is to be introduced in fiscal 2004, cutting unrecognized retirement benefit obligations by ¥33 billion.

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