FLY INTO TOMORROW JAL REPORT 2019 Fiscal year ended March 2019 The JAL Group adopts the Corporate Policy as its universal management goal and management rationale, and established the Safety Charter as the Group’s safety policy based on the Corporate Policy. The JAL Group also established the JAL Philosophy as a mindset, values and attitude expected of all Group employees, with the hope that application of this Philosophy will lead to realization of the Corporate Policy. JAL PHILOSOPHY JAL Group Corporate Policy Part 1 In Order to Lead a Wonderful Life Part 2 To Become a Wonderful JAL Chapter 1 The Formula for Success Chapter 1 Each of Us Makes JAL What It Is The JAL Group Will: (The Formula for Life and Work) Each of Us Makes JAL What It Is The Result of Life and Work = Attitude × Discuss Frankly Effort × Ability Lead by Example Pursue the material and intellectual growth Be the Center of the Vortex Valuable Lives Are Entrusted to Us in Our Work Chapter 2 Have the Right Attitude Be Thankful Base Criteria for Decision-Making on Put Yourself in the Customer’s Position of all our employees; “Doing What Is Right as a Human Being” Have a Beautiful Mind Chapter 2 Be Humble and Honest Have a Keen Sense of Profitability Deliver unparalleled service to our Always Be Cheerful and Positive Maximize Revenues and Minimize Expenses A Small Good Is Like a Great Evil, While a (Measure Your Inflow and Control Your Outflow) Great Good May Appear Merciless Elevate Our Cost-Consciousness JAL REPORT 2019 Wrestle in the Center of the Ring Pursue Profit Fairly customers; Grasp Matters Simply Manage the Company Based on Accurate Figures Possess Opposing Extremes Chapter 3 Unite Our Hearts and Chapter 3 Accumulate Tedious Efforts Make the Best Baton Pass with Passion Align Mental Vectors “Workfloor” Management Work Earnestly Follow the Merit System Increase corporate value and contribute to Accumulate Tedious Efforts Work with Voluntary Attention Fire Yourself Up Chapter 4 Possess a Fighting Spirit the betterment of society. Strive for Perfection Maintain an Ardent Desire Never Give Up Until We Succeed Chapter 4 Ability Will Improve Boast and Make It Come True Possess True Courage Ability Will Improve SAFETY CHARTER Chapter 5 Be Creative in Our Work Today Should Be Better Than Yesterday, Tomorrow Better Than Today Conceive Optimistically, Plan Pessimistically, and Safety: The protection of lives. Execute Optimistically Think Through to Visualize the Results This is the commitment and basic foundation of business continuity for the JAL Group. Decide and Act with Speed Face Challenges with Courage We take to heart our mission and responsibility as safety professionals to ensure a safe Aim High operation on every flight with the best of our knowledge, skills and abilities. To accomplish this, we will act according to the following principles. ● Stop immediately when safety concern arises. ● Comply with rules and strictly follow standard operating procedures. ● Always check and confirm; never rely on assumptions. ● Promptly communicate information without omission to ensure safety. ● Deal with problems quickly and appropriately without underestimation. 01 EDITORIAL POLICY CONTENTS The JAL Group has published this JAL Report 2019 to inform stakeholders about business Message from the President 04 Message from the President activity outcomes in the previous year, medium- and long-term management strategies, and to provide an understanding of the Group’s pursuit of both economic value and social value and efforts to achieve sustainable growth. Business Activities and Strategy 16 History of the JAL Group 18 Value Creation Process Period covered by the report JAL Group’s Basic Stance on Value 20 Primarily April 2018 to March 2019 (fiscal 2018) Creation Medium Term Management Plan - 25 Scope of the report Rolling Plan 2019 This report covers 142 JAL Group companies, comprising Japan Airlines Co., Ltd., 83 subsidiaries 32 Financial Strategy and 58 affiliates. 36 Human Resources Strategy Reference guidelines 38 JAL Group Business Activities Value Provided by JAL Group — The International Integrated Reporting Framework issued by the International Integrated 44 Reporting Council (IIRC), and the Guidance for Collaborative Value Creation issued by the Commitment to Quality Ministry of Economy, Trade and Industry, were used as references in creating this report. The 48 Risk Management JAL REPORT 2019 GRI Standard issued by the Global Reporting Initiative (GRI) was also used as references for ESG 50 Financial and Non-Financial Highlights information. ESG Management 52 ESG Management Approach 54 Environment 59 Customers and Regions 61 Human Rights, Diversity & Inclusion 65 Corporate Governance 77 Supply Chain Initiatives Date of publication September 2019 Financial Data / Corporate Information 82 Financial Data — Eight-year Summary JAL corporate website Evaluation and Analysis of Financial 84 Conditions 94 Consolidated Financial Statements Offers a comprehensive insight into JAL’s business approach and activities in general, as well as 117 Consolidated Subsidiaries investor and CSR information. 118 ESG Data About forward-looking statements This report includes forward-looking statements about JAL Group businesses and outlooks. These statements reflect 120 International Route MAP current JAL Group analysis related to existing information and various trends. Actual performance may differ from current forecasts as a result of business risks and uncertainties. 122 Domestic Route MAP Stock Information / Corporate 123 Information 02 03 MESSAGE FROM THE PRESIDENT Our Approach to Safety and Sense of Security used for pre-flight alcohol tests with the new model that were more precise and prevented improper testing. At the In fiscal 2018, the JAL Group was involved in the causation time of the London incident, we had completed distribution of serious problems and suffered a considerable loss of of the new detectors to all airports in Japan but distribution trust from its customers and stakeholders. In October 2018, to overseas airports was considerably behind schedule and an alcohol-related incident by a copilot caused significant had not been completed. Also, even though a large volume Message from the President concern and inconvenience to society. As President of the of historical test data had been missing, nobody noticed JAL Group responsible for safety, I feel deep remorse and and the situation was left as it was. On December 21, 2018, express my sincerest apologies. this series of incidents resulted in the issuance of a Business Maintaining flight safety is the greatest mission of the JAL Improvement Order to Japan Airlines by the Ministry of Land, Group. Precious lives of our customers are entrusted to Infrastructure, Transport and Tourism. us in our business. This means that the behavior of every Since then, we interviewed all persons concerned, conducted employee can pose a risk to the lives of our customers. reproduction experiments and verification tests as much as This alcohol-related incident threatened safety, the basic possible, and based on the findings, established recurrence foundation of our business, and betrayed the trust of prevention measures such as improvement of tests including Business Activities and Strategy and Activities Business society, which is totally unacceptable. distribution of new breathalyzers, and awareness reform What I find most regrettable is that our organization including education to increase knowledge on alcohol, and should have and could have prevented such an incident submitted a report to the Civil Aviation Bureau on January from happening. As a group of safety professionals, we 18, 2019. are determined to restore public trust by identifying inherent issues within the organization and engaging all 2016 Violation of laws and regulations by cockpit crew (Komatsu incident) After flight duty, a copilot went drinking with the captain at the JAL REPORT 2019 organizations in working towards resolving those issues June 27 destination (Komatsu), and assaulted the captain and allegedly interfered quickly and thoroughly. in the execution of duties of with a policeman who came to the scene. He was immediately arrested. July 13 Serious Reprimand 2017 • 20 alcohol-related incidents occurred caused by alcohol consumption by cockpit crew. Background to Receiving the Business • The copilot in the London incident was suspended from flight duty ManagementESG immediately before duty twice in a row due to poor health. Improvement Order • A cabin attendant involved in an onboard alcohol consumption incident 2018 was suspected of alcohol consumption while on duty. On October 28, 2018, a copilot assigned to JAL flight 44 May 22 Inappropriate conduct by a cabin attendant A cabin attendant consumed alcohol in a lavatory during duty aboard JAL underwent an alcohol (breath) test conducted by the London flight 8791 (Honolulu-Kansai) police authorities before starting duty. This was because the June 6 Serious Reprimand driver of the bus carrying the copilot notified the authorities October 28 Scheduled flight delayed due to alcohol consumption by cockpit crew (London incident) after noticing alcohol on his breath. The test showed a breath A copilot assigned to JAL044 (London-Haneda) was arrested for drinking in excess of the legal alcohol limit set under British aviation law. The flight alcohol concentration that exceeded regulations defined was scheduled to be operated by two captains and one copilot but was operated with two captains, because staff simplistically interpreted the Data/ Information Financial Corporate under British law and the copilot was detained by authorities. Manual as allowing a two-pilot complement. After a further blood alcohol test conducted by the November 28 Delayed scheduled flights due to alcohol consumption by cockpit crew (flight delay) authorities, the copilot was found to have violated British The pre-flight alcohol test of a captain assigned to JAC flight 3741 (Kagoshima-Yakushima) showed that he was above the prescribed limit. law and was subsequently arrested and taken into custody. It was clear that normal operations would be hindered, and as a result a total of four flights were delayed.