The integration will create the sixth largest international airline in the world. The move is seen as a result of the dramatic slump affecting the world airline industry, especially since the September 11 terrorist attacks.Japan Airlines and Japan Air System have reached a basic agreement to establish an incorporated holding company. The new company will be formed after obtaining the necessary approvals from the government bodies concerned and the companies' shareholders.

The formal announcement was made at a press conference given by the presidents of both airlines - Isao Kaneko of Japan Airlines, and Hiromi Funabiki of Japan Air System - in Tokyo.

Both companies are prepared to establish an integrated business structure and corporate constitution capable of rapid response to national requirements and market demands to maintain and expand air transport services.

By the better utilisation of assets, cost reductions, co-operation in the investment and development of information technology systems and efficient procurement of finance, the new venture will improve the company's value and benefit stockholders further. Strengthening the corporate constitution of the new company will benefit employee security, making more use of the personnel skills of both airlines.

CONTENT OF AGREEMENT

Both companies will together establish an incorporated holding company by stock transfer, with the target date of September 2002, after obtaining the approval of stockholders at the two airlines respective annual general meetings of shareholders in June 2002.

Planned representative Directors of the incorporated holding company:

Chairman: Hiromi Funabiki, President, JAPAN AIR SYSTEM

President: Isao Kaneko, President, JAPAN AIRLINES

Company name and brand names, logo and head office location are to be studied.