JAL swings back to profit in FY07
12 May 2008
The Japan Airlines Group announced a significant earnings turnaround to a net profit of ¥16.9 billion ($162.1 million) for the fiscal year ended March 31, reversing a loss of ¥16.2 billion in the previous year. The Group said the reversal comes on the back of premium strategies on its international operation and route restructuring on its domestic network.
The airlines turnaround came on the back of international passenger demand, which was boosted by "premium strategies" launched by the airline over the past two years. International revenue increased 4% to ¥754.3 billion, even as domestic demand continued to be stagnant due to a reduction in supply after the airline restructured its network. Domestic revenue moved up just 0.3% to ¥677.4 billion.
The airline's focus on high-profit, high-growth routes and the increase of the role of its low-overhead international subsidiary JALways boosted income from international operations. It increased frequencies to China, India, Russia and Vietnam and also raised its profile through a greater commitment to oneworld, revamping lounges and check-in areas at Tokyo Narita's Terminal 2. It also introduced JAL Premium Economy and first class on some domestic flights.
The airline slashed operating costs 6.1% to ¥2.14 trillion and said its operating income of ¥90 billion, up from ¥22.9 billion in FY06, was the highest since the 2002 integration with Japan Air System.
It said net profit would have been higher but for a series of extraordinary losses resulting from special early retirement programmes, funds set aside for antitrust investigations by US and EU authorities and temporary depreciation costs.
FY07 passenger numbers eased 3.8% to 55.3 million while RPKs declined at the same rate to 92.17 billion. Capacity fell 4% to 134 billion ASKs, lifting load factor 0.2 point to 68.7%.
It continues its fleet rationalisation operations, with the retirement of older 747s and MD-81s, and said it would accelerate the disposal of five 747-200Fs that will be replaced by 767-300Fs on routes to China, Vietnam and Indonesia.
Going forward, JAL is forecasting a 23% drop in profit to ¥13 billion for FY09 due to escalating fuel prices and increased competition, particularly from the popular Shinkansen bullet train.
