Friday August 7, 11:53 AM
Japan Airlines announces billion-dollar loss
By Miwa Suzuki
TOKYO (AFP) - Japan Airlines, Asia's biggest carrier, said Friday that it lost one billion dollars in the previous quarter as the global economic downturn and swine flu fears caused a slump in passenger numbers.
The group announced drastic cuts to its flight services as it braces for a second straight year in the red.
JAL (Berlin: JAY.BE - news) 's net loss ballooned to 99.04 billion yen (1.0 billion dollars) in the April-June quarter, from 3.41 billion yen in the same period of 2008.
The carrier swung to an operating loss of 86.11 billion yen from a year-earlier profit of 3.91 billion yen. Revenue slumped 31.7 percent to 334.90 billion yen.
"Our earnings results turned out to be very grim," said JAL senior vice president Yoshimasa Kanayama. "We strived to cut costs. But it was not enough to offset the drop in income."
JAL, which has announced more than 11,000 job cuts since 2005, maintained its forecast for a loss of 63 billion yen in the year to March 2010, after a 63.2-billion-yen deficit last year.
But it said there were some glimmers of a recovery in travel by leisure passengers thanks to receding swine flu fears and lower fares.
"The first-quarter results were certainly severe. As far as revenue is concerned, however, there are somewhat bright signs for September onwards. Various cost cuts will also take effect," Kanayama said.
But "business demand is unlikely to recover sharply," he added.
Passenger demand on JAL's international routes plunged 18.6 percent in the first quarter while domestic routes saw a fall of 12.4 percent.
Revenue from international passengers nearly halved to 97 billion yen while domestic sales fell about 15 percent to 131 billion yen.
JAL announced a major overhaul of its flight plan as part of its efforts to return to the black.
It will reduce services on eight international routes within Asia from October 25 and suspend flights between Nagoya in central Japan and Paris as well as between Nagoya and Seoul.
It will also cut the number of flights on six domestic routes and downsize to smaller planes on 14 international passenger routes and one domestic route.
JAL will need to make further cutbacks to return to profit because the outlook for demand is bleak, Credit Suisse analyst Osuke Itazaki said.
"Business (conditions) will likely remain severe. The environment for the aviation industry is unstable. People say it's the age of globalisation but the number of outgoing passengers has been falling since 2001," he said.
"The pie is not getting any bigger while the industry has been hit by unforeseen events at short intervals," he said, referring to the SARS scare, surges in fuel costs and other negative developments.
JAL is not the only airline suffering. All Nippon Airways (Frankfurt: 861920 - news) , Japan's second-largest carrier, last week posted a net loss of 29.2 billion yen for the quarter to June.
ANA aims to end the year to March 2010 in profit thanks to cost cuts and an expected gradual improvement in passenger numbers, but "it's not an easy goal to achieve," Itazaki said.
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