Japan Airlines reduces losses in 4th quarter

Saturday 10th May, 07:00 AM JST

TOKYO —

Japan Airlines reduced losses in the January-March quarter from the same period last year on cost cuts but forecast lower profit Friday for this fiscal year, blaming soaring fuel costs and intense competition.

The nation’s top carrier, also known as JAL, had a 3.53 billion yen loss for the fiscal fourth quarter, better than the 6.89 billion yen loss the company had the same period the previous year.

Sales fell 6.8% to 529.2 billion yen from 567.8 billion yen, partly because JAL has been dropping subsidiaries for reform efforts, and their sales are no longer part of the statement.

Tokyo-based JAL is Asia’s most indebted carrier as well as its largest by sales.

Japan Airlines has been trying to turn itself around through job cuts, more fuel-efficient aircraft and a focus on business travelers.

Soaring fuel bills, costly early retirement packages and a tarnished image from a series of safety lapses have hurt JAL in recent years. It has struggled to win back customers who began booking with rival All Nippon Airways.

Although international business travel was relatively good for JAL in the fiscal year ended March 31, domestic passenger demand was stagnant, according to the airline.

JAL became profitable for the fiscal year ended March 31, marking 16.9 billion yen in profit, a turnaround from the 16.2 billion yen in red ink it chalked up the previous fiscal year—its second straight year of red ink.

But it is projecting a 23% drop in profit to 13 billion yen for the fiscal year ending March 2009.

Demand is expected to be slow in coming months, and JAL faces stiff competition in Japan not only from rival airlines but also the popular Shinkansen bullet train, it said.

Cost cuts that tackled rising fuel prices were behind the recent turnaround, according to JAL, offsetting some of the costs for early retirement programs and money set aside for the costs for price-fixing investigations by the U.S. and European authorities.

JAL reached a plea agreement that has been accepted by the U.S. Justice Department to plead guilty and pay a $110 million criminal fine for its role in a conspiracy to fix rates for international cargo shipments.

JAL is setting aside another 6 billion yen for possible costs for the still ongoing European investigation, company spokesman Stephen Pearlman said.

Passengers on JAL flights for the fiscal year through March totaled 55.3 million, down 3.8% from the previous year. Much of the decline came from a nearly 5% drop in domestic passenger traffic at 41.9 million.