May 10, 2007

Struggling JAL forecasts return to profit

TOKYO : Japan Airlines Corp. on Wednesday forecast a return to profit in the current year as it benefits from rising passenger revenue after suffering two straight years of losses.

Asia's largest carrier, which has been axing thousands of jobs in a restructuring drive, predicted a net profit of seven billion yen (58.39 million dollars) in the financial year to March 2008.

Japan Airlines (JAL) said it benefited from more profitable trips by business travellers, particularly on routes to Asian destinations such as China, which is Japan's top commercial partner.

"The recovery trend in international flights seems to be taking root," JAL executive officer Yoshimasa Kanayama told a news conference.

JAL missed its original goal of returning to the black in the last year to March 31, reporting a net loss of 16.27 billion yen, roughly in line with a preliminary estimate released last week.

But it reported operating profit of 22.9 billion yen, some 76 percent higher than it originally predicted and a sharp improvement on the 26.8 billion yen loss the previous year.

Total operating revenue rose 4.6 percent from the previous year to 2.30 trillion yen.

"At the operating level we greatly surpassed our original target," JAL managing director Tetsuya Takenaka said.

The company expects to save some 50 billion yen in the current year by slashing personnel costs, Takenaka said.

JAL has slashed a series of routes as part of its restructuring but it has increased flights on short and medium-haul routes, particularly in China.

"Although the number of our seats on international flights declined due to suspension of flights to Micronesia and other resort destinations, the number of our customers on international flights didn't decline that much, which means we became more cost-effective," said Kanayama.

JAL has in recent years has taken a beating from rival All Nippon Airways, in part due to a string of safety scares at Japan's largest airline.

But JAL said it was also rebounding at home, with more individuals travelling and taking advantage of promotional fares amid Japan's longest sustained economic recovery since World War II.

"We expect to have this pace of growth the current year, attracting more profit-bringing customers with the introduction of first-class service on domestic routes," Takenaka said.

JAL said it has also gained from service improvements on international routes, including the start of a "premium economy" class, and membership in the Oneworld alliance of international carriers.

Revenue per customer increased 13 percent from the previous year in international flights and rose two percent from domestic flights.

JAL blamed special factors for the past year's losses, including an extraordinary loss of six billion yen from its early retirement plan and the removal of a deferred tax asset from its balance sheet.

"The auditor wanted to be strict on accounting rules, considering wary eyes of the general public after recent accounting scandals" by other companies, Kanayama said. - AFP/de


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