Leaner JAL earns bumper first half profit
The airline aims to reduce its workforce by 8% by Mar-09, while it cut capacity in the latest half by 5.6% on international routes and 2.3% domestically. Investors have welcomed JAL's recent restucturing efforts, sending the carrier's shares higher.
Japan Airlines share price from Jan-07 to Nov-07
Source: Centre for Asia Pacific Aviation&Tokyo Stock Exchange
JAL is entering the traditionally weaker (loss-making) second half, however the strong first half result prompted the airline to raise its full-year operating profit forecast by 37%. This is despite an upgrade in its fuel forecast to USD100 per barrel for the second half (ending 31-Mar-08), up from USD75 in the previous forecast.
The airline also retained its full-year net profit forecast (after two consecutive years of losses), citing a write-down on retiring aircraft and reserves for potential fines by US authorities from a global price fixing probe.
JAL Director, Tetsuya Takenaka, stated, “I think things have improved, but we still need to be prepared to face various risks”. These include the rising cost of fuel and intensifying competition.
JAL’s Chief Industry Affairs Officer, NobuTaka Ishikure, told the Centre’s Aviation Outlook Summit in Singapore last week that new/expanded runway infrastructure at Tokyo’s Narita and Haneda airports (from Mar-10 and Oct-10, respectively), would provide a big boost to capacity at the nation’s dominant air traffic centre:
• Narita: Increase from 548 to 602 slots per day (+10.0%);
• Haneda: Increase from 810 to 1,114 slots per day (+37.5%), including 82 slots per day to be designated for international services.
Regulatory changes would also raise competition, according to Mr Ishikure, including the Asian Gateway Strategy (approved last week by the Japanese Government), which will see liberalised access for foreign airlines to 27 regional gateways and the promotion of Kansai and Nagoya airports as hubs for the Asia Pacific region.
LCC entry in North Asia, led by Tiger Airways in South Korea, will also accelerate competitive responses from the incumbents, with Korean Air and All Nippon Airways already preparing their own LCC units to meet the threat head-on.
JAL, now in a healthier financial position than at any point this decade, still has more work to do to prepare for this onslaught. It has an 18-month window to complete its turnaround, but the results to date are encouraging.
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