JAL Group reports consolidated half-year results

Japan Airlines Corporation has reported consolidated half-year results of the JAL Group for financial year 2006, the period from April 1, 2006 to September 30, 2006.

The group’s revenue in the first half of FY2006 increased by 37.6 billion yen to 1,150 billion yen, up 3.4% on the same period last year. Route network restructuring and aircraft downsizing contributed to the 2.9% year-on-year improvement in JAL’s international passenger revenue, which increased by 10.2 billion yen to 370.7 billion yen.

The airline recovered market competitiveness in Japan by implementing a series of measures, including the launch of promotional campaigns and the expansion of the number of Class J seats, which helped to stimulate domestic passenger demand. As a result, domestic passenger revenue was up by 5.3 billion yen (1.6%) to a total of 345.8 billion yen.

During the first half of FY2006, total operating costs were 1,141.8 billion yen, 45.2 billion yen (4.1%) up on the same period in FY2005. Despite a 27.9 billion yen increase in the airline’s fuel bill compared to the same period last year, steady cost reform coupled with the introduction of contingency measures, such as fuel consumption reductions, fuel surcharges, and a 10% basic wage reduction, helped to limit the overall increase in operating costs.

In the first half of FY2006, the JAL Group posted a net profit of 1.5 billion yen, compared to a 12 billion yen net loss in the previous year, a net income improvement of 13.5 billion yen.

International passenger traffic: As a result of route network restructuring and aircraft downsizing outlined in the JAL Group’s recent medium-term business plans, supply measured in available seat kilometers (ASK) decreased by 10.8% when compared to the same period last year. Demand in terms of revenue passenger kilometers (RPK) was stagnant on Oceania and Hawaii routes, but was strong on US mainland, Europe, South East Asia, and Korea routes. Passenger demand on China routes fully recovered from the effects of anti-Japanese demonstrations held in China in April 2005. Overall there was a decline in passenger demand (RPK) of 6.1% when compared to the same period last year. The international flight seat load factor for the group was up 3.5 points on the previous year to 71.4%. Unit price increased by 9.5% compared to the previous year, mainly due to a revision of fares and fuel surcharges. Revenue over the half year increased by 10.2 billion yen to 370.7 billion yen, up 2.9% on the previous year. The total number of passengers carried was 6,760,569.

Domestic passenger traffic: Compared to last year, corporate account passenger traffic was stagnant. However, individual passenger traffic as a whole remained the same, mainly due to the implementation of a series of measures including the introduction of discount fares, and the launch of seasonal promotional campaigns, which helped to stimulate demand. The number of passengers traveling in tour groups declined when compared to the previous year, due to fare increases, and also as a result of the effect the Aichi Expo had in boosting demand in Japan during 2005. During the first half the number of Class J seats - JAL’s domestic business class seat - was increased on aircraft to meet customer demand.

Supply measured in available seat kilometers (ASK) increased by 0.6% on the previous half year, and demand measured in revenue passenger kilometers (RPK) increased by 0.2%. Due to rising fuel costs, fares were revised resulting in a year-on-year increase in unit price of 1.3%. As a result, domestic passenger revenue was up by 5.3 billion yen (1.6%) to a total of 345.8 billion yen. The total number of passengers carried was 22,190,898.

International cargo traffic: Though demand from overseas including China was weak on the whole, there have been signs of recovery since summer. Demand from Japan was generally strong, with a high growth rate to China. Measured in revenue cargo ton kilometers (RCTK), worldwide international air cargo demand decreased by 2% on the previous year. With the revision of the fuel surcharge, yield rose by 10.4%, and revenue increased by 8.1%, up 6.9 billion yen on the previous half year. Volume carried was 379,186 tons, down 2.7.% on the year before.

Fuel costs: The price of Singapore kerosene from April to September 2006 averaged US$84.9 per barrel versus an average of US$69.6 per barrel for the previous half year. JAL managed to limit the full effect of increasing fuel prices by conducting a wide range of measures including fuel hedging, and fuel consumption reductions. As a result, the fuel bill for the half was 209.2 billion yen, 15.4% increase or 27.9 billion yen up on the previous year.

Maintenance costs: Maintenance costs in the financial half year increased to a total of 64.6 billion yen, up by 12.4 billion yen or by 23.8% when compared to the previous year, mainly due to planned B777 PW4000 engine modifications.

Foreign Exchange rate: The average US$ - Yen exchange rate in the first half of this year was 115.5 yen compared to 108.5 yen in the previous year, effecting operating income by -10.2 billion yen. However, the negative effect of the exchange rate was limited, by US dollar hedging which enabled the group to post a foreign exchange profit of 7.6 billion yen for non-operating income.

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