Japan Airlines returns to profit for HY1

Japan Airlines (JAL) has ended a loss-making period during the pandemic and produced both an operating and net profit for the first six months of FY23. The airline has raised its full-year guidance. JAL reported a net profit attributable to shareholders of ¥61.671 billion compared to ¥-2.158 billion between March and September last year. Revenues were up to ¥820.9 billion from ¥618.5 billion. Operating expenses increased to ¥736.7 billion from ¥637.4 billion, with fuel costs up by 109.8 percent to ¥170 billion. The result is an operating profit of ¥88.387 billion, up from ¥-4.120 billion last year, and an EBIT margin of 11.1 percent. The results confirm a trend seen in the first quarter of FY23. Japan Airlines generated the highest revenues on its international network or ¥314.4 billion, up from ¥163.2 billion. The number of passengers grew by 189.1 percent to 3.3 million, with capacity in available seat kilometers up by 144.7 percent to 23.7 million. Yet, passenger numbers are still at 65 percent of pre-pandemic levels. Revenue from domestic operations increased by 131.8 percent to ¥275 billion, up from ¥208.6 billion. Some 17.5 million passengers flew on the domestic network, up 127.8 percent year on year. ASKs grew 101.1 percent to 17.6 million. Domestic pax numbers have recovered to 90 percent of 2019 levels. Competition with ANA was fierce, but JAL was able to attract passengers through special offers and price stimulation. Cargo revenues were down 53 percent to ¥66.9 billion from ¥126.2 billion, with ¥50.6 billion earned on international routes. Tonnes carried was 360 compared to 374 tonnes in FY22, with volumes reaching 106 percent of 2019 levels. “While the tightness of global supply and demand has been resolved, we have focused on the transportation of high value-added goods such as pharmaceuticals through our high transportation quality, as well as maximizing volume, particularly between Asia and North America, by utilizing both our own and other companies' supplies. Through these efforts, we have maintained revenue higher than pre-pandemic levels.” ZIPAIR and Spring Japan turn in a profit JAL’s subsidiary airlines ZIPAIR, Spring Japan, and Jetstar Japan performed better, producing an operating profit/EBIT of ¥2.7 billion. ZIPAR generated ¥24.9 billion in revenues from 541K passengers compared to ¥7.4 billion and 162K in the same period last year. ASKs grew 74.7 percent to 3.7 million. September was a good month when the airline carried one million passengers. ZIPAIR now flies to eight destinations in the US and Asia, having added San Francisco and Manila to the schedule this summer. Spring Japan generated ¥6.6 billion in revenues, up from ¥3.6 billion. Passengers carried grew to 390K from 208K, ASKs were up by 70.1 percent to 553K. The low-cost airline is heavily focused on China and continues rebuilding the network. Spring Japan now offers three daily flights to China. Challenges remain While demand is recovering well, JAL is facing several challenges: “The surrounding environment is becoming increasingly severe due to such factors as the weak yen, high fuel prices, inflation, a shortage of human resources, disruptions in the supply chain for aircraft parts and other products, and unstable global conditions. The JAL Group will respond to high fuel prices and raw material costs by improving unit prices through strengthened revenue management and further cost reductions.” At the same time, the Japanese labor market is suffering from shortages. It is actively recruiting new employees but has also established a new Airport Ground Handling Association with stakeholders across the air transport industry, in order to be prepared for the continued growth in demand. JAL welcomed 2.000 new staff in April, the first time in three years that it grew its workforce again. Japan Airlines revised its full-year guidance upward and is now expecting revenues to grow by 26 percent to ¥1.684 billion, of which ¥1.339 billion will come from the full-service carrier. The outlook for the low-cost airlines has been revised downwards, with revenues down by ten percent to ¥71 billion. Yet, JAL is guiding a full-year operating profit up thirty percent at ¥130 billion and a net profit up 25 percent at ¥80 billion. The airline plans to raise dividends from ¥40 to ¥60. JAL will take delivery of its first Airbus A350-1000 in the coming weeks for introduction on the network before the end of this year.

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