JAL’s group profit soars amid cost cuts

by Hiroko Nakata

Japan Airlines Corp. said Friday that its group operating profit more than quadrupled to ¥90.01 billion for the business year that ended March 31, helped by its cost-cutting efforts amid surging fuel costs.

It was the highest figure for Japan’s largest airline since its merger with Japan Air System Co. in 2002. JAL also logged a ¥16.92 billion group net profit for the year, against a ¥16.27 billion net loss the previous year. Sales dipped 3.1 percent to ¥2.23 trillion.

Although the transport sector was aided by demand for international flights, JAL’s group sales fell on the sale of shares of consolidated subsidiaries, whose sales were no longer included in the group’s financial statement, it said.

“It is good that we could report this much profit as a whole group,” JAL Executive Officer Yoshimasa Kanayama said. “But we cannot be optimistic (about the future), considering rising fuel costs and the impact of the subprime loan (crisis).”

For the business year to next March, JAL expects group operating profit will slide by 44.5 percent to ¥50 billion. It also sees a 2.1 percent fall in sales to ¥2.18 trillion and a 23.2 percent drop in net profit to ¥13 billion.

Kanayama said fuel costs would rise by ¥137 billion for the 2008 business year over the previous year if Singapore kerosene, a type of jet fuel, hits an annual average of $140 a barrel.

“If it rises above $140, we would have to make more (cost-cutting) efforts, or raise the (international-flight) surcharge on fuel,” he said.

As for charges by U.S. and European watchdogs on alleged participation in an illegal cargo cartel, JAL said it had set aside ¥17.21 billion for possible penalties as a special loss.