Japan Airlines System Corp. President Isao Kaneko said that although flights to the United States and Europe are recovering from the effects of the Iraq war, SARS fears continue to affect flights to the rest of Asia.

“European and U.S. routes are recovering significantly, with the effects of the Iraq war (having now) faded,” Kaneko said in a recent interview.

“In Asia, business passengers are returning fairly quickly,” he said. “But the return of tour groups, comprising a large portion of 70 percent (of total passengers), is slow. We hold expectations toward the summer, but I can’t talk about optimistic figures.”

In May, Japan Airlines System projected a group net loss of 43 billion yen and a pretax loss of 22 billion yen on projected revenues of 2.032 trillion yen for the current fiscal year through next March 31.

At that time, it forecast a 162 billion yen fall in operating revenues resulting from the Iraq war and the effects of the severe acute respiratory syndrome epidemic.

Kaneko said the revenue fall “may be slightly worse” than forecast in May, considering the tour group situation, though not to the extent that it requires a revision to the group’s May earnings projection.

“We will prevent (a downward revision) through efforts to increase sales,” he said. “We can only pray that there is no recurrence of (SARS) infections in the winter.”

In addition to SARS, negative “psychological effects since the (Sept. 11, 2001) terrorist attacks (on the U.S.) are also behind the delayed recovery” in international flights, Kaneko said.

In an effort to recover, the group will use the Southern All Stars pop group in its campaigns and try to boost the number of passengers flying to Hawaii and other areas unaffected by the disease.

The integration of Japan Airlines and Japan Air System and setting up Japan Airlines System, the holding company, in October, have brought about the planned effects, Kaneko said.

The main purpose of the integration was to compete with All Nippon Airways in terms of domestic flights, he said. Through a better domestic flight schedule, the proportion of individual passengers has improved by 2 to 3 percentage points from the conventional figure of around 60 percent, Kaneko said.

Referring to intensified domestic flight fare competition last year leading to lower earnings, Kaneko said that although large discounts spur demand, once that has settled, income drops drastically.

He said the group may not fall into a vicious cycle of excessive discount-fare competitions, but added, “I think competition will require wisdom and ingenuity.”

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