Japan Airlines Corp. on Monday reported narrower losses for the first quarter of fiscal 2006, but it faces tough times ahead as it struggles to deal with soaring fuel prices and falling domestic passenger numbers, and thus may hike international fares possibly by year’s end.

JAL reported a net loss of 26.7 billion yen for the April-June period, compared with a net loss of 38.3 billion yen the previous year.

The country’s largest airline posted an operating loss of 31.9 billion yen, compared with a loss of 32 billion yen a year earlier. Sales rose 3.7 percent to 522.2 billion yen.

JAL said its decision to shut down unprofitable international routes helped earnings.

Revenue from domestic flights increased slightly, thanks to higher fares.

To cover higher fuel costs, JAL said it will raise its fuel surcharge on international flights again, possibly by the end of the year.

Oil prices averaged $82 per barrel of Singapore kerosene in the April-June period, compared with $66.7 per barrel on average for the same period last year.

JAL has been gradually increasing surcharges on international flights since introducing them in January 2005. They range from 1,300 yen to 11,500 yen per ticket, depending on the route.

“We are taking countermeasures such as consuming less fuel, reducing costs . . . and we are even considering selling assets. But fuel costs are rising and (the problem) is getting out of our grasp,” JAL Senior Vice President Tetsuya Takenaka told reporters.

Takenaka didn’t say how much higher the surcharges may rise. He also declined to comment more on asset sales.

The carrier has been hit by a string of safety lapses since last year. The problems have not caused any injuries, but customers have turned to other airlines, including archrival All Nippon Airways Co., pushing JAL’s domestic passenger numbers down.

“Our biggest concern continues to be our domestic operation. We have to win back customers who turned to other carriers,” Takenaka said. “But we feel that our domestic operation is on track to recover.”

No. 2 ANA, by contrast, has seen sales and profits hitting record highs for the first quarter of fiscal 2006, posting a net profit of 7.68 billion yen.

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