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Japan Airlines Corp. said Wednesday it will log a net loss of 16.2 billion yen for the business year that ended March 31 instead of 3 billion yen in net profit as it earlier pledged, after its auditor required the carrier to apply stricter accounting rules.

A one-time loss of 6 billion yen resulting from JAL’s early retirement program launched in March was another factor pulling down net income, the carrier said.

However, the nation’s largest airline stressed that it is making a remarkable recovery in regular business activities, citing drastic improvement in operating profit and sales, as more people fly with JAL.

“I feel sorry that we will not be able to secure a 3 billion yen net profit,” JAL President Haruka Nishimatsu told a hastily arranged news conference in Tokyo.

“But taking into account that we surpassed our targets for operating profit and ordinary income, I think our earnings results (for business 2006) will be deemed successful,” Nishimatsu said with confidence.

JAL fell into the red because it decided to remove 44.7 billion yen in deferred tax assets from the balance sheet and book a loss of the same amount instead. Most of the 44.7 billion yen was accrued from reserves for retirement allowances, JAL said.

Usually, an auditor will not allow a company to record deferred tax assets when it is skeptical about the firm’s future profitability.

But Nishimatsu said the auditor’s decision was based on JAL’s past business records, which were at the mercy of emergencies like the Sept. 11, 2001, terrorist attacks in the United States and the outbreak of severe acute respiratory syndrome in Asia.

“We were allowed to record the deferred tax as assets until the last business year . . . but I think the auditor began taking a more conservative approach in line with the recent trend of tightened accounting standards,” Nishimatsu said.

JAL revised upward its forecast for operating profit for business 2006 to 22.9 billion yen, compared with a 13 billion yen profit projected earlier. It was a drastic improvement, given that JAL reported an operating loss of 5.8 billion yen for the first three quarters of the business year.

It also revised the projected sales for the year to 2.3 trillion yen, up from its original projection of 2.27 trillion yen.

“We are seeing a rise in passenger numbers for both our domestic and international flights, especially travelers on first class and business class,” Nishimatsu said.

JAL said the recovery in passenger numbers was more prominent in the January-March period, when it saw the revenue per passenger for its international flights improve by 10 percent.

Nishimatsu played down the impact of the company’s failure to attain the 3 billion yen net profit target, saying JAL should be evaluated by the profitability of its regular business.

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