JAL Loses 5.8 Billion Yen / 4300 Jobs To Be Axed

[urbanflyer]

more drama unfolding as Japan's largest airline continues its downward spiral

JAL's operating loss soars to 5.8 billion yen

By KAHO SHIMIZU
Japan Times Staff writer

Japan Airlines Corp. announced Tuesday it had an operating loss of 5.8 billion yen for the first three quarters of its business year to March, a huge setback from the 800 million yen loss the previous year.

The nation's top airline continues to struggle with a high cost structure that makes it vulnerable to rising fuel prices. JAL said the higher fuel prices cost it 320.4 billion yen in the April-December period -- 36.3 billion yen more than the year before.

JAL had a net loss of 9.3 billion yen for the period -- an improvement from the 23 billion yen loss it had the previous year -- as it had one-time gains from unloading some of its assets.

Sales rose 3.9 percent year-on-year to 1.73 trillion yen, thanks mainly to additional surcharges for customers on international flights and fare hikes on domestic flights due to soaring fuel prices.

JAL also attributed the sales rise to strong business and tourist demand for routes to China and South Korea, as well as a recovery in the number of passengers on its domestic flights, which had plunged in 2005 due in part to a string of safety-related problems.

Passengers on JAL's domestic flights increased slightly to 33.47 million. The growth was more prominent in the October-December period, when the figure rose 1.9 percent from a year earlier.

The number of passengers on its international flights during the nine-month period fell 5.8 percent year on year to 10.06 million. JAL attributed the fall to a 10.4 percent reduction in capacity as it terminated or reduced services on unprofitable routes.

For the October-December quarter, JAL's operating loss narrowed to 14 billion yen from 16.6 billion yen a year ago.

Although JAL projects a fall in sales for the full year to March because of weak demand for international leisure travel and a drop in domestic business-class passengers, it kept its forecasts of a 3 billion yen net profit and 13 billion yen operating profit unchanged.

JAL expects sales for the year to March to reach 2.268 trillion yen, down 0.6 percent from the projection released in November.

The company has been unloading assets, including stakes in other firms, to meet the profit targets for the full fiscal year.

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Japan Airlines Corp. will cut 4,300 jobs over three years starting in April to help return to profitability, the airline announced Tuesday.

JAL also plans to cut 700 of its 53,100 mainline workers, mostly ground staff, through an early retirement program, and the rest by attrition.

The struggling carrier's medium-term restructuring plan also includes restructuring its domestic and international flight services, and selling some assets and shareholdings to boost earnings.

JAL is hoping the changes will bring it a consolidated operating profit of 88 billion yen in its 2010 business year, a big jump from its forecast of 13 billion yen for the current business year to March.

"We must do this," JAL President and CEO Haruka Nishimatsu said. "We must keep in our minds that unless we do this there will be no more chances for revival."

Nishimatsu said he would step down if the carrier fails to pay dividends to shareholders in 2010. The airline will not pay dividends again this year, the second year in a row.

Aircraft problems and executive bickering in 2005 drove people away from the nation's flagship carrier. The airline had a group net loss of 47.2 billion yen in the 2006 business year.

The job cuts will mean that personnel costs in the 2009 business year will be reduced by 50 billion yen from 2006, JAL said.

A 10 percent cut in base pay, which began last April, will remain in place in 2007. Reductions in bonuses and retirement fees will be up for negotiations. Executives' pay will be cut by 45 percent to 60 percent in the business year starting in April.