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Japan Airlines Sinks Into Loss

Posted on: Wednesday, 10 May 2006, 06:00 CDT

By YURI KAGEYAMA

TOKYO - Japan Airlines sank into a 47.2 billion yen loss ($423 million) for the fiscal year through March, as fliers switched in droves to rivals after a spate of safety lapses, the carrier said Wednesday.

The airline, which posted a 30.1 billion yen profit in the previous fiscal year, suffers a serious image problem at a time when all the world's airlines are in trouble fighting soaring oil prices.

Japan Airlines, which did not break down quarterly numbers, has had several safety problems since last year, including wheels falling off during a landing, an engine that burst into flames and a flight that took off with a faulty latch.

No one has been injured in the troubles, but the image of Japan's biggest airline by revenue - once prized as the nation's flagship - has been badly tarnished, especially among Japanese travelers, who are opting for rival All Nippon Airways.

The troubles have triggered a squabble in management ranks, and the company just recently appointed a new president.

Toshiyuki Shinmachi had been under pressure from board members to resign and announced in March that he is stepping down in June to be replaced by Haruka Nishimatsu, seen as relatively neutral in the infighting.

Wednesday's earnings were roughly in line with the forecast Japan Airlines Corp. gave at the end of March, when it said it expected a 47 billion yen ($421 million) loss.

Sales for fiscal 2005 totaled 2.199 trillion yen ($19.7 billion), up 3.3 percent from 2.13 trillion yen the previous year.

Demand for international passenger travel to Europe and Southeast Asia dipped during the latest fiscal year from the previous year but remained solid in routes to the United States, South Korea and Taiwan, JAL said.

Japan Airlines has announced a revival plan to turn around its business and hopes to swing back into the black in the fiscal year ending March 31, 2007 at a 3 billion yen ($26.9 million) profit on 2.3 trillion yen ($20.6 billion) sales.

It has repeatedly promised to fix safety problems and cut costs to boost profitability. But safety problems have not gone away. In March, an airliner run by its subsidiary flying from Tokyo to Guam had to return when a cockpit window cracked.

JAL said Wednesday that fuel costs added an extra 88.2 billion yen ($791 million) to its bill compared to the previous year as aircraft fuel jumped from about $50 a barrel last fiscal year to $72 a barrel.

Retirement benefit changes added another 33 billion yen ($296 million) this fiscal year to personnel costs compared to the previous year, while 6 billion yen ($53.8 million) was lost from the negative impact caused by currency fluctuations.

International cargo has recovered somewhat recently, thanks to a rise in shipments of flat-panel TVs and computer and auto parts but demand in international cargo still fell 3 percent on year, the airline said.

JAL shares, which rose as high as nearly 340 yen ($3) at one point during the past year, slipped 1.9 percent to 305 yen ($2.70) in Tokyo trading a few hours after earnings were announced.

Source: Associated Press/AP Online

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