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Feb 08, 2008
JAL Corporation and Consolidated Subsidiaries FY2007 Third Quarter Results

Tokyo February 8, 2008: JAL Group today announced consolidated results for the third quarter (October-December 2007 inclusive) and the first three quarters (April - December inclusive) of FY2007, the financial year ending March 31, 2008.

For the first three quarters of FY2007, total operating revenue in the air transport segment - JAL Group’s core business - improved significantly on the same period last year, up by 28.7 billion yen to 1,392.5 billion yen.

Operating costs for the segment went down by 65.5 billion to 1,321.2 billion yen compared to the previous year.

As a result, the JAL Group posted an operating income in the air transport segment of 71.2 billion in the first three quarters of FY2007, up 94.3 billion on last year. 

1)      JAL Group Consolidated FY07 Results for the Period April - December 2007

Units: Japanese yen - billions

Period: April -December 2007

FY07

Year ended Mar 31, 2008

FY06

Year ended Mar 31, 2007

Difference

Same period % comparison on

previous year

Operating revenue

1,701.1

1,734.1

- 32.9

98.1%

1. International Passenger

572.9

549.2

23.6

104.3%

2. Domestic passenger

520.1

514.8

5.2

101.0%

3. International cargo

143.6

145.5

- 1.9

98.7%

4. Other

464.4

524.4

- 59.9

88.6%

Operating expenses

1,618.6

1,740.0

- 121.3

93.0%

Operating income (loss)

82.5

- 5.8

88.4

-

Ordinary income (loss)

79.2

- 7.7

86.9

-

3rd Quarter Net income (loss)

20.4

- 9.3

29.8

-

 *All figures rounded down to the nearest tenth of a billion yen.

Operating Revenue

Over the nine month period, supply on international and domestic passenger routes measured in available seat kilometers (ASK) decreased respectively by 4.9% and 3.1%, as a result of network restructuring by shifting to high profit routes, suspending low profit routes and fleet downsizing, as outlined in the JAL Group Medium-term Corporate Revival Plan FY2007-2010.

Mainly as a consequence of this, demand measured in revenue passenger kilometers (RPK) fell on international passenger routes by 3.7% and on domestic routes by 4.4%. However, due to an increase in unit price, operating revenue for the core air transport business segment which includes cargo, increased by 2.1% when compared to the same period last year, up by 28.7 billion yen to a total of 1,392.5 billion yen.

Consolidated operating revenue declined by 32.9 billion yen or 1.9% from the same period last year to 1,701.1 billion yen. One main factor was a 58 billion yen decrease in non-air transport business revenue resulting from the exclusion of JALUX from the consolidated statement, after the trading company changed from a consolidated subsidiary to an equity method affiliate.  

Operating Expenses

As a result of steady implementation of business structure and cost reforms outlined in the Medium-term Corporate Revival Plan, such as a review of all routes, fleet downsizing by introducing more fuel efficient medium and small size aircraft, and personnel cost reductions, the JAL Group’s operating expenses decreased by 7.0% or 121.3 billion yen to 1,618.6 billion yen during the first three quarters of FY2007, when compared to last year.

Operating, Ordinary & Net Income

For the first three quarters of FY2007, the JAL Group recorded an operating income of 82.5 billion yen up 88.4 billion yen on last year, and an ordinary income of 79.2 billion yen up 86.9 billion yen on last year. The Group posted a net income of 20.4 billion yen up 29.8 billion yen when compared to the same 9 month period the previous year.

2) Business Segment Outline (April - December 2007)

a) Operating Revenue

International Passenger

Demand: Tourism demand was weak on Europe routes and Hawaii routes due to a weakening of the yen. Reduced seat supply, a part of JAL’s route restructuring, led to a decrease in revenue passenger kilometers (RPK) and passenger numbers on US mainland and Oceania routes. While demand over the nine month period on China, Korea and Southeast Asia routes all increased on the previous year.

Demand measured in revenue passenger kilometers (RPK) was 96.3% from the same period last year. The revenue seat load factor rose 0.9 points to 71.9%. In total 10,061,760 international passengers were carried by JAL Group Airlines, almost identical to the number carried in the same period the year before.

Supply: In addition to fleet downsizing, JAL has actively reduced flight frequency and suspended flights on low profit routes. On the other hand, the airline has increased scheduled flights on high profit routes to such high growth markets as China, India and Vietnam, whilst increasing international charter flights to meet demand primarily from the ‘baby boomer’ generation. Supply measured in available seat kilometers decreased by 4.9% from the same period last year.

Unit price: In addition to an increase in business passenger demand and the shifting of resources to high profit routes, air fares were revised and the fuel surcharge was increased resulting in an increase in unit price of 8.3% compared to the same period last year.

Revenue: Given the above, revenue increased by 4.3% from the same period last year up 23.6 billion yen to 572.9 billion yen.

Domestic Passenger

Demand: During the nine-month period, JAL implemented a number of measures that increased customer convenience and value through, for example, the launch of Japan’s first ever domestic first class cabin, the introduction of discount fares and the launch of seasonal promotional campaigns. Route restructuring and fleet downsizing which came into effect during FY2007, and a boost in demand from a one-off special fare made available in October 2006 to commemorate the final stage of JAL Group integration, meant that revenue passenger kilometers (RPK) were 4.4% down on the previous year. The number of domestic passengers carried during the period by JAL Group airlines decreased by 4.6% to 31,915,821.

Supply: Supply measured in available seat kilometer (ASK) was 3.1% down on the same period last year, a result of fleet downsizing and a review of routes, including flight frequency adjustments, to more effectively meet demand.

Unit price: Due to changes in passenger composition and an increase in air fares, unit price increased by 5.6% when compared to the same period last year.

Revenue: Given the above, revenue increased by 1.0% from the same period last year by 5.2 billion yen to 520.1 billion yen.

International Cargo

Demand: Demand from Japan to North America declined over the period when compared to the same period last year mainly due to a reduction in belly space resulting from a decrease in the number of passenger flights operated. Demand from Japan to Europe increased as a result of better utilization of passenger aircraft belly space. Also, demand to China and Southeast Asia was strong and increased on the previous year, due mainly to increased supply from the introduction of 767 freighters.

Demand from China to Japan increased from last year, but decreased from Europe, Southeast Asia and the US, due to for example, a reduction in available belly space the result of route restructuring and fleet downsizing. Revenue cargo ton kilometers (RCTK) were 2.2% down when compared to the same period last year.

Unit price: Increased 0.9% from the same period last year.

Revenue: Revenue decreased by 1.3% from the same period last year by 1.9 billion yen to 143.6 billion yen.

b) Operating Expenses & Foreign Exchange

Fuel costs

The price of Singapore kerosene from April to December 2007 averaged US$88.1 per barrel, an increase on last year’s average of US$81.9 per barrel. From the end of October onwards the average price of fuel was extremely high, regularly exceeding the US$100.00 per barrel mark. Despite this, through fleet renewal and downsizing, route restructuring and a range of fuel consumption reduction measures, JAL managed to reduce fuel costs over the period by 13.3 billion yen to 307.0 billion yen when compared to the same period last year.

Personnel costs

As a result of steadily implementing the various measures of the Medium-term Corporate Revival Plan, in the air transport segment personnel costs decreased over the 9-month period by 14.9 billion yen from the same period last year. To achieve JAL Group’s target of reducing total personnel costs annually by 50 billion yen compared to FY2006, in FY2007 in Japan the company has already made large reductions to the summer and winter bonuses of staff, has offered special early retirement programs to cabin attendant and managerial level ground staff, and plans to revise retirement benefit related systems and reduce retirement benefit costs. Worldwide the Group has been increasing productivity by, for example, expanded introduction of Toyota Production System methods.

Foreign Exchange

The average yen-to-dollar exchange rate for the 9-month period was \117.6 to US$1.00 compared to the average rate of \116.3 to US$1.00 for the same period last year. A weak yen, strong Euro and strong Asian currencies combined to boost operating income by 600 million yen. As a result of hedging and other measures, the company posted a foreign exchange gain of 12.1 billion yen in non-operating income.

Miscellaneous

Steady reduction of sales commission rates in Japan, review of external contracts and so on.

3) JAL Group Consolidated FY2007 Third Quarter Result                

Units: Japanese yen - billions

Period:

October-December 2007

3rd Quarter FY07

Year ended Mar 31, 2008

3rd Quarter FY06

Year ended Mar 31, 2007

Difference

Same period % comparison on

previous year

Operating revenue

558.2

584.1

- 25.8

95.6%

1. International Passenger

188.7

178.5

10.2

105.7%

2. Domestic passenger

167.3

169.0

- 1.6

99.0%

3. International cargo

52.1

53.1

- 0.9

98.2%

4. Other

149.9

183.4

- 33.4

81.8%

Operating expenses

532.3

598.1

- 65.8

89.0%

Operating income (loss)

25.9

-14.0

39.9

-

Ordinary income (loss)

20.5

-13.0

33.5

-

3rd Quarter Net income (loss)

13.1

-10.8

 24.0

-

*All figures rounded down to the nearest tenth of a billion yen

4) Consolidated Financial Forecast for the Year Ending March 31, 2008

No change to the consolidated forecast announced on November 6, 2007.

Units: Japanese yen - billions

Units: billion yen  

FY2007 Revised Forecast

Announced Nov 6, 2007

FY2006 Result

Year ended Mar 31, 2007

Operating revenue

2,238.0

2,301.9

International passenger

744.5

724.8

Domestic passenger

689.0

675.6

International cargo

188.5

190.5

Other

616.0

710.8

Operating expenses

2,190.0

2,278.9

Operating income

48.0

22.9

Ordinary income

44.0

20.5

Net income

7.0

- 16.2

*All figures rounded down to the nearest tenth of a billion yen

5) JAL Group - Consolidated Traffic Statistics Apr 1 - Dec 31, 2007 vs. Apr 1 - Dec 31, 2006

Apr 1 - Dec 31, 2007

FY07 - year ending Mar 31, 2008

Apr 1 - Dec 31, 2006

FY06 - year ended Mar 31, 2007

Same period % comparison or point change on previous year

INTERNATIONAL

Passenger number

10,061,760

10,065,258

100.0%

Revenue passenger kms (000)

45,697,349

47,467,200

96.3%

Available seat kms (000)

63,600,428

66,878,577

95.1%

Revenue seat load factor

71.9%

71.0%

+0.9 points

Revenue cargo ton kms (000)

3,374,920

3,499,308

97.8%

Mail ton kilometers (000)

144,113

124,399

115.8%

Revenue ton kms (000)

7,753,143

7,973,086

97.2%

Available ton kms (000)

11,450,204

11,971,034

95.6%

Revenue weight load factor

67.7%

66.6%

+1.1 points

DOMESTIC

Passenger number

31,915,821

33,471,407

95.4%

Revenue passenger kms (000)

24,106,789

25,206,812

95.6%

Available seat kms (000)

37,954,571

39,177,712

96.9%

Revenue seat load factor

63.5%

64.3%

- 0.8 points

Revenue cargo ton kms (000)

307,135

306,989

100.0%

Mail ton kilometers (000)

66,531

67,608

98.4%

Revenue ton kms (000)           

2,180,237

2,295,460

95.0%

Available ton kms (000)

4,452,543

4,587,551

97.1%

Revenue weight l/factor

49.0%

50.0%

+1.0 points

TOTAL

Passenger number

41,977,581

43,536,665

96.4%

Revenue passenger kms (000)

69,804,138

72,674,012

96.1%

Available seat kms (000)

101,554,999

106,056,289

95.8%

Revenue seat load factor

68.7%

68.5%

+ 0.2 points

Revenue cargo ton kms (000)

3,682,055

3,756,297

98.0%

Mail ton kilometers (000)

210,644

192,007

109.7%

Revenue ton kms (000)

9,933,380

10,268,546

96.7%

Available ton kms (000)

15,902,747

16,558,585

96.0%

Revenue weight load factor

62.5%

62.0%

 +0.5 points

- International results include data from JAL International, Japan Asia Airways and JALways.

- Domestic results include data from JAL International, Japan Transocean Air, JAL Express, Japan Air Commuter, Hokkaido Air System, J-Air & Ryukyu Air Commuter.

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