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Oct 31, 2013
JAL Group Announces Consolidated Financial Results for the First Half of the Fiscal Year 2013

TOKYO October 31, 2013: JAL Group (JAL) today announced the consolidated financial results for the first half of the fiscal year of 2013- the period from April 1 to September 30, 2013. For the details, please refer to attached [Consolidated Financial Results for the Six Months Ended September 30, 2013].

During the reporting period of consolidated financial results for the first half of the fiscal year, Japan’s economy has been on a moderate recovery track. Exports have shown movements of picking up and the effects of Japanese government policies have been developing, while household income and business investment have increased. However, the slowdown of overseas economies has been a downside risk to the Japanese economy.


Under these economic conditions, JAL Group strived to increase management efficiency and deliver the highest standard of service, while maintaining a strong commitment to flight safety, in an effort to achieve the targets of Rolling Plan 2013 of the Medium Term Management Plan.


As a result of the above, consolidated operating revenues and operating expenses increased to 659.3 billion yen (up 4.0%) and to 563.4 billion yen (up 7.9%) respectively year-on-year, while operating income and ordinary income declined to 95.8 billion yen (down 14.6%) and 90.1 billion yen (down 18.8%) respectively from the previous year. Net income declined to 81.9 billion yen (down 17.8%) from a year ago.


(1)    JAL Group Consolidated Results for the Period April 1, 2013 -September 30, 2013

Unit: Billions of yen

  Fiscal Year 2012

(Apr. 1, 2012 - Sep. 30, 2012)

Fiscal Year 2013

(Apr. 1, 2013 - Sep. 30, 2013)

Difference

vs. prior year

% vs. prior year

Total Operating Revenue

634.2

659.3

+ 25.0

104.0

International Passenger

Domestic Passenger

Int. and Dom. Cargo

Others

210.3

250.4

37.9

135.5

222.2

251.7

38.9

146.4

+ 11.8

+ 1.2

+1.0

+ 10.9

105.7

100.5

102.7

108.1

Total Operating Expense

522.0

563.4

+ 41.4

107.9

Operating Income

112.1

95.8

- 16.3

4.4

85.4

Operating Margin

17.7%

14.5%

- 3.2 points

-

Ordinary Income

111.0

90.1

- 20.8

81.2

Net Income

99.7

81.9

- 17.7

82.2

Figures are rounded down to the nearest tenth of a billion yen while percentage points are rounded up to the nearest tenth.

(2)    Air Transportation Segment


International Passenger

In international passenger operations, we took necessary action to expand our network and increase aircraft efficiency following the resumption of Boeing 787operations to maximize revenue. We also installed new cabin seats, and such to improve our products and services.


In route operations, the Boeing 787 was returned to service on Narita=Boston/San Diego, Haneda=Beijing, and Narita/Haneda=Singapore routes from June 1, 2013, and deployed on Narita=Delhi route on July 12, 2013, and on Narita=Moscow and Haneda=San Francisco routes on September 1 to increase product competitiveness and operational cost efficiency. The postponed Narita=Helsinki route was launched on July 1, 2013. While temporarily reducing flights on Narita=Beijing route to flexibly respond to sluggish demand and improve profitability, the Boeing 767 was replaced with the larger Boeing 777-200ER to meet robust demand on Narita=Honolulu (JL782/781) and Chubu/Kansai=Honolulu routes.


Sales-wise, special time-limited fares for connections from Helsinki were sold, timed to the launch of Helsinki flights in July 2013, to increase customer awareness and use of this new route. As a decline in corporate demand was anticipated in the summer peak season, time-limited fares on business class travel were sold from Japan to Europe and Asia to increase the load factor.


On the product side, JAL SKY SUITE 777, a fully revamped Boeing 777-300ER with sweeping upgrades in spaciousness, comfort and functionality in every class, was deployed between Narita and New York, as well as between Narita and London where it was first rolled out. It began operating between Narita and Paris in July 2013.The Boeing 767-300ER will also be installed with fully-flat seats in Business Class providing direct access to the aisle, while Economy Class will be fitted with the JAL SKY WIDER, just as on the Boarding 777-300ER, to provide passengers with 10 cm. (max.) more legroom than the previous seat. The revamped Boeing 767-300ER named JAL SKY SUITE 767 will be put in service between Narita and Vancouver in December 2013, and progressively expanded to long-distance Southeast Asia routes, such as between Narita and Kuala Lumpur in January 2014, and Honolulu flights.
JAL BEDD-SKY AUBERGE, JAL’s exclusive restaurant in the sky offering delectable delights prepared by a team of Japan’s star chefs in First Class and Business Class on European and North American routes, was expanded to Honolulu flights on September 1, 2013. Called “BEDD for Resort”, celebrity chef Chikara Yamada is in charge of this special Business Class menu. In Economy Class, “Ore-no Kinaishoku for Resort” in collaboration with Ore-no French and Ore-no Italian which are popular restaurants in Japan, is being provided on Honolulu routes, too.


As a result of the above, international supply when measured in available-seat-kilometer (ASK) increased by 4.4% year-on-year, demand in terms of revenue-passenger-kilometer (RPK) increased by 4.5 % year-on-year, while the load factor (L/F) increased 0.1 points year-on-year to 76.3%. International passenger revenue increased by 5.7% year-on-year to 222.2 billion yen.



Domestic Passenger

We adjusted supply to meet demand and implemented demand-boosting measures to maximize profitability.


In route operations, we endeavored to expand the domestic network following the increase of flight slots at Haneda and Itami airports. We increased Haneda flights, and launched Haneda= Chubu services to improve connectivity to international flights. At Itami, we resumed scheduled flights to Matsuyama/Hakodate/Misawa, and increased a total of 18 flights on 16 routes. Code-sharing of all flights operated by Hokkaido Air System Co., Ltd. began in July 2013 to improve customer convenience, and contribute to the regional and economic development of Hokkaido.


In sales activities, as an official sponsor of Tokyo Disney Resort
® since it opened in 1983, JAL is collaborating with Disney to celebrate the 30th anniversary of Disneyland and boost leisure demand. Six JAL Happiness Express jets (two Boeing 777-200’s and four Boeing 737-800’s) painted with Disney character motifs are plying domestic routes during this campaign, and they have been used by many customers. To expand WEB sales channel, we tied up with Recruit Lifestyle Co., Ltd., which operates Jalan.net, one of the largest hotel and ryokan booking sites in Japan, and started sales of JAL Jalan Pack, a Dynamic Package product that allows users to freely assemble a travel package for themselves using JAL domestic tickets and domestic accommodations made available online.


As a result of the above, domestic supply during the reporting period increased by 3.0% year-on-year when measured in available-seat-kilometer (ASK), demand increased by 2.7% in terms of revenue-passenger-kilometer (RPK), while the load factor (L/F) declined by 0.2 points year-on-year to 62.4%. Domestic passenger revenue increased by 0.5% year-on-year to 251.7 billion yen.



International and Domestic Cargo

In international cargo operations, we strove to increase volume and maximize revenue by attracting perishable commodities and express shipments overseas, and effectively using space through enhanced revenue management and aggressive sales activities. Product wise, we improved our temperature-controlled transport services, and in particular, successively increased results of J SOLUTIONS PHARMA, an advanced customized transport service for pharmaceuticals. We also renewed JAL CARGO’s website to improve accessibility and usability, and become the customer’s first choice for air cargo services. The volume of international cargo transported during the reporting period in terms of revenue-cargo-ton-kilometer (RCTK) increased by 9.6% year-on-year, and international cargo revenue increased by 4.0% year-on-year to 26.2 billion yen.


Domestic cargo operations were affected by a decline in perishable commodities due to adverse weather conditions, and a reduction of packets and parcels, but sales staff strengthened relationships with customers and acquired new shipments to maximize revenue. The volume of domestic cargo transported during the reporting period in terms of revenue-cargo-ton-kilometers (RCTK) increased by 0.7% year-on-year, and domestic cargo revenue increased to 12.6 billion yen.


(3)    JAL Group Consolidated Financial Position

FY2012

As of March 31, 2013

The first half Year of FY2013

As of September 30, 2013

Difference

Total assets (billion yen)

1,216.6

1,261.4

+ 44.8

Net assets (billion yen)

583.1

636.5

+ 53.3

Equity ratio *1(%)

46.4

49.0

+ 2.5 points

Interest-bearing debt (billion yen)

160.1

137.3

- 22.7

Debt/Equity Ratio *2

0.3

0.2

- 0.1


Figures are rounded down to the nearest tenth of a billion yen while percentage points are rounded up to the nearest tenth.

Note:

1.          Shareholders’ equity is total net assets excluding minority interests

2.          Debt-to-equity ratio is interest-bearing debt divided by shareholders equity

(4)    Forecast of JAL Group Consolidated Financial Results for the Full Fiscal Year Ending March 31, 2014

Unit: Billions of yen

Operating Revenue

Operating Income

Ordinary Income

Net Income

Previous forecast

(Announced April 30, 2013)

1,272.0

140.0

127.0

118.0

New forecast

1,286.0

155.0

144.0

128.0


Note: The forecast above represents estimates of future results based on the information available at the time of release and the company’s reasonable judgment on this information. They are inherently subject to risks which may result in a divergence in the actual result from the forecasts and estimates contained herein.


Reasons for above Revisions of Financial Forecast for Fiscal Year Ending March 31, 2014:


To reflect the current market, a revision of market preconditions has been made as below:

Foreign Exchange Rate

Fuel(Singapore Kerosene)

Previous forecast

JPY95.0/USD

      USD127.0/bbl

New forecast

         JPY99.3/USD

(The second half Year: JPY100.0/USD)

USD119.8/bbl

(The second half Year: USD120.0/bbl)



Consolidated operating revenues for the full year are expected to increase by 14.0 billion yen from the previously announced forecast, due to a revision of market preconditions, and strong demand on Southeast Asia routes, etc. Consolidated operating expenses for the full year are expected to decline by 1.0 billion yen from the previously announced forecast due to falling fuel prices and continuous cost reduction initiatives in the second half of the fiscal year, though foreign currency rates may push costs upward. Consolidated operating income for the full year reflecting the above factors is expected to increase by 15.0 billion yen from the previous forecast.


END


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