JAPAN AIRLINES

PRESS RELEASES

  • January 31, 2019

JAL Group Announces Consolidated Financial Results

- Third Quarter of Fiscal Year 2018 -

 

The JAL Group (JAL) today announced the consolidated financial results for the third quarter of FY2018.

To summarize the business environment in the third quarter, key observations included U.S.-China trade frictions and political instability within European countries; however the overall global economic situation remained robust. In particular, the Japanese and U.S. economy spurred international and domestic air travel demand for the carrier, including air freight.

At the same time, crude oil prices increased significantly over the previous year due to the extended oil production cuts by OPEC and heightening geopolitical risks caused by the growing tension in the Middle East; affecting JAL`s international passenger and cargo revenue results. During this fiscal year, oil prices have been unstable as steep rises were observed in the first half followed by a sharp decrease in December 2018. The JAL Group is taking action to mitigate the impact on its financial performance by utilizing hedging techniques and applying fuel surcharges on international flights, while monitoring the economic situation.

Under these economic conditions, the company continued to implement profit conscious management strategies based on the principles of JAL Philosophy and the divisional profitability management system. In order to reach the goals set out in the FY2017-2020 JAL Group Medium Term Management Plan, the company will strive to realize greater management efficiencies and provide unparalleled service to customers, while committing to provide a safe and comfortable travel experience.

Through nine months of the consolidated fiscal year, operating revenue increased by 8.1% to 1,131.0 billion yen, while operating expenses also increased 9.4% to 985.5 billion yen. Operating profit increased 0.2% year-over-year to 145.5 billion yen, whereas ordinary profit decreased by 2.5% to 138.5 billion yen. Profit attributable to owners of parent for the third quarter was 106.5 billion yen, down 6.6% year-over-year.

  1. 1. JAL Group Consolidated Results for the Period April 1, 2018 - March 31, 2019

Unit: Billions of yen

  Fiscal Year 2017

(4/1/2017 – 12/31/2017)

Fiscal Year 2018

(4/1/2018 – 12/31/2018)

Difference

vs. Prior Year

% vs. Prior Year

Operating Revenue

1,046.0

1,131.0

+ 85.0

108.1

International Passenger

Domestic Passenger

Cargo (Inter/Dom)

Other

346.4

398.5

59.0

241.9

403.4

404.7

67.4

255.4

+ 57.0

+ 6.1

+ 8.3

+ 13.4

116.5

101.5

114.2

105.5

Operating Expense

900.8

985.5

+ 84.7

109.4

Operating Profit

145.2

145.5

+ 0.2

100.2

Operating Profit Margin

13.9%

12.9%

- 1.0 point

-

 

Ordinary Profit

142.1

138.5

- 3.5

97.5

Profit attributable to owners of parent

114.1

106.5

- 7.5

93.4

Figures have been truncated and percentages are rounded off to the first decimal place.
  1. Air Transportation Segment

International Operations
For international passenger operations, outbound demand from Japan was steady while inbound demand remained strong, as the number of visitors to Japan reached 31.19 million in CY2018; exceeding the 30 million mark for the first time in the country`s history. To capture the robust demand, the carrier proactively optimized its cabin configuration and increased seat availability to balance out the supply and demand on each route. As a result of the routes launched in FY2017 (Narita=Kona, Narita=Melbourne, Haneda=London), available seat kilometers (ASK) increased by 6.2% year over year, passenger traffic grew by 7.8% year over year, revenue passenger kilometers (RPK) rose by 7.4% year over year, and load factor reached 81.8%.

In route operations, JAL announced a new service between Haneda=Manila from February 1, 2019 and Narita=Seattle from March 31, 2019. In regards to strengthening and expanding partnerships, JAL announced the launch/expansion of codeshare flights with S7 Airlines of Russia (from April 29, 2018), Garuda Indonesia (from October 28, 2018), Vietjet Air (from October 28, 2018), Alaska Airlines (from March 31, 2019), British Airways` (BA) new Kansai=London route (from March 31, 2019) and on Finnair`s (AY) Kansai=Helsinki route from March 31, 2019. To promote joint businesses with partner airlines, JAL filed an application for antitrust immunity with Hawaiian Airlines in June 2018 and with China Eastern Airlines in October 2018.

On the product and service front, the carrier introduced the JAL International Award Ticket PLUS program to provide customers convenient options to redeem award tickets. By using additional miles, customers can redeem award tickets that would normally be waitlisted under current conditions.

On routes to Hawaii, JAL introduced new services to meet the diversified needs of its customers to further increase the carrier`s brand preference. Through a concept called Style yourself ~ JAL HAWAII, JAL opened a new lounge at Daniel K. Inouye International Airport in August 2018, launched an early check-in service program with the carrier`s hotel partners and offered a reciprocal mileage program with Hawaiian Airlines. In addition, JAL plans to introduce a dedicated self-service check-in counter at Daniel K. Inouye International Airport from March 2019.

The new passenger service system, which was renewed in November 2017, is being utilized to maximize yield management strategies, as well as increasing sales on its overseas online channels.

As a result of the above, international passenger revenue was 403.4 billion yen, up 16.5% year over year.

In international cargo operations, air freight demand in the first-half of the fiscal year centered on automobile and semiconductor related shipments and remained steady throughout the quarter.

Domestic Operations
JAL expanded routes operated by the Embraer 190 aircraft, centered on routes in and out of Osaka (Itami) Airport and introduced the JAL SKY NEXT configured Boeing 737-800 aircraft on Okinawa (Naha) routes operated by Japan Transocean Air. As a result, available seat kilometers (ASK) increased by 1.0% year over year, passenger traffic grew by 2.0% year over year, revenue passenger kilometers (RPK) rose 1.6% year over year, and load factor reached 72.9%.

In route operations, JAL launched new services between the islands of Tokunoshima, Okinoerabu, and Okinawa (Naha), also known as the “Amami Islands Hopping Route,” operated by Japan Air Commuter to further expand travel among the Amami Islands. In addition, the ATR72-600 aircraft was launched for the first time in Japan by Japan Air Commuter.

For products and services, the carrier started to accept domestic award reservations up to one-day prior to the flight from October 2018. In addition, JAL partnered with Kyushu Railway Company to offer optional services for customers traveling to airports in Kyushu using the domestic award ticket program, Dokokani Mile.

To support the recovery in the aftermath of the 2018 Hokkaido Eastern Iburi Earthquake, JAL offered Support Sakitoku fares at affordable prices on routes to/from Hokkaido along with dynamic package travel products. In addition, JAL lowered fares on its JAL Japan Explorer Pass as a limited time offer on Hokkaido routes and Kansai region routes (Kansai, Itami, Nanki-Shirahama) to revitalize inbound traffic to Japan.

The new passenger service system produced an effective yield management program with greater precision in domestic passenger operations.

As a result of the above, domestic passenger revenue was 404.7 billion yen, up 1.5% year over year.

  1. 3. JAL Group Consolidated Financial Position

 

FY2017
As of March 31, 2018

FY2018
As of December 31, 2018

Difference

Total Assets (billion yen) *1

1,853.9

1,934.1

+ 80.1

Net Assets (billion yen)

1,094.1

1,140.8

+ 46.7

Equity Ratio (%)*2

57.2

57.2

0.0 point

Interest-bearing Debt (billion yen)

125.7

129.4

+ 3.6

Debt/Equity Ratio *3

0.1x

0.1x

- 0.0x

Figures are rounded down to the nearest tenth of a billion yen while percentages are rounded off to the first decimal place.

Note:
1. The Company applied “Partial Amendments to Accounting Standard for Tax Effect Accounting” (Corporate Accounting Standard No. 28, February 16, 2018), from the beginning of the first three months of the consolidated financial statements. The figure as of March 31, 2018 is based on a retroactive application.
2. Shareholders’ equity is total net assets excluding minority interests.
3. Debt-to-equity ratio is interest-bearing debt divided by shareholders equity.
  1. 4. Consolidated Financial Forecast for the Fiscal Year Ending March 31, 2019

Unit: Billions of yen

Operating   Revenue

Operating Profit

Ordinary  Profit

Profit attributable to owners of the parent

Previous Forecast (A)
(Announced on Oct 31, 2018)

1,488.0

167.0

156.0

110.0

New Forecast (B)

1,488.0

175.0

161.0

138.0

Change (B-A)

 

+ 8.0

+ 5.0

+ 28.0

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.
Revised - Market preconditions to reflect the recent market as follows.

 

Exchange Rate

(JPY/USD)

Singapore Kerosene

(USD/BBL)

Dubai Crude Oil

(USD/BBL)

Previous Forecast

112.3

90.5

74.9

New Forecast

110.8

83.9

68.7

  • Full-year consolidated operating revenue is forecasted to be the same amount as previously announced. However, full-year consolidated operating expenses are expected to be 8 billion yen lower than the previous forecast, reflecting the third quarter results and changes in fuel price assumptions and additional conditions.
  • As a result, the full-year consolidated operating profit is expected to be 8 billion yen higher than the previous forecast.
  • Full-year consolidated ordinary profit is expected to increase by 5 billion yen and full-year net profit attributable to owners of the parent is expected to increase by 28 billion yen after additionally recording deferred income tax according to Tax Effect Accounting. As a result, the revised earnings forecast for the fiscal year ending March 31, 2019 is shown above.

 

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