Press Release

The JAL Group (JAL) today announced the consolidated financial results for the second quarter of FY2018. During the second quarter, a number of natural disasters struck regions across Japan, such as the Northern Osaka Prefecture Earthquake in June and the Hokkaido Eastern Iburi Earthquake in September, as well as numerous typhoons that affected flights across the country. In response to these natural disasters, the JAL Group proactively implemented measures to fulfill its social mission as a public transport operator; providing emergency transportation services for relief supplies and offering discounted fares to support recovery assistance to the affected areas.

To summarize the business environment in the second quarter, the global economy remained robust and spurred air travel demand on both international and domestic routes. On the other hand, crude oil prices increased significantly over the previous year due to the extended oil production cuts by OPEC and the heightening geopolitical risks caused by the growing tension in the Middle East. Although higher fuel costs have affected the carriers` international passenger and cargo revenues, 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.

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 the first six months of the fiscal year, the operating revenue for the consolidated fiscal year increased by 8.4% to 750.1 billion yen, while operating expenses also increased 10.1% to 653.3 billion yen. Operating profit decreased 2.3% year-over-year to 96.8 billion yen and ordinary profit decreased by 3.5% to 94.2 billion yen. Profit attributable to owners of parent for the second quarter was 73.3 billion yen, down 5.9% year-over-year.

2) Air Transportation Segment

International Operations

In international passenger operations, JAL proactively increased supply to capture robust demand from Japan, as well as for inbound tourism and business travel throughout Asia. To increase supply, the carrier optimized its cabin configuration to increase seat availability to balance out the supply and demand on each route. As a result of the new routes launched in FY2017 (Narita=Kona, Narita=Melbourne, Haneda=London), available seat kilometers (ASK) increased by 6.9% year over year, passenger traffic grew by 9.4% year over year, revenue passenger kilometers (RPK) rose by 8.7% year over year, and load factor reached 82.4%.

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) and on British Airways (BA) new Kansai=London route which starts operations from March 31, 2019. In addition, JAL filed an application with Hawaiian Airlines for antitrust immunity in June 2018, signed a memorandum of understanding to pursue a joint business with China Eastern Airlines in August 2018 and reached a partnership agreement with Garuda Indonesia in September 2018.

On the product and service front, JAL was awarded the 5-Star rating in the World Airline Awards by Skytrax, and won the award for Best Economy Class Airline Seat for the second year running. The JAL Group will continue to embrace challenges to expand its route network to offer greater customer convenience and comfort, and improve the quality of its products and services.

In disaster response operations, JAL operated additional international flights between Tokyo (Narita) International Airport and Los Angeles, Bangkok, Honolulu, Taiwan Taoyuan and Shanghai (Pudong) due to Typhoon Jebi (Typhoon No. 21) that struck the Kansai region in September 2018. To promote tourism to the Kansai region, JAL also set inbound promotional fares on routes between Osaka (Kansai) and Los Angeles, Bangkok, Honolulu, Taiwan Taoyuan and Shanghai (Pudong).

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 269.2 billion yen, up 17.4% year over year.

In international cargo operations, strong demand was centered on automobile and semiconductor related shipments. During the month of September, cargo facilities at Kansai International Airport were impacted by Typhoon Jebi (Typhoon No. 21) affecting cargo revenue. In response, JAL utilized the cargo space to maximize sales on its additional flights to/from Tokyo (Narita) International Airport and expanded cargo handling at Tokyo (Narita) and Chubu international airports in an effort to maintain Japan’s distribution channels.

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. However, given the impacts of the earthquake and typhoons, available seat kilometers (ASK) rose by 0.5% year over year. Through these challenging times, passenger traffic grew by 1.4% year over year; revenue passenger kilometers (RPK) rose by 0.7% year over year and recorded a load factor of 72.1%.

In route operations, JAL launched new services between the islands of Tokunoshima = Okinoerabu = Okinawa (Naha), also known as the “Amami Islands Hopping Route,” operated by Japan Air Commuter to further expand travel among the Amami Islands.

In disaster response operations, JAL operated additional flights centered on the Tokyo (Narita) = Osaka (Itami) route to enable passengers to connect to international flights to/from Tokyo (Narita) International Airport, as Kansai International Airport’s function was affected by Typhoon Jebi (Typhoon No. 21).

To support recovery of leisure demand that had dropped in the aftermath of the 2018 Hokkaido Eastern Iburi Earthquake, JAL offered “Support Sakitoku” fares at affordable prices on routes to/from Hokkaido and 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.

As a result, domestic passenger revenue was 268.1billion yen, up 1.2% year over year.

• Full-year consolidated sales forecast in earnings has been revised for the fiscal year ending March 2019.
• Full-year consolidated sales are expected to increase by 33.0 billion yen, reflecting the first-half results and the latest demand forecast for the second-half.
• On the other hand, full-year consolidated operating expenses are expected to increase by 33.0 billion yen from the previously announced forecast, reflecting the first-half results and changes in fuel price assumptions/additional factors. As such, the full-year consolidated operating profit has not been revised from the previously announced forecast.
• Further, full-year consolidated ordinary profit and full-year net profit belonging to shareholders of the parent remain the same, as previously announced.
• Looking ahead to the third quarter, demand is expected to be robust on international and domestic routes and the JAL Group will strive to achieve an operational profit target of 167.0 billion yen by maximizing sales and minimizing costs.