Press Release

The JAL Group (JAL) today announced the consolidated financial results for the First Quarter of FY2019.

To summarize the business environment in the First Quarter, based on rising uncertainties due to U.S.-China trade frictions and other economic factors, the Japanese economy was affected to an extent. At the same time, favorable conditions for inbound travel demand were seen in the industry where the number of international passengers remained high. For the domestic sector in Japan, the 10 day holiday period called Golden Week saw strong travel demand among the younger generation, as recent consumption patterns show a shift in value toward the experience gained in travel over goods in both international and domestic sectors. In these economic conditions, the total international passenger and cargo demand saw limited growth but the domestic sector was rather strong throughout the First Quarter.

Crude oil prices, which affect fuel costs and international passenger and international cargo revenues, continued to increase when compared to the previous fiscal year but prices started to drop in late May due to concerns on the world economy, as well as the ongoing trade frictions between the U.S. and China. However, fuel prices slightly rose back up in the middle of June, partly attributable to the tension between the U.S. and Iran, which left fuel price projections unclear. 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.

As a result, the operating revenue for the First Quarter increased 4.0% year over year to 355.7 billion yen, while operating expenses increased 5.5% year over year to 334.6 billion yen. The operating profit decreased 15.6% year over year to 21.0 billion yen and ordinary profit decreased 7.9% from the previous year to 21.2 billion yen. The net profit attributable to owners of the parent was 11.9 billion yen, down 32.1% from the previous year.

2. Air Transportation Segment

International Operations
In international passenger operations, business demand from Japan weakened as the global economic growth slowed down, including routes to North America. In addition, the supply-demand situation worsened on European routes due to a surplus in the industry. However, inbound business demand has remained strong for North American routes and saw a slight recovery for routes in China and Southeast Asia. In addition to the new Narita=Seattle route, launched on March 31, 2019, the company changed its flight frequencies on some routes and optimized its cabin configuration.

Based on key initiatives, the available seat kilometers (ASK) increased by 2.9% year over year, passenger traffic grew by 0.5% year over year, revenue passenger kilometers (RPK) rose by 1.4 % year over year, and the load factor reached 80.2%.

For partnerships, JAL continued to strengthen and expanded agreements with leading airlines. JAL announced the expansion of codeshare flights with Garuda Indonesia (from May 8, 2019), Cathay Dragon (from May 29, 2019) and Xiamen Airlines (from June 3, 2019). To promote joint businesses with partner airlines, JAL disclosed an application for antitrust immunity with Malaysia Airlines Berhad on May 27, 2019.

On the product and service front, JAL revamped its First Class lounge at Narita Airport on April 1, 2019, improving its meals and overall lounge experience. For the Hawaiian routes, the company introduced the ARASHI HAWAII JET, featuring a livery of a famous Japanese pop idol group, which has been in operation from May 22, 2019. JAL and JTB also partnered up to provide improved package tours from local cities in Japan to strengthen its competitiveness.

As a result of the above, international passenger revenue was 127.8 billion yen, up 2.4% year over year.

In international cargo operations, due to the trade frictions between the U.S. and China, cargo revenue decreased by 3.3% year over year.

Domestic Operations
In domestic passenger operations, both leisure and business demand continued to remain strong, especially to Okinawa and Hokkaido. In addition to JAL`s competitive products and services, extra flights on high-demand routes, such as to Okinawa were operated during the peak season.

Based on key initiatives, available seat kilometers (ASK) increased by 0.7%, passenger traffic grew by 4.3% year over year, revenue passenger kilometers (RPK) rose by 5.5% and the load factor reached 71.9%.

For route operations, JAL agreed on a codeshare partnership with Amakusa Airlines on the Kumamoto=Osaka (Itami) route. Codeshare flights will start from August 1 and reservations have been open since June 1. JAL aims to revitalize the Amakusa area by encouraging more travel in these areas.

For the product and service front, JAL decided to accept reservations 330 days prior to departure starting from September 10, 2019. Also, the company renewed its website for domestic reservations and purchases on May 14, improving the reservation flow and added functions for smartphone users.

As a result of the above, domestic passenger revenue was 123.9 billion yen, up 5.7% year over year.