JAPAN AIRLINES

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  • October 31, 2019

JAL Group Announces Consolidated Financial Results for Second Quarter of Fiscal Year 2019

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

To summarize the business environment in the Second Quarter, the Japanese economy made a moderate recovery amid the rising uncertainties with U.S.-China trade frictions and additional economic factors. While international passenger demand saw limited growth, domestic passenger demand remained strong in the first half, backed by the 10 day Golden Week holiday in celebration of the Reiwa era. International cargo demand was weaker when compared to previous years.

The fluctuation of crude oil prices, which affect fuel costs and international passenger and international cargo revenues, remained stable. 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. The JAL Group will continue to monitor economic trends that may affect the price of crude oil and the company`s financial performance.

As a result, the operating revenue for the Second Quarter increased 1.3% year over year to 759.8 billion yen, while operating expenses increased 3.9% year over year to 678.5 billion yen. The operating profit decreased 16.0% year over year to 81.3 billion yen and ordinary profit decreased 12.5% from the previous year to 82.5 billion yen. The net profit attributable to owners of the parent was 51.2 billion yen, down 30.2% from the previous year.

  1. 1. JAL Group Consolidated Results for the Period April 1, 2019 - September 30, 2019

Unit: Billions of yen

       Fiscal Year 2018

(4/1/2018 – 9/30/2018)

Fiscal Year 2019

(4/1/2019 – 9/30/2019)

Difference

vs. Prior Year

% vs. Prior Year

Operating Revenue

750.1

759.8

+ 9.6

101.3

International Passenger

Domestic Passenger

Cargo (Inter/Dom)/Mail

Other

269.2

268.1

49.7

163.0

266.0

276.8

45.1

171.7

- 3.1

+ 8.7

- 4.6

+ 8.7

98.8

103.3

90.7

105.4

Operating Expense

653.3

678.5

(673.3)

+ 25.1

(+ 19.9)

103.9

(103.1%)

Operating Profit

96.8

81.3

(86.5)

- 15.5

(- 10.3)

84.0

(89.4%)

Operating Profit Margin

12.9%

10.7%

(11.4%)

- 2.2 point

(- 1.5 point)

-

 

Ordinary Profit

94.2

82.5

- 11.7

87.5

Profit attributable to owners of parent

73.3

51.2

- 22.1

69.8

Figures have been truncated and percentages are rounded off to the first decimal place.
Number in parentheses (  ) is based on previous depreciation method.

2. Air Transportation Segment

International Operations
In international passenger operations, the Japan-outbound leisure demand showed robust growth, but the business demand from Japan weakened due to global economic conditions. In addition, the supply-demand situation became evident on European routes due to a surplus in the industry. A decline in demand was observed on the Hong Kong and Korea routes due to the political uncertainty.

On the other hand, with the launch of the Tokyo (Narita)=Seattle route and Tokyo (Haneda)=Manila route and the further optimization of its cabin configuration, the available seat kilometers (ASK) increased by 2.5% year over year, passenger traffic grew by 0.5 % year over year, revenue passenger kilometers (RPK) rose by 0.9 % year over year, and the load factor reached 81.1%.

In route operations, JAL announced the launch of the Tokyo (Narita)=Vladivostok route from February 28, 2020, and strengthened its partnerships with other airlines, such as 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 on May 27, 2019.

On the product and service front, JAL revamped its First Class lounge at Narita Airport on April 1 and the Sakura Lounge on August 9, improving its meals and overall lounge experience. To promote its services in China, JAL partnered with Didi Chuxing and launched the JAL×DiDi Airport Pickup and Taxi Arrangement Campaign on September 1. On the Hawaii 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. Despite these efforts, international passenger revenue was 266.0 billion yen, a decrease of 1.2% year over year. In international cargo operations, the demand from Japan slowed rapidly due to the trade frictions between the U.S. and China. As a result, cargo revenue decreased by 8.9% year over year.

Domestic Operations
In domestic passenger operations, both leisure and business demand continued to remain strong, especially on the Okinawa route. Although the strong typhoons affected the operation of flights in Japan, JAL operated extra flights on high-demand routes, such as Tokyo (Haneda)=Okinawa (Naha) and Tokyo (Haneda)=Hokkaido (New Chitose). In route operations, JAL strengthened and expanded partnerships with other airlines such as codesharing with Amakusa Airlines and Fuji Dream Airlines. Based on these key initiatives, available seat kilometers (ASK) increased by 1.7%, passenger traffic grew by 3.4% year over year, revenue passenger kilometers (RPK) rose by 4.4% and the load factor reached 74.0%.

For the product and service front, the company renewed its website for domestic reservations and purchases on May 14, improving the reservation flow and added functions for smartphone users. Further, the JAL Group started to accept reservations and purchases 330 days prior to departure starting September 10, 2019. The state-of-the-art Airbus A350-900 aircraft was put into service on the Tokyo (Haneda)=Fukuoka route from September 1, and the company`s first domestic configured Boeing 787-8 aircraft started service on the Tokyo (Haneda) = Osaka (Itami) route from October 27.

As a result of the above, domestic passenger revenue was 276.8 billion yen, up 3.3% year over year.

  1. 3. JAL Group Consolidated Financial Position

 

FY2018
As of March 31, 2019

FY2019
As of September 30, 2019

Difference

Total Assets (billion yen)

2,030.3

1,928.8

- 101.4

Net Assets (billion yen)

1,200.1

1,208.1

+ 8.0

Equity Ratio (%) 1

57.4

60.8

+ 3.4 point

Interest-bearing Debt (billion yen)

142.3

133.9

- 8.4

Debt/Equity Ratio 2

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. Shareholders’ equity is total net assets excluding minority interests.
2. Debt-to-equity ratio is interest-bearing debt divided by shareholders equity.
  1. 4. Consolidated Financial Forecast for the Fiscal Year Ending March 31, 2020

Unit: Billions of yen

Operating   Revenue

Operating Profit

Ordinary  Profit

Profit attributable to owners of the parent

Previous Forecast (A)
(Announced on April 26, 2019)

1,563.0

170.0
(180.0 *)

171.0

114.0

New Forecast (B)

1,516.0

170.0
(180.0 *)

171.0

114.0

Change (B-A)

- 47.0

 

 

 

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.

* Number is based on previous depreciation method. The new depreciation method has changed in which assets are classified to each component, for example, based on economic lives of components, such as aircraft fuselage, engines and cabin interior, and each component is depreciated separately.
Reasons for Revisions of Financial Forecast for the Fiscal Year Ending March 31, 2020

 

Exchange Rate

(JPY/USD)

Singapore Kerosene

(USD/BBL)

Dubai Crude Oil

(USD/BBL)

Previous Forecast

115.0

90.0

70.0

New Forecast

109.6

(2nd half: 110.0)

76.8

(2nd half: 75.0)

62.1

(2nd half: 59.0)

- Full-year consolidated revenue forecast in earnings has been revised for the fiscal year ending March 2020.
- Full-year consolidated revenue is expected to decrease by 47.0 billion yen from the previously announced forecast, reflecting changes in fuel price, foreign exchange rate assumptions, first-half results and the latest demand outlook for the second-half.
- On the other hand, the full-year consolidated operating profit, consolidated ordinary profit and net profit belonging to shareholders has not been revised from the previously announced forecast.
- In the difficult conditions to foresee future trends in international passenger demand, the JAL group will strive to achieve the expected profits by implementing company-wide measures to improve profitability, mainly by reducing cost, and respond to revenue risks.

Dividend Per Share

 

2nd Quarter End

Fiscal Year End

Total

FY2019 (Forecast)

55.0 yen

55.0 yen

110.0 yen

Note: Revisions to the most recently disclosed dividend forecasts: None

The projected annual dividend for the fiscal year ending March 2020 remains the same at 110 yen per share, of which the interim dividend will be 55 yen per share as decided through a resolution of the Board of Directors on October 31, 2019.

5. Acquisition of Treasury Stock
For financial strategies, in an aim to improve capital efficiency and provide stable shareholder returns, JAL completed the repurchase of 5,818,100 shares, equivalent to 20 billion yen, which was completed by September 20. The cancellation of all repurchased shares was resolved at the board meeting held on October 23, 2019.

In addition, the repurchase of up to 8 million shares or 20 billion yen of the Company's common stock, including the cancellation, was resolved at the board meeting held on October 31, 2019.

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