Press Release

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.

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.

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.