Press Release

The JAL Group (JAL) today announced the consolidated financial results for the third quarter of FY2019.

To summarize the business environment in the third quarter, the Japanese government raised the level of consumption taxes at the beginning of October, directly affecting the purchase habits of local consumers, and U.S.-China trade frictions continued to have lingering effects for the cargo business. In autumn, the carrier was forced to cancel numerous flights due to natural disasters, which included a set of super typhoons that affected the entire nation of Japan. For commercial flights, international passenger demand continued to experience limited growth this fiscal year, but domestic passenger demand remained strong due to key initiatives implemented by the carrier.

The fluctuation of crude oil prices, which affect fuel costs and international passenger and international cargo revenues, remained stable. The JAL Group has taken strategic measures to mitigate the impact on its financial performance by utilizing hedging techniques and applying fuel surcharges on international flights. The carrier 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 reported through the third quarter reached 1,130.8 billion yen, while operating expenses increased 2.6% year over year to 1,010.7 billion yen. The operating profit decreased 17.4% year over year to 120.1 billion yen and ordinary profit decreased 12.1% from the previous year to 121.8 billion yen. The net profit attributable to owners of the parent was 76.3 billion yen, down 28.4% from the previous year.

2. Air Transportation Segment

International Operations
In international passenger operations, the Japan-outbound business demand weakened due to global economic conditions. In addition, the supply-demand situation became apparent on European and China routes due to a surplus in the industry. And, a decline in demand was observed on the Hong Kong and Korea routes due to political uncertainty. However, during the Rugby World Cup hosted by Japan, strong travel demand was temporarily seen on both European and Australian routes.

With the launch of the carrier`s Tokyo Narita=Seattle route and Tokyo Haneda=Manila route in FY2018, along with the further optimization of the carrier`s cabin configuration, the available seat kilometers (ASK) increased by 1.4% year over year. Passenger traffic, on the other hand, decreased by 1.5 % year over year, while revenue passenger kilometers (RPK) rose by 0.4 % year over year, and the load factor reached 81.0%.

In route operations, JAL will launch new services and increase flights from Tokyo Haneda Airport to 11 global destinations, starting March 29. The gateway destinations include Chicago, Dallas Fort Worth, Los Angeles, New York, Honolulu, Helsinki, Moscow, Sydney, Delhi, Shanghai, and Dalian. Within the next month, the carrier will launch its much anticipated Tokyo Narita=Vladivostok route on February 28 and the Tokyo Narita=Bengaluru route on March 29.

During this fiscal year, JAL strengthened its partnerships with other airlines by expanding codeshare flights with Garuda Indonesia, Cathay Dragon, Xiamen Airlines, Finnair, and with Aircalin. And, during the third quarter, JAL was granted antitrust immunity to start a joint business relationship with Malaysia Airlines.

On the product and service front, JAL completed a series of lounge renovations in Japan, improving its meals and overall lounge experience, as well as introducing a self-service bag drop service at Tokyo Narita airport in late October. In December, the carrier opened the newly renovated Special Assistance Counter, as part of the carrier`s initiative to offer more accessible facilities at the airport. On the Hawaii route, the company introduced the ARASHI HAWAII JET, featuring a livery of a famous Japanese pop idol group, which has been in operation since May 2019. Despite these efforts, international passenger revenue was 392.1 billion yen, a decrease of 2.8% year over year.

Domestic Operations
In domestic passenger operations, both leisure and business demand continued to remain strong, especially on the Okinawa route. JAL increased flights on high-demand routes, such as Tokyo Haneda=Okinawa Naha and Tokyo Haneda=Hokkaido New Chitose. In route operations, JAL strengthened the codeshare partnerships with Amakusa Airlines and Fuji Dream Airlines. Based on these key initiatives, available seat kilometers (ASK) increased by 1.6%, passenger traffic grew by 2.6% year over year, revenue passenger kilometers (RPK) rose by 3.2% and the load factor reached 74.1%.

On the product and service front, the company renewed its website for domestic reservations, improving the reservation flow and added functions for smartphone users. As a key improvement measure, the JAL Group now accepts domestic reservations 330 days prior to departure. And, the state-of-the-art Airbus A350-900 and Boeing 787-8 aircraft were put into domestic service for the first time to improve its environmental performance and to increase customer satisfaction levels in Japan. As a result of the above, domestic passenger revenue was 415.4 billion yen, up 2.7% year over year.

New Business Domains
ZIPAIR Tokyo received an Air Operator Certificate in July and revealed the livery and interior of its aircraft in December. The carrier is currently preparing to launch commercial flights in May 2020. In September, JAL Business Aviation Co., Ltd. started to provide operational support for business jet operators and currently arranging maintenance services.

Regarding the use of technologies, JAL Innovation Lab conducted various projects, such as conducting demonstrations with an avatar robot at Haneda Airport to improve customer service levels and have been involved in developing the commercial use of next-generation services using “5G” and IoT technology in collaboration with KDDI Corporation.

Reasons for Revisions of Financial Forecast for the Fiscal Year Ending March 31, 2020
The full-year consolidated revenue is expected to decrease by 30.0 billion yen, compared with the previous forecast, primarily due to weaker demand in international passenger and cargo operations. The full-year consolidated expenses are expected to be in line with the past forecast.

As a result, the full-year consolidated operating profit decreases by 30.0 billion yen. Accordingly, the Company projects a decrease of 26.0 billion yen in the full-year consolidated ordinary profit and a decrease of 21.0 billion yen in the full-year net income attributable to owners of the parent.