Japan Airlines cuts service after $1bn loss
By Jonathan Soble in Tokyo
Published: August 7 2009 10:05 | Last updated: August 7 2009 17:18
Japan Airlines suffered a record Y99bn ($1bn) loss in the quarter to June, forcing it to cut or reduce services on 16 domestic and international routes and switch to smaller aircraft on more than a dozen others in an effort to save costs.
Asia’s biggest air carrier by revenue secured Y100bn in emergency funding from a group of existing creditors in June after the Japanese government agreed to guarantee new loans.
A former national carrier, JAL had only just returned to profit after a four-year restructuring.
The airline had initially sought an injection of Y200bn and continued steep losses could force the government to stretch its guarantee to cover more funds, analysts said.
Globally, airlines could lose as much as $9bn this year, according to the International Air Transport Association.
Even traditionally strong carriers are struggling. Singapore Airlines has warned it could make its first full-year loss since its founding in 1972.
Finn departure
The chief executive of Finnair quit on Friday after the airline posted a worse-than-expected quarterly loss.
“I am not satisfied with the results achieved. The rate of change has been insufficient,” Jukka Hienonen said.
The Finnish airline cited weak demand and falling ticket prices for the loss of €32.5m ($46.2m), compared with analysts’ forecasts of a €30m loss.
All Nippon Airways, JAL’s smaller but sturdier Japanese rival, fell into a Y29bn loss in the three months to June against a profit of Y6.6bn a year earlier.
JAL’s loss compared with a Y3.4bn deficit a year ago. The airline said on Friday that sales had fallen 32 per cent in the quarter to Y335bn.
The decline was concentrated in its international business, where passenger numbers dropped by nearly a fifth and revenues plunged by half as the airline was forced to offer steep discounts to fill seats.
The airline stood by is forecast for a smaller Y63bn loss for the full year. That projection risks being undone, however, if JAL’s pensioners reject a plan to cut pay-outs, which would generate a one-time saving of Y88bn.
JAL must win approval from two-thirds of its 9,000 pensioners in order to cut benefits. According to an unofficial count by a group of pensioners opposed to the plan, more than 3,000 intend to vote against it.
JAL has sold non-core assets, cut jobs and eliminated unprofitable routes in an effort to turn itself round, but analysts and creditors say more radical measures are needed.
As part of the service reductions announced on Friday, JAL said it would suspend flights to Paris and Seoul from the central Japanese city of Nagoya.
Copyright The Financial Times