JAL expects first profit in 3 years

Staff cuts and growth in demand for pricier seats are boosting Japan Airlines' net

TOKYO >> Japan Airlines Corp., Asia's largest carrier by sales, forecast its first profit in three years as it cuts staff and economic growth fuels demand for international business-class tickets.

Net income may total 7 billion yen ($58.4 million) in the 12 months ending March 31, following a 16.3 billion yen loss in the last fiscal year, the Tokyo-based company said in a statement yesterday.

Japan Air's international passenger sales rose 5 percent in the year ended March, as it added flights to China and sold more business-class and first-class tickets. The airline plans to cut its staff costs by 50 billion yen a year by fiscal 2009, after making losses of about 64 billion yen during the last two business years.

"It's going to be difficult for the company to turn a profit quickly," said Takahiro Matsumura, a Tokyo-based strategist at Toyo Securities Co. "Labor problems may make it hard for the company to cut costs."

Operating profit, or sales minus the cost of goods sold and selling, general and administrative expenses, will likely rise 53 percent to 35 billion yen in the year ending March 31, the carrier said. Sales may fall 4.6 percent to 2.2 trillion yen after the airline sold a stake in an airport store operator last year.

All Nippon Airways Co., Japan's largest domestic carrier, expects net income to almost double this fiscal year to 64 billion yen, buoyed by the sale of 13 hotels, it said on April 27.

Japan Air missed its goal of achieving a profit in the last fiscal year after a 54.4 billion yen writedown of deferred tax assets eroded gains from the sale of five hotels and other holdings. The company didn't say how much it raised from selling the hotels.

Last month, the airline also reduced its stakes in Japan Airport Terminal Co. and Airport Facilities Co., which manage facilities at airports including Tokyo Haneda and Narita.

Japan Air earned 725 billion yen from international passengers in the year ended March. Its international passenger numbers fell 5.1 percent to 13.47 million. Japan's economy grew 5.5 percent in the period, the fastest rate in three years.

The carrier has boosted its China services to 276 flights a week, including codeshares, as of April 26, 15 percent more than the end of March 2006. It plans to add another seven flights a week next month.

Japan Air expects the price of jet fuel to average $75 per barrel this fiscal year. The price averaged $79.7 in Singapore last fiscal year, according to data complied by Bloomberg. The price rose 1 percent to $80.85 today.

The airline narrowed its fourth-quarter net loss to 6.8 billion yen from 24.1 billion yen a year earlier, it said in a separate statement today. Sales rose 7.1 percent to 568 billion yen.

Japan Airlines shares were unchanged at 241 yen in Tokyo before the announcement.