JAL posts largest loss in 6 years


POSTED: Saturday, August 08, 2009

Japan Airlines Corp., Asia's largest airline by sales, posted the biggest quarterly loss in at least six years as companies slashed business travel.

Japan Air had a loss of Yen99 billion ($1 billion) in the three months ended June 30, compared with a loss of Yen3.4 billion in the same period last business year, the Tokyo-based company said yesterday.

Sales dropped 32 percent to Yen335 billion.

The airline will eliminate flights to Paris and Seoul from Nagoya and reduce service to India and China from Tokyo, after sales from international passengers plummeted 46 percent. President Haruka Nishimatsu has declared “;nothing off limits”; for cost-cutting after the carrier followed All Nippon Airways Co. and Singapore Airlines Ltd. in reporting losses.

“;Everything is going wrong for Japan Air right now,”; said Yoshihiro Okumura, who helps oversee the equivalent of $365 million at Chiba-gin Asset Management Co. “;Costs are excessive, but at the same time it needs to invest in new aircraft to renew its fleet.”;

The airline industry globally might lose $9 billion this year as a swine flu outbreak compounds the effects of the global recession, according to the International Air Transport Association.

Japan Air reiterated its loss forecast of Yen63 billion for the full year.

It predicts a one-time savings of Yen88 billion this year by cutting pensions, which has yet to be approved by the carrier's retirees.

More than 3,000 retirees out of approximately 9,000 intend to vote against the move, according to an unofficial tally on a Web site run by the Committee to Consider the Revision of JAL's Pension Scheme. That's enough to block the cuts, as the Tokyo- based carrier needs a two-thirds majority to push them through.

“;We're still talking to employees and retirees,”; Yoshimasa Kanayama, Japan Air's chief financial officer, said yesterday. “;We haven't held detailed talks on the cuts yet.”;

Japan Air is losing international passengers as the economy shrinks. The airline will make frequency cuts on eight overseas routes—including Tokyo flights to and from Taipei, Seoul and New Delhi—permanent from Oct. 25. It is also ending two Nagoya services and its Osaka-London service due to shrinking demand.

The carrier's international passenger sales are tumbling at three times the rate of its domestic business as premium customers avoid flying overseas.

Revenue at its international passenger division shrank 46 percent to Yen97 billion last quarter. Domestic sales shrank 15 percent to 131 billion yen.

“;Japan Air needs more cost cuts,”; said Mitsushige Akino, who oversees $615 million in assets in Tokyo at Ichiyoshi Investment Management Co. “;It should get rid of money-losing routes.”;

Japan Air already has announced plans to cut Yen195 billion in costs this fiscal year.