JAL Group Announces Consolidated Financial Results for First Half of Fiscal Year 2012

TOKYO, 2012-11-03 — /travelprnews.com/ — The JAL Group (JAL) announced today, the consolidated financial results for the first half of fiscal year 2012 (year ending March 31, 2013).

During this reporting period of April 1 to September 30, 2012, risks from downward pressure on the economy caused by the European debt crisis, deflation, and recent territorial issues, were prevalent. Under these conditions, JAL rigorously increased employees’ profit consciousness through the divisional profitability management system in order to realize greater efficiency in management, based upon a solid foundation of flight safety, and endeavoured to meet the targets set out in the Mid-Term Management Plan announced on February 15, 2012.

Consolidated operating revenue, operating expense and operating income for this reporting period increased 5.7% to 634.2 billion yen, 522.0 billion yen, and 112.1 billion yen respectively. Ordinary income rose 7.7% to 111.0 billion yen and the total net income for the six months increased 2.4% from last year to 99.7 billion yen.

(1)    JAL Group Consolidated Results for the Period April 1 – September 30, 2012

Unit: Billions of yen	1st Half FY2011 (Apr. 1 – Sep. 30, 2011)	1st Half FY2012 (Apr. 1 – Sep. 30, 2012)	Difference vs. prior year	% vs. prior year
Total Operating Revenue	599.8	634.2	+ 34.3	105.7
International Passenger Domestic Passenger Int. and Dom. Cargo Others	190.8 243.3 39.2 126.4	210.3 250.4 37.9 135.5	+ 19.4 + 7.0 -1.3 + 9.0	110.2 102.9 96.7 107.2
Total Operating Expense	493.6	522.0	+ 28.3	105.7
Operating Income	106.1	112.1	+ 6.0	105.7
Operating Margin	17.7	17.7	+ 0	–
Ordinary Income	103.1	111.0	+ 7.9	107.7
Net Income	97.4	99.7	+ 2.3	102.4

Figures are rounded down to the nearest tenth of a billion yen.

(2) Air Transportation Segment

International Passenger

JAL’s newest service to Boston has attracted customers expansively from all parts of Asia and North America, performing at a remarkably strong load factor of 83.6% on average since its inaugural in April this year.Additionally, the 787 Dreamliner was introduced between Narita and Delhi where demand continues to thrive, Narita and Moscow, as well as between Haneda and Beijing, to align supply with demand so as to improve profitability. Furthermore, a total of 214 charter flights were operated to off-line destinations such as Barcelona, Athens, Rome, Madrid, and Venice, tapping on the robust leisure demand prompted by the strong yen. This contributed to the 4.5% increase in JAL’s international network capacity in terms of available seat kilometer (ASK) compared to the same period last year.

Despite flight cancellations and a decline in passenger traffic on JAL’s China routes from late-September, traffic demand to Europe and South East Asia on the other hand was high. Over the Pacific, JAL’s joint business partner and oneworld® alliance member American Airlines (AA), resumed their daily Haneda = New York service on July 17, 2012, facilitating connections to destinations in North American and South America by the early morning arrival in New York, and attracting transit passengers in particular. Overall, demand in terms of revenue passenger kilometer (RPK) rose 17.1% compared to a year ago and resulted in a 8.2 percentage point increase in load factor to 76.2%.

JAL also expanded its network from Japan to Europe with the commencement of a joint business with British Airways (BA) on October 1, 2012. Launching the sales of joint fares from September 5, 2012 and starting codeshare fights with BA between Tokyo (Narita and Haneda) and London from October 1, 2012, products and services are being enhanced to improve the passenger experience between Japan and Europe. In Asia, JAL began codesharing on flights between Japan and Asia from July 1, 2012, with Malaysian Airlines – scheduled to officially joinoneworld on February 1, 2013.

Through innovative services and products, JAL strived to meet the customers’ diverse needs and introduced the world’s first electronic manga service “SKY MANGA” in the international inflight entertainment program onboard the 787 Dreamliner. The airline is also the first and sole Japanese airline to provide onboard Internet connectivity with the launch of JAL SKY Wi-Fi on its international flights, starting with its daily New York service from July. Overall, revenue from international passengers increased 19.4 billion yen (10.2%) to 210.3 billion yen.

Domestic Passenger

In view of the rebound in passenger demand for flights from Haneda to Hokkaido, Chugoku, Shikoku and Okinawa after the post-quake decline last year, as well as on routes to and from Tohoku to meet the demand for post-quake restoration, JAL increased flight frequencies and assigned larger aircraft to these destinations. In July, JAL also resumed scheduled services between Sapporo and Niigata, and thus raised domestic ASK by 7.6% compared to the same period last year.

To boost demand, JAL increased flights that offer the popular “JAL First Class” service on the Haneda = Fukuoka route from July and on the Haneda = Okinawa route from August, and also made its highly-evaluated “Class J” business class product available on more domestic flights. RPK rose 7.7% while average load factor increased 0.1 points versus last year to 62.6%.

Among other efforts to encourage demand, JAL introduced new “Sakitoku” and “Super Sakitoku” discount fares to provide greater savings for customers who purchase their tickets up to 55 days in advance. As a result, revenue from the domestic passenger segment came to 250.4 billion yen, which is 7.0 billion yen (2.9%) more than the first half of last fiscal year.

International and Domestic Cargo

Amid a decline in overall cargo demand outbound Japan due to the economic downturn in Europe, JAL focused on utilizing the geographical advantage of Haneda airport to attract transit cargo of perishables and express goods. JAL also boosted demand from regional Japan by improving international and domestic connection services at Haneda and handled more high-value, temperature-controlled cargo such as pharmaceuticals to maximize revenue.

Domestically, JAL strived to secure stability of regular cargo by strengthening relationships with customers and actively promoted air transport of perishables from regional Japan. The volume of international and domestic cargo transported during the reporting period in revenue-cargo-ton-kilometers (RCTK) terms increased year-on-year by 4.5 % while revenue from this segment decreased 3.3% from a year before to 37.9 billion yen.

(3) JAL Group Consolidated Financial Position

	FY2011 Year ended March 31 2012	1st Half FY2012 Apr. 1 – Sep. 30, 2012	Difference
Total assets (billion yen)	1,087.6	1,147.3	+ 59.7
Net assets (billion yen)	413.8	497.6	+ 83.7
Capital ratio *1(%)	35.7	41.7	+ 6.0
Interest-bearing debt (billion yen)	208.4	184.2	– 24.2
Debt/Equity Ratio *2	0.5	0.4	– 0.2

Figures are rounded down to the nearest tenth of a billion yen while percentage points are rounded up to the nearest tenth.

Note:

1.          Shareholders’ equity is total net assets excluding minority interests

2.          Debt-to-equity ratio is interest-bearing debt divided by shareholders equity

(4) Forecast of JAL Group Consolidated Financial Results

Reflecting the decline in passenger traffic in the air transportation segment caused by the recent territorial issues, consolidated operating revenue for the full fiscal year is expected to decline by approximately 5 billion yen from the previously announced forecast. While fuel costs are expected to increase due to rising fuel prices, group-wide cost reduction initiatives will be continued in the second-half with a goal of lowering operating expense by 20 billion yen. As such, operating income is now expected to be approximately 15 billion yen more than previously estimated.

Consolidated ordinary profit is expected to increase by approximately 15 billion yen due to the increase in consolidated operating income, while net profit is expected to increase by approximately 10 billion yen due to an increase in taxes owing to a higher profit. Therefore, the forecast for the fiscal year ending on March 31, 2013 has been revised as shown in the table below.

Unit: Billions of yen	Operating Revenue	Operating Income	Ordinary Income	Net Income
New forecast for the full fiscal year ending March 31, 2013	1,215	165	155	140
Previous forecast for the full fiscal year ending March 31, 2013	1,220	150	140	130

Note: The forecast above represents estimates of future results based on the information available at the time of release and the company’s reasonable judgment on this information. They are inherently subject to risks which may result in a divergence in the actual result from the forecasts and estimates contained herein.

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