On November 1, JAL announced its consolidated group financial results for the second quarter of the fiscal year ending March 31, 2023. The presentation was given by Hideki Kikuyama, Representative Director, Senior Managing Executive Officer and General Manager of Finance & Accounting Division, and Norimasa Aoki, Managing Executive Officer and General Manager of General Affairs Division.
Looking at sales by business segment, international flights saw a recovery in demand due to the easing or removal of entry restrictions in various countries, as well as strong transit demand in the North America-Asia region. Domestic routes showed a strong recovery trend mainly during Golden Week and summer holidays, but the speed of recovery temporarily slowed down due to the impact of the 7th Wave. As a result, international passenger revenues for full-service carriers increased 460.3% y/y (up 134.1 billion yen) to 163.2 billion yen. Domestic passenger revenues increased 132.5% (+118.9 billion yen) to 208.6 billion yen.
The cargo business, which is also performing well in the Corona disaster, remains strong, posting a 28.3% y/y increase (+27.8 billion yen) to 126.2 billion yen, as the brand is doing well despite a declining trend in volume handled from Japan, and profit margins remain high.
In addition, regarding the LCC business (ZIPAIR and Spring Japan), ZIPAIR, which handles medium- to long-haul routes, is growing sales beyond expectations, and Mr. Kikuyama explained, “We are increasingly confident of the success of our business model as the only medium- to long-haul LCC in Japan.
On the other hand, conditions remain difficult for Spring Japan, which continues to suspend or reduce flights to China, where the zero-corona policy continues. As a result, LCC business revenue was 11.5 billion yen. Mileage, Life, Infrastructure, and other businesses posted a 43% year-on-year increase (+30.3 billion yen) to 101.0 billion yen.
The above factors led to a 112.8% year-on-year increase in sales (+327.8 billion yen) to 618.5 billion yen, with figures approaching pre-Corona disaster levels on the back of a recovery in aviation demand EBIT (Earnings Before Interest and Taxes. EBIT (Earnings Before Interest and Taxes, or EBIT in the previous index) turned positive at 0.3 billion yen. Net loss was 2.1 billion yen, an improvement of 102.8 billion yen from the same period last year. In the second quarter alone, EBIT was 27.9 billion yen and net income was 17.4 billion yen, the first time since the third quarter of FY2019 that the company was profitable on a quarterly basis.
With regard to the main items of operating expenses, fuel costs have increased significantly due to the situation in Ukraine and the depreciation of the yen, and are estimated to be 154.8 billion yen. On the other hand, real fixed costs, which exclude variable factors such as the scale of operations and number of passengers and one-time costs associated with business restructuring, are limited to 244.6 billion yen as a result of cost management efforts to keep them within the 500 billion yen range for the full year, the company said.
The group’s consolidated financial position shows interest-bearing debt of 923.8 billion yen, of which 108.1 billion yen is due within one year, and total assets of 2,448.5 billion yen. The equity ratio is 31.9% (the figure on the rating, which takes hybrid financing into account, is 39%). Free cash flow was 67.7 billion yen, as aviation demand is on a recovery trend.
Although there is no change from the previously announced figures of 80 billion yen in EBIT and 45 billion yen in net income for the full year ending March 31, 2023, the company has revised its forecast for other items due to the effects of soaring fuel prices and a weaker yen.
The fuel price is assumed to be $125 per barrel for Singapore kerosene, up from the initial forecast of $120 per barrel, and the plan for the exchange rate is revised from the initial forecast of 120 yen per dollar to 145 yen per dollar. Regarding passenger demand, we expect an upward swing for international routes, which are performing well, and for domestic routes, which were affected by the 7th wave, we have factored in a decline in the second quarter. However, due to the effect of nationwide travel support, bookings have been favorable since October, according to the company.
Regarding dividends, the company will continue to make its best efforts to pay them at the end of the fiscal year, and Mr. Kikuyama explained, “We will make an announcement promptly when the situation becomes more predictable after assessing the future business environment.
© Source travel watch