JAL Q3 loss narrows, en route to full-year target

Tokyo, Feb 6: Japan Airlines Corp. (JAL) said on Tuesday its quarterly loss narrowed as it cut unprofitable routes and domestic demand started to recover, and it kept its full-year profit forecast.

Its international operations were helped by strong demand on routes to China, South Korea and Southeast Asia as well as higher fuel surcharges that boosted per-customer spending.

JAL, Asia's largest airline by revenue but ranked sixth by market value, said it would sell its stake in a Tokyo hotel to U.S. investment fund Aetos Capital, generating a special profit of 12 billion yen (0 million).

Despite a 14 billion quarterly loss, JAL stuck to its forecast for a 13 billion yen operating profit in the full year to March 31, higher than a forecast of 11.7 billion yen in a poll of nine analysts by Reuters Estimates.

JAL said an overhaul of its pension system and other cost cutting steps would help it reach the target even though it slightly lowered its full-year revenue forecast to 2.27 trillion yen due to slow international leisure travel and domestic business demand.

Mild weather in Japan was also hurting demand for skiing tours this winter, it said.

''The biggest factor is reduced personnel costs through an overhaul of our pension system, and we are also cutting various other costs,'' Executive Officer Yoshimasa Kanayama told a news conference.

''With these, we will try to cover an expected revenue decline.'' JAL also kept its forecast for a net profit of 3 billion yen in the year to March, saying a windfall gain from the sale of its 48.55 percent holding in Tokyo Humania Enterprise, which owns the building housing Hotel Nikko Tokyo, has already been factored into the target.

As with other airlines, JAL's earnings have been hurt by persistently high oil prices, and fuel costs are expected to rise 12 percent in 2006/07 to 423 billion yen.

While demand for JAL's domestic flights has recovered somewhat, it is still struggling to win back customers who left it for rival All Nippon Airways after a series of safety mishaps, including an engine catching fire.

JAL said its group operating loss in the three months to Dec. 31 came to 14.02 billion yen (6.5 million) against a 16.6 billion yen loss in the same period a year earlier.

Revenues rose 5 percent to 584.15 billion yen.

JAL is due to announce a business plan for the four years to March 2011 later on Tuesday. The plan is expected to include about 3,000 job cuts.

The Nikkei business daily reported on Saturday that JAL plans to reduce staff costs by some 50 billion yen in 2009/10 compared with the current business year.

JAL is also accelerating its disposal of non-core assets, such as its stakes in trading house Jalux Inc. and hotel buildings, while it plans to further restructure its international and domestic routes to boost profit.

ANA, Japan's No.2 airline, has been buoyed by a leaner operational model and its younger, more fuel-efficient fleet, and it raised it 2006/07 operating profit forecast by 17 percent in January after posting a 2 percent increase in profit for the first nine months of the business year.

Shares in JAL fell 7.8 percent in October-December, outperforming a 9 percent decline in the Tokyo Stock Exchange's air transport subindex IAIRL.

By late afternoon JAL shares were down 1.6 percent at 251 yen, while the subindex was up 0.19 percent.

Reuters