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Friday, Aug. 8, 2008

JAL trims losses, plans route cuts, surcharge hikes


Staff writer

Japan Airlines Corp. said Thursday it narrowed its group net loss for the April-June quarter and its operating profit swung back into the black.

Faced with surging fuel costs, however, the country's largest carrier also said it will suspend or reduce 19 of its international and domestic flights from this fall, and hinted at further fuel surcharge increases for international passengers.

JAL reported a net loss of ¥3.4 billion for the quarter, down 19 percent from a year earlier. This marks the fifth consecutive improvement on a same-quarter basis.

The airline posted a ¥3.9 billion operating profit, swinging back to the black from the ¥8.5 billion operating loss a year ago. However, sales edged down about 6 percent to ¥490 billion.

JAL said earnings were boosted by growing international business demand, a shift in its operations to more profitable routes, and rises in fares and fuel surcharges.

Demand for domestic services was sustained by strong group travel.

To counter soaring fuel prices, the airline said it will end three international routes — between Fukuoka and Shanghai, Chubu International in Aichi Prefecture and Busan in South Korea, and Kansai International and London.

Domestically, 12 routes will be suspended and four will have the number of flights reduced. Routes to be suspended will include Kansai to Sendai and Chubu to Fukuoka. Reduced routes will include Kansai to Sapporo and Kansai to Fukuoka.

JAL said it faces a tough environment due to surging fuel costs.

Oil prices averaged $141 per barrel of Singapore kerosene in the April-June period, almost twice as much as the average $79 per barrel for the same period last year.

The company's fuel costs in the first quarter of this business year rose by ¥3.6 billion from last year to ¥101.1 billion, it said.

"Oil (prices) are getting drastically higher," JAL Vice President Isamu Jinguji said. "Although we as a corporation will make efforts, we will not easily be able to absorb such radically high oil" prices without closing down some routes, or imposing fuel surcharges on passengers.

With the latest operational review, JAL expects to save more than ¥12 billion.

"If oil prices continue to rise, we will also have to consider reviewing (operations) further," the vice president added without elaborating.

The airline meanwhile has been increasing fuel surcharges on international flights since 2005. They currently range from ¥500 to ¥32,000 per ticket, depending on the route.

Jinguji indicated the company's willingness to raise fuel surcharges further. "Certainly we would like to raise fuel surcharges to absorb" additional costs the airline has to bear, he said.

"But considering its effect on the market, we would not be able to raise (surcharges) as we did before," he said, suggesting the hike margin might be limited.



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