Japan Airlines Cost-Cuts its Way to a $2.33 Billion Annual Net Profit

May 14, 2012
Two years after bankruptcy, productivity-boosting efforts lead to a dramatic turnaround despite a tough year in Japan.

Japan Airlines, which went bankrupt two years ago in one of the country's biggest-ever corporate failures, on May 14 logged an annual net profit of $2.33 billion, thanks to cost-cutting efforts.

The carrier said net profit for the year through March was $2.99 billion on sales of $15 billion, as a strong yen saw more Japanese people travel overseas, although demand was hit by last year's quake-tsunami disaster.

The carrier, which had forecast a $2 billion net profit, also said it posted a record operating profit of $2.57 billion in the period.

Despite last year's natural disasters and record flooding in Thailand, the carrier said it managed to avoid losses by cutting back on its flight schedule.

"[Then] JAL reacted swiftly to capture more traffic and deployed larger aircraft and operated extra flights to Honolulu when demand recovered from summer due to the strong yen," it added in a statement.

After filing for bankruptcy in 2010 JAL underwent an aggressive cost-cutting plan, led by charismatic businessman Kazuo Inamori, who was brought in by the government to help turn the firm around.

Inamori, founder of high-tech giant Kyocera (IW 1000/299), has previously lamented the airline's lack of cost discipline, saying its executives were too inept to run a vegetable shop.

On May 14, he warned against complacency at the revived carrier, given "unexpected risks" that routinely hit the airline industry.

"All the employees became united to reduce costs and increase profit," he told a news briefing in Tokyo.

"[But] I keep telling them not to feel complacent of this result," added the company director who serves as chairman emeritus.

In a statement, the company warned that business conditions would "continue to cast uncertainty," especially because of rising oil prices, while Europe's debt problem also threatened the global economy.

The carrier predicted it would earn a profit of $1.6 billion in the present fiscal year.

In March 2011, the company exited bankruptcy, more than a year after a spectacular collapse that prompted a government bailout of the once-venerable flag carrier.

It went bust with staggering debts of about $29 billion but continued flying during its rehabilitation, which included massive job and route cuts.

Japanese media have reported that JAL, which was forced to delist during its crisis, may return to the market by Sept. 2012.

President Yoshiharu Ueki on May 14 said only that if the carrier were to list "all we can do is to make this company attractive for investors and to continue showing good performance while focusing on safety in our operations."

In Feb., the firm said it had ordered 10 new Boeing (IW 500/15) Dreamliner aircraft as it looks to build on its recovery and fight off the threat from an emerging budget sector.

During its restructuring, the company cut unprofitable routes, reviewed its fleet and reduced fuel expenses. It also started using a new revenue management system to improve productivity.

Last month, domestic rival All Nippon Airways (ANA) posted a record operating profit of $1.2 billion in the year ended in March, boosted by cost cuts and a recovery in international travel demand.

Japan's aviation market has long been dominated by JAL and ANA, but the launch of a number of new low-cost carriers this year are expected to provide some stiff competition.

JAL said it is aiming to save $627 million in costs during the five-year period to March 2017.

Copyright Agence France-Presse, 2012

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