Japan Airlines H1 net profit slips 17.8% to US$833m

Japan Airlines said on Thursday net profit for the six months to September dropped 17.8 per cent to $833 million, as the strong yen and rising fuel costs bit into its bottom line.

But it boosted its outlook for the full year, striking an optimistic note on prospects for customer numbers on both domestic and international routes.

In a half that saw the grounding of its fleet of Boeing 787 Dreamliners after a series of safety glitches, the company said it had made 81.94 billion yen ($833 million), with an operating profit that was down 14.6 per cent at 95.84 billion.

Sales however edged up 4.0 per cent to 659.30 billion.

The numbers were healthier than main rival All Nippon Airways, which issued a grim earnings report, citing high fuel costs and the worldwide grounding of Boeing's next generation aircraft as contributing factors.

JAL, which returned to the market last year after a spectacular bankruptcy, did not give a specific reason for its weaker earnings.

But depreciation of the yen, which has slid to around 100 to the dollar compared with 80 a year ago, was seen amplifying the cost of fuel as well as user fees for international airports.

Japan's thorny ties with neighbours also depressed demand for flights to South Korea and China.

Tokyo is embroiled in separate territorial spats with both countries.

But JAL said revenues from its international services increased "despite the suspension of Boeing 787 flights and stagnant demand on Korea and China routes".

"On June 1, 2013, JAL resumed operation of the Boeing 787 on completing of all necessary safety measures, after battery problems grounded the fleet in January 2013 and caused substantial concerns and inconvenience," the company said.

JAL and ANA were sideswiped by the grounding of Boeing's new aircraft that began in January. After a long-running probe, the planes were allowed to fly again in June.

JAL said it increased the use of the fuel-efficient Dreamliner on international services to increase overall efficiency, while reducing Narita-Beijing flights because of shrinking demand.

Domestic services also fared well, with expanded routes and improved services such as better airport lounges.

Unlike ANA, which cut its full year profit forecasts by two-thirds, one-time flag carrier JAL upgraded its annual forecasts, citing strong demand for flights to Southeast Asia and cost cutting efforts.

The figures were also expected to benefit from an adjustment in foreign exchange movement and falling fuel prices.

The new net profit projection came to 128 billion yen, up from the previous estimate of 118 billion yen.

Operating profit is now expected to come in at 155 billion yen, compared with 140 billion yen, on sales of 1.286 trillion yen, up from 1.272 trillion yen.

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