The prognosis turned worse for Japanese carriers in the July-September financial quarter, as Japan Airlines went deeper into the red while All Nippon Airways changed its forecast for the full year from a small profit to a loss.
Both carriers were struggling to cope with soft domestic demand due to the economic crisis and fears over the H1N1 flu, and as cost cutting measures failed to keep up with falling revenues. Their responses, however, have been different.
Japan Airlines spelt out the size of its troubles after posting a net loss of ¥32.1 billion ($356 million) as operating revenues plunged more than a quarter to ¥429 billion. It also withdrew its full-year performance forecast, saying that it was difficult to give one while its reconstruction plans remain in limbo.
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Struggling JAL saw 3Q operating revenues plunge more than a quarter |
Rival All Nippon Airways, on the other hand, believes that it can stand on its own two feet. Its net profit for the three months fell 11.5% to ¥3.8 billion and the carrier posted a half-year loss of ¥25.3 billion versus a ¥22 billion profit a year before.
"Conditions were extremely challenging during the three-month period due to the global recession triggered by last year's financial crisis, as well as the spread of H1N1 influenza, which began affecting Japan from mid-May," the airline says. "While we have implemented a range of measures to boost revenues and cut costs, we were unable to offset the slump in demand and fall in unit prices."
Longer To Recover
While saying it is on track with previously announced plans to cut costs by ¥73 billion and increase income by ¥30 billion for the full-year, it adds that "it will take more time than we originally envisaged for demand and unit prices to recover".
"Both results were weaker than we had expected," says JPMorgan Japan. "It was the first time JAL has ever suffered a loss in Q2 (a busy travel season) since quarterly reporting began. There were a number of reasons. Momentum in international passenger numbers bottomed in July and began to grow again year-on-year in August, but yields were down around 35% year-on-year at both ANA and JAL, showing no improvement from Q1, and recovery in demand for international travel was slow."
Elsewhere, Singapore Airlinesposted a net loss of S$159 million ($114.5 million) during its fiscal second quarter mainly due to higher fuel prices. This is a S$482.8 million drop from the net profit of S$323.8 million the Star Alliance member reported a year before. While this represents an improvement from the net loss of S$307 million SIA reported in its fiscal first quarter, the carrier remains set to report its first full-year loss.
SIA, however, remains optimistic. "Advance bookings indicate that demand for air travel has stopped declining and is gradually recovering," it says. While yields have fallen due to promotional pricing on flights across SIA's network, the carrier adds: "The market conditions allow for some rollback of promotional pricing but yields are unlikely to get back to pre-crisis levels within the next six months."
Pressure On India
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Read our in-depth interview with Air China chairman Kong Dong here |
India's two largest carriers Kingfisher Airlines and Jet Airways continued to bleed as they tried to cope with the twin issues of excess capacity and price-wars in the domestic market. Here too, however, there appears to be some light at the end of what has been a very dark tunnel. "Operationally, the performance has stabilised and the impact of initiatives like rationalisation of capacity and our cost reduction program have started to show results," says Kingfisher.
One bright spot is Air China, with China's flag carrier posting a net profit of 885.3 million yuan, an improvement from a net loss of 1.97 billion yuan a year before. Revenues from operations increased marginally by 1.32% to 14.1 billion yuan, while operating costs fell by 10% to 13.49 billion yuan.
Air China chairman Kong Dong says profits from operations were increasing as Air China benefited from both cost cutting measures and the Chinese government's stimulus measures that boosted domestic demand.
Source: Airline Business
