JAL turns the corner but ANA struggles

Recovery has started sooner for Japan Airlines (JAL) than for All Nippon Airways (ANA). JAL has returned to profit, but both carriers face the twin threats of recession and domestic competition.

Figures for the financial year ending 31 March will not be available until May, but the signs are that JAL ended with a healthy after-tax consolidated profit (see table). JAL expects to pay its first dividend in seven years in a victory for president Isao Kaneko, who took over in June and staked his reputation on meeting these goals. For the second time in 30 years, ANA will not pay a dividend. Its after-tax consolidated loss widened.

JAL's recovery is less dramatic than the numbers suggest. Last year's loss was due to an extraordinary write-off of ´155 billion ($1.3 billion) in accumulated losses and over-valuations. By cleaning its balance sheet in one swoop, JAL depressed last year's result and allowed it to show improved profits.

ANA has resorted to the same strategy on a smaller scale. In the year just ended it took an extraordinary write-off of about ´15 billion from liquidating its troubled finance unit, ANA Finance, and extra payouts for early retirements.

Both airlines are suffering from the continued effects of Japan's recession and new domestic competition. Passenger numbers are up, but ANA's sales fell by 1%, while JAL's dropped by 6%. Both declines are due to lower fares and fewer premium class passengers.

Their restructuring efforts continue. Both carriers have deferred aircraft orders and announced staff cuts. The most dramatic move, however, is their plan to transfer more routes to low cost subsidiaries. JAL expects to move more domestic flights to JAL Express, which will add Boeing 737-400s and its first 767 this year. JAL is converting Japan Air Charter into a scheduled carrier and will transfer to it leisure routes in South-East Asia and the Pacific. ANA plans similar moves.

Japanese group forecasts for year-end 1998/9

Source: Airline Business