TOKYO: Japan Airlines said on Friday its three-month net profit more than halved as savings from a decline in fuel costs could not make up for weak travel demand at home and abroad.
Falling oil prices have helped the carrier’s bottom line—fuel is often an airline’s single-biggest expense.
JAL said the impact of killer earthquakes in April in western Japan dented tourist travel to the region and thus demand for flights, while revenue on international routes slumped amid “stagnant” demand.
The airline in a statement said net profit in April-June dropped to 14.7 billion yen ($142 million) from 32.6 billion yen a year earlier, as revenue inched down 4.8 percent to 297.2 billion yen.
JAL offered little detail on the sharp profit decline but the Nikkei business daily reported Thursday that growing personnel costs on the back of a pilot shortage as well as the negative impact on travel due to terror attacks in Europe were key factors.
Terror attacks, now often honing in on so-called soft targets, including foreign tourists, are expected to remain a “downside driver,” said Hiroshi Hasegawa, an analyst at SMBC Nikko Securities.
Revenue from JAL’s international services for the quarter dropped 9.1 percent from a year earlier.
“Crude oil prices, which affect our fuel purchasing costs, international passenger revenue and international cargo revenue, have been lower than the year before,” JAL said.
The airline nevertheless left its full-year forecast unchanged, projecting net profit of 192 billion yen with sales at 1.343 trillion yen for the fiscal year to March.
But analyst Hasegawa cited the rise of low cost carriers as a worry for Japanese airlines in huge regional market China.
“The prospect for aviation demand in China is another concern in the wake of severe competition with LCCs there,” he said.
JAL re-listed its shares in Tokyo in 2012 to mark a spectacular turnaround three years after it went bankrupt with massive debts and saw its stock delisted from the Tokyo Stock Exchange.
Rival All Nippon Airways is scheduled to announce its quarterly earnings next week.