Japan Airlines Q1 profit rises on overseas flight gains; ANA sinks on oil costs

Tokyo

FULLER international flights and a tight lid on costs helped Japan Airlines Co (JAL) post a modest rise in quarterly operating profit while rival ANA Holdings Inc's profits fell by 21 per cent as higher oil prices squeezed margins.

In results reported on Tuesday, JAL said that it had filled a record 81.3 per cent of seats on its international flights during the quarter ending on June 30, above the 75.3 per cent reported by ANA, due to strong inbound demand and stable outbound demand.

Japan's rising status as a tourist destination bolstered the international passenger numbers. JAL was freed in April 2017 from government-imposed restrictions on route expansions, more than seven years after filing for bankruptcy and receiving a taxpayer-funded bailout.

JAL reported operating profit for the quarter of 24.9 billion yen (S$303.9 million), up from 24.7 billion yen in the same period a year earlier and above the 24.7 billion yen average estimate of two analysts polled by Thomson Reuters I/B/E/S.

JAL shares were 3 per cent lower during trading on Tuesday afternoon, while ANA shares were one per cent lower; although for the year to date, JAL has outperformed ANA.

ANA's operating profit for the quarter was 20 billion yen, down from 25.4 billion yen in the same period a year earlier and below the 23.4 billion yen average estimate of two analysts polled by Thomson Reuters I/B/E/S.

ANA said that margins had been squeezed by higher oil prices and rising costs for investments in safety, quality and personnel.

ANA, which operates the biggest fleet of Boeing Co's 787 aircraft, has been forced to cancel almost 1,000 domestic flights in July and August as it inspects the Rolls-Royce Holdings plc engines on the planes for compressor issues that have affected airlines globally.

The airline said that it has incurred around 3.5 billion yen in lost revenues over that period, and plans to claim them back from Rolls-Royce.

In September and October, ANA will cancel an average of 15 domestic and international flights a day, affecting 1.5 per cent of the total.

The two airlines maintained their full-year forecasts, with JAL expecting a 4 per cent drop in operating profit to 167 billion yen and ANA forecasting 165 billion yen, roughly flat with last year.

JAL is expected to announce plans to extend its tie-up with China Eastern Airlines Corp Ltd at a media event in Shanghai on Thursday. It already has a code-sharing arrangement with the Chinese airline. REUTERS