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Japan Airlines Reports Fiscal Year Loss, Provides No Outlook
Japan Airlines reported on Friday an annual net loss of 286.7 billion yen ($2.6 billion) but did not release a forecast for the current financial year, citing rising uncertainty around the Covid-19 pandemic as it continues to negatively affect air travel demand.
This is the carrier’s first fiscal year loss since relisting in 2012 following restructuring.
“There has been no indication of passenger demand recovery yet” due to restrictions on international travel and tougher immigration measures, the airline said in a statement. Japan Airlines President Yuji Akasaka said the situation remains “severe” and the outlook for a recovery in air travel demand still remains to be seen.
Japan’s national carrier has been undergoing cost-saving restructuring to survive the pandemic but has still incurred great losses of $3.7 billion before interest and taxes as revenue declined to 65.3% of the total the year before to $4.4 billion in the year that ran from March 31, 2020, to March 31, 2021.
The company last week revised its projection for a possible 2020-2021 net loss to $2.6 billion from a $2.8 billion forecast in February.
Japan Airlines’ decision to not release an outlook for the year ending March 2022 was said to be due to difficulty in having “to foresee the recovery of demand while the global spread of Covid-19 shows no sign of slowdown.”
“Air travel demand depends on when the effects of vaccinations will start appearing,” Akasaka said in a press conference Friday. “Looking at the situation in the United States and Britain, demand has certainly returned as vaccinations have progressed. So we need to prepare for a sharp recovery…but what we do not know is when that will happen.”
Uncertain Road to Recovery
With Japan’s vaccination rollout currently moving along much more slowly compared to the U.S. and some European nations, the country is still struggling to curb coronavirus infections and had to re-instate a third state of emergency for popular cities such as Osaka and Tokyo until the end of May.
Continuous waves of infections have also increased fear with locals as public concerns mount over holding the Olympics — slated to take place this summer after being delayed from summer 2020 — in a pandemic, with online petitions to cancel the games garnering hundreds of thousands of signatures in just a few days.
Despite the petitions, the postponed games is still set to open in July, but overseas spectators have been barred from the event, and a decision on domestic spectators will be delayed until June.
The lockdowns and border restrictions have shown to have a negative impact on air travel demand, as in the just-ended business year, the number of passengers on domestic flights came to 12.21 million, down 66.5% from a year ago, while those on international flights tumbled 96.0% to a total of 357,519 passengers.
Revenue from international flights took a much larger hit than that from domestic ones, marking a 94.3% year-on-year drop to $256.8 million. Domestic service revenue came to $1.6 billion, down 67.2%.
Looking to a post-pandemic recovery in travel, JAL said it will shift more resources to low-cost carrier businesses as a medium-term business plan until fiscal 2025 was also unveiled Friday.
Japan Airlines will make Spring Airlines Japan Co., a unit of China’s major low-cost carrier Spring Airlines Co., a consolidated subsidiary in June, according to the new medium-term plan.
Akasaka said the carrier expects to “fully recover” from the impact of the pandemic in fiscal 2023 when it hopes to see a profit of $1.6 billion n in earnings before interest and tax, with $92 million coming from the low-cost carrier business.
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