The FINANCIAL — JAL Group (JAL) on April 27 announced the consolidated financial results for FY2017.
During the fiscal year, ending March 31, 2018, air travel demand remained strong for domestic and international flights due to moderate economic recovery trends seen in Japan and the overseas market. Crude oil prices, which affect JAL’s fuel costs and international passenger/cargo revenues, increased as OPEC agreed to maintain oil production cuts leading to the emergence of geopolitical risks. Through the twelve months, the exchange rate of the Japanese yen against the US dollar ranged between 105 and 115 yen, according to JAL.
Under these economic conditions, the company implemented profit conscious management strategies based on the principles of JAL Philosophy and the divisional profitability management system. In order to reach the goals set out in the FY2017-2020 JAL Group Medium Term Management Plan, the company will strive to realize greater management efficiencies and provide unparalleled service to customers, while committing to provide a safe and comfortable travel experience.
As a result of the above, operating revenue for the consolidated fiscal year increased 7.3% to 1,383.2 billion yen, while operating expenses increased 8.1% to 1,208.6 billion yen. Operating profit increased 2.5% to reach 174.5 billion yen and ordinary profit declined 1.1% from the previous year to 163.1 billion yen. Finally, profit attributable to owners of parent was 135.4 billion yen, down 17.5% due to deferred income taxes from the previous fiscal year.
In international passenger operations, passenger traffic increased 2.3% and revenue based passenger load factors reached a record high at 81%, attributed to strong outbound/inbound demand.
With regard to route operations, in addition to the launch of new services between Tokyo (Narita)=Melbourne and Tokyo (Narita)=Kona in September 2017, JAL increased flights between Tokyo (Haneda)=London in October 2017 to capture additional corporate and leisure demand. The company also signed new partnership agreements with Vietjet, Vistara, Hawaiian Airlines, Aeromexico, and Aeroflot to further improve its network.
On the service front, JAL won top honors for “Loyalty (Repeat Intention Rate)” for the fifth consecutive year in addition to “Customer Satisfaction” in the latest Japanese Customer Satisfaction Index (JCSI). For in-flight meals, JAL introduced new menus in Premium Economy and Economy Class on medium to long-haul routes. The menus were created by chefs featured in RED U-35, which is Japan`s largest culinary competition for the newest generation of talented chefs.
As a result of the above, the capacity on international routes measured in Available Seat Kilometers (ASK) increased by 2.4% year-on-year, and international passenger revenue was up 11.5% recording 462.9 billion yen.
In domestic passenger operations, due to competition with other airlines, revenue per passenger declined from the previous year but passenger traffic increased by 4.5%. This can be partially attributed to the recovery in demand in the aftermath of the Kumamoto Earthquakes in April 2016, in addition to various demand-boosting measures.
In route operations, in order to improve the convenience and comfort level on regional routes, the Embraer 190 aircraft was introduced on flights to/from Osaka (Itami) airport. In addition, the state-of-the-art ATR42-600 turboprop was introduced to the island routes near Kagoshima Prefecture, operated by Japan Air Commuter.
Regarding products, JAL began to offer complimentary in-flight Wi-Fi service on flights operated with JAL SKY NEXT aircraft and has received positive reviews. In addition, Boeing 737-800 aircraft operated by Japan Transocean Air were retrofitted with JAL SKY NEXT cabin interiors to add greater convenience and comfort in air travel.
On the sales and marketing front, JAL and TripAdvisor, Inc. have collaborated to open a travel information website to provide travel content on lesser-known local sights and events in Japan to foreign travelers. Appropriately named “Untold Stories of Japan”, the immersive portal on TripAdvisor’s website provides information on tourist facilities and activities, as well as a special fare for overseas visitors “JAL Japan Explorer Pass” to boost and spread inbound tourism across Japan. Furthermore, JAL partnered with Hyakusen Renma, a company that provides Airbnb accommodations in Japan. The two companies look to create new travel products to promote inter-regional travel by both domestic and overseas visitors.
As a result of the above, the capacity on domestic routes measured in Available Seat Kilometers (ASK) increased by 0.8% year-on-year, and domestic passenger revenue was up 3.9% from the year before recording 518.2 billion yen.