Japan Airlines posted a Y93.7 billion ($885 million) net loss in the April to June period, as Covid-19-related travel and quarantine measures nearly wiped out the carrier’s passenger revenues.
Operating revenues declined by 78.1% year-on-year to Y76.3 billion in the first quarter of the fiscal year (FY) ending 31 March 2021, as international passenger revenue declined by 97.9% while the domestic network shrank by 85.1%.
Operating expenses declined accordingly, by 37.8% to Y206 billion. Fuel costs, which made up nearly 20% of the expenses one year before, declined by nearly 70% to Y19.4 billion.
Cargo, which in the year-ago period accounted for only 6.5% of operating revenues, increased by 16.9% to Y26.5 billion in the recently concluded quarter. Subsidiary Zipair, which was set to begin passenger operations in May from Tokyo Narita to Bangkok , launched instead with cargo-only flights in June.
In contrast, JAL recorded a Y12.9 billion net profit for the April to June 2019 period.
The company aims to reduce capex by a total of Y80 billion, revised upwards by Y30 billion in the latest reporting period. These reductions will come from negotiating deferrals of aircraft delivery, as well as evaluating functions such as IT, ground services, among others.
The airline has also saved Y108.4 billion in revenue and capacity-linked expenses compared to the year-ago period, along with Y29 billion in fixed costs associated with the launch of new international flights from securing new slots at Tokyo Haneda.
JAL says it has raised approximately Y300 billion in liquidity since February and has access to Y200 billion, having increased this by Y150 billion.
At the end of June, the company has Y394 billion cash on hand, while interest-bearing debts maturing within a year’s time are capped at Y50.7 billion.
JAL expects recovery for the international market to be “delayed for the long term” due to strict quarantine measures, while domestic travel has “tentatively returned to a certain level” since Japan lifted a nationwide state of emergency towards the end of May.
“However, as a new wave of [Covid-19] cases has been reported in Japan, a sense of uncertainty is expected for the immediate future,” JAL says.
The company did not provide a financial forecast, citing “the unforeseeable circumstances surrounding the impact of Covid-19”.
It does, however, provide a scenario in which domestic travel continues on the current trajectory and approaches 80% capacity year-on-year by December, while international travel returns from October and trends towards 40% by year-end.
Given these assumptions, the airline expects its domestic passenger revenue for the current fiscal year to decline by 55-65% year-on-year, and international passenger revenues to show a 10-20% reduction. This works out to a 35-45% decline in total full-year passenger revenues.