Japan Airlines’ net profit more than halved in the financial year ended 31 March, with coronavirus crisis cited as the overwhelming factor.

“This is the unprecedentedly tremendous event risk ever for the airline industry and its end is not foreseeable at this moment. There is no question that the JAL Group has been significantly affected as well.”

The group’s operating revenue declined by 5.1% year-on-year, from Y1.49 trillion ($14 billion) to Y1.41 trillion. This largely comprises the international and domestic passenger segments, which declined by 10.3% and 2.6%, respectively.

Operating expense was largely steady at Y1.31 trillion, and against that, operating profit nearly halved from Y176 billion to Y101 billion. Net profit slumped 64.6% to Y53.4 billion.

As at 31 March, the group had Y329 billion in cash and cash equivalents, down from Y522 billion on 31 March 2019.

Capacity on JAL’s international network declined by 1.1% while revenue passenger kilometres (RPKs) were down 6.2%, pushing load factor down 4.2 percentage points to 77.1%. Weakness in the segment was attributed to lower Japan outbound demand, due to the global economic slowdown, while routes to Europe and China faced an industry-wide surplus, the company says. Geopolitical issues also impacted services to Hong Kong and South Korea.

During the period, the group’s domestic capacity gained 0.2% but against a 2.9% decline in RPKs, load factor fell by 2.2 percentage points to 70.3%. The carrier reports robust leisure and business demand, but the outbreak of Covid-19 led demand to fall rapidly from February onwards.

The group states that it is actively expanding through codeshares and partnerships, while reiterating its commitment for long-haul, low-cost carrier subsidiary Zipair Tokyo to launch its first service in 2020.

JAL says that current schedules amount to a 95% reduction on its international network, while domestic capacity has been cut by 70%. It has therefore deployed its passenger fleet on international and domestic cargo flights “to increase aircraft turnover and then profits”.

Besides managing capacity to minimise operating cost, JAL is looking at restructuring fixed costs and investments to minimise the impact on financial performance. It adds that proactively managing its financing allows it to secure cash on hand appropriately.

The group did not provide a forecast for the next financial year as the pandemic remains uncertain.

“There is possibility that the whole society, not only the airline industry, may change fundamentally,” it says. “However, the importance of global interaction of people and logistic network will not change.”