Japan's two biggest airlines Japan Airlines (JAL) and All Nippon Airways (ANA) are forecasting combined net losses for the year ending March of more than ´50 billion ($405 million) as a slowing domestic economy and the impact of the US terrorist attacks take their toll.

Announcing sharp falls in first-half profits, All Nippon Airways said that it expects a full-year net loss of ´11 billion. JAL, in also announcing sharp first-half profit-falls, forecast a net loss of ´40 billion. JAL had previously been forecasting a ´25 billion profit.

The two carriers have responded to the downturn by unveiling major route cuts. JAL and ANA have already slashed many routes and reduced other long-haul operations, representing available capacity cuts of between 10% and 15%. They are also stepping up internal restructuring efforts.

ANA, which makes most of its money from still-healthy domestic operations, says it will reduce workforce numbers by 1,100 to 12,700 by March 2003 - partly by discontinuing a recruitment plan. It will also make other internal cuts in a bid to save ´30 billion. ANA saw consolidated net profit fall 47% in the first half ended 30 September, while operating profit fell 28%.

JAL reported a 61% drop in net profit for its first half and a 45% drop in operating profit.

Both expect the global economic slowdown to have an impact on domestic operations in the second half. Like other Asian carriers, the two have been suffering from a sharp drop in cargo revenue, mostly because of a plunge in IT-related exports to the USA.

JAL recently agreed to merge with number-three carrier Japan Air System, in a move which will give them a combined domestic market share of 48%, roughly equal to that of ANA.

Source: Flight International