Andrew Mollett/TOKYO

Japan Air System (JAS) has added to the bad news in the Japanese airline sector, warning that it expects to post a loss for the last financial year and unveiling a renewed cost-cutting drive.

JAS had forecast a profit of ´700 million ($5 million) for the latest 1997/8 year to the end of March, but is now predicting a ´1.9 billion loss when the figures are reported shortly. Sales are expected to total just under ´360 billion, compared with a forecast of ´374 billion.

The news from JAS, which follows the recent Japan Air Lines announcement of massive write-offs against its ailing foreign investments, will be accompanied by a new restructuring plan. The aim is to cut seat costs by more than 10% over the next three years.

Some 500 staff will be shed over the next three years and plans are under way to suspend services on 21 unprofitable routes and reduce operations on another 29.

Many local routes will be transferred to lower cost affiliates, while JAS concentrates on the major trunk business. "We cannot be in a situation where profitable routes are simply financing our loss-making ones," comments a senior JAS official.

He adds that with new competition starting to emerge, it has become increasingly important "to reinforce our profitable operations and ditch those routes failing to give the adequate returns".

Like other Japanese operators, JAS has been hit by falling domestic passenger demand over the past few months, while competition is putting pressure on fares.

Source: Flight International