On October 31, 2019, JAL released its financial results for the first half of fiscal year 2019. While the company recorded higher revenue than in the first half of the previous fiscal year, it experienced considerable decline in profits.
The announcement comes just a couple of days after ANA revealed similar trends in its H1 FY2019 financial results.
JAL Group H1 FY2019 Financial Results
JAL Group recorded operating revenue of 759.8 billion yen (1 US dollar = about 108 yen). That’s a modest increase of 1.3% compared to the first half of fiscal year 2018.
The group’s operating profit in H1 FY2019 was 81.3 billion yen. That’s a 16% decrease compared with H1 FY2018. JAL’s ordinary profit and profit attributable to owners of parents have decreased as well, by 12.5% and 30.2% respectively.
While the revenue from domestic passenger services grew 3.3% to 276.8 billion yen, both the revenue from international passenger services and from cargo operations decreased year-over-year. The formed decreased by 1.2% to 266.0 billion yen while the latter by 9.3% to 45.1 billion yen.
The company cites the prolonged ten-day Golden Week holiday period as one of the drivers behind the growth of domestic revenues. Just like ANA, JAL attributes significant part of the decrease in its cargo business to the ongoing trade tensions between the United States and China.
As for the decline in its international traffic, according to the report:
…the Japan-outbound leisure demand showed robust growth, while the business demand from Japan weakened along with the global economic slowdown. In addition, the supply-demand imbalance became clear especially on the European routes due to oversupply by competitors, and the declining demand was observed on the Hong Kong and Korean routes due to political uncertainty or the worsened relationship between Japan and South Korea.
The airline recorded a 0.5% YOY decline in the number of international passengers and a 3.4% increase in the number of domestic passengers transported. That adds up to a 2.6% overall increase compared to last year, or a total of 22,588,498 passengers carried in H1 FY2019.
The volume of cargo and mail transported has decreased by 4% YOY.
JAL’s Revised Forecast for FY2019
JAL, just like ANA, has revised its forecast of the full year’s performance.
It cut its revenue forecast by 47 billion yen to 1,516 billion yen. That represents a 3% cut compared to the original forecast of 1,563 billion yen.
That said, the airline has decided not to adjust its profit forecasts. The airline still expects to report 170 billion yen in operating profit, 171 billion yen in ordinary profit, and 114 in profit attributable to owners of parent at the end of the year.
Summary
Just like with ANA, the prolonged Golden Week holiday period has helped JAL’s domestic business. However, it’s international business has faced a number of challenges including:
- Slowdown of demand for international business travel out of Japan
- Political tensions between Japan and South Korea
- Anti-government protests in Hong Kong
- Trade war between the United States and China
- Increase in competition, especially on long-haul routes
As a result of that, among other reasons, JAL’s performance in the first half of FY2019 was notably worse than in the first half of FY2018.
