Japan Airlines Raised Earning Estimates
By Industry Leaders Magazine | February 6, 2013 12:00 PM EST
On the 4th of February, Japan Airlines informed that it raised the operating profit forecast to 163 billion yen from analysts' expectations of around 140 billion yen. Despite sluggish fourth quarter earnings, the airline the airline decided to raise the forecast slightly more than 15 percent as demand for the European and American routes climbed.
JAL Lifts Profit Outlook
Japan Airlines Co Ltd. raised its profit forecast for the full fiscal year by approximately 16 percent to about 163 billion yen as demand for European, North American and South Asian routes increased. The carrier raised its earnings estimates up by approximately 23 billion yen amid high fuel costs and weakening of the yen. Initially Japan Airlines estimated a net profit of roughly 140 billion yen. Japan Airlines matched analysts' expectations by increasing the sales forecast up by about 1.1 percent to 1.25 trillion yen. The revenues for the year grew by about 3.6 percent to slightly over 940 billion yen while profits of Japan Airlines in the first three quarters of the year reduced by 3.7 percent. The average stock jumped 3.1 percent in 2013.
The recent grounding of Boeing Dreamliner 787 disrupted earnings of Japan Airlines for period ended December. However, European, US and Southeast Asian routes helped to boost sales for Japan Airlines though it faced various challenges. These included the grounding of Dreamliner 787, weakening of the yen and an increase in fuel prices, thus spurring the overall expenditure. Also, the sales of Japan Airlines have been affected by the island dispute between Tokyo and Beijing while demand for flights dramatically reduced. Moreover, the operating costs of the airlines increased by around 5 percent owing to high fuel costs and fall in the exchange rate of yen against other major currencies. In after-hours trading, Japan Airlines witnessed an increase in the price of its shares by 1.2 to nearly 3,815 yen per share.
787 Grounding Compensation
Japan Airlines is expected to discuss the compensation for the grounding of Boeing Dreamliner 787 due recent events including a lithium-ion battery fire in Boston and an emergency landing of Dreamliner 787 in Japan. Unsolved battery problems led to the global grounding of Dreamliner 787 on the 16th of January. The no-fly order imposed on the airlines led to cancellation of 830 scheduled Dreamliner flights shrugging off nearly 1.4 billion yen sales for January. Due to overheating of batteries of the Dreamliner airlines forced the airline to postpone deliveries of new aircrafts till the problem subsides. Japan Airlines is also planning to delay the launch of a new Japan-Helsinki route and would cancel six 787 flights for the February period.
The National Transportation Safety Board of US is working along with other experts in order to determine the unresolved problem of lithium-ion batteries supplied by GS Yuasa Corp. The experts believe that the battery did not possess any "anomalies" in the electrical and thermal tests. However, Japan Airlines is still pondering over the issue of compensation for the Dreamliner 787 flights. "The most important thing is to be able to fly the 787 safely again, rather than compensation. So, obviously, we are preparing to discuss such matters when the situation comes under control, but we are not talking about that yet," underlined Yoshiharu Ueki, CEO of Japan Airlines.
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