Friday, May 02, 2008

Japan Airlines posts profit twice more than expected

On Friday, Japan Airlines (JAL) posted a net profit of more than twice their expectation resulting from cost cuts. Last fiscal year, the airline made 16 billion yen and their forecast was 7 billion. The company will report its final result on May 9. AFP reports:

JAL said it now expects to post an operating profit of about 90 billion yen for the year to March, much higher than an earlier forecast of 48 billion yen and up from the previous year's 22.9 billion yen.

Revenue fell to about 2.23 trillion yen from 2.30 trillion the previous year, JAL said in a statement.

JAL has slashed thousands of jobs and scrapped unprofitable routes in a bid to restore its financial health.

It has also stepped up efforts to lure in high-paying business customers, including by introducing first-class service on domestic routes last year.

Interesting thing is that the air lines has been incurring loss for the last two years in a row and in the previous year, it lost 16.2 billion yen.

Now, the airlines is planning to sale 49.4% share of its credit card firm, to Mitsubishi UFJ Financial Group (MUFJ) for $402 million. The firm will merge with two other credit card firms: Mitsubishi UFJ Nicos, and Japan Credit Bureau (JCB). Currently, JAL credit card firm has 2.03 million members and a yearly transaction of 1.5 trillion yen. After the merger, the membership will rise to three million.

The company is going to lose a large amount of money over price fixing charges. Last month, it agreed to pay a fine of $110 million to the US Justice Department over price-fixing charge. It will pay another hefty fine to the European Union authorities. The company set aside 6.19 billion yen ($59.2 million) for fine payment. Aside these, rising fuel cost will also affect its profit margin.

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