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JAL slashes profit outlook
TOKYO, Japan (Reuters) -- Asia's largest carrier, Japan Airlines System Corp, says it will post a second straight annual operating loss, stemming from the slowdown in international flight reservations over worries about a war in Iraq. Japan Airlines, a holding firm formed from the merger of Japan Airlines (JAL) and Japan Air System (JAS), said it now expects a group operating loss of two billion yen ($17 million) for the business year ending in March. It forecast a 17 billion yen profit in November after a joint JAL/JAS operating loss of about one billion yen last year. The group's loss forecast and last month's deeper loss estimates from its chief domestic rival, All Nippon Airways, stand in stark contrast to the upbeat outlook for some other Asian airlines, highlighted by Cathay Pacific Airways strong results last week. Japan Airlines said Tuesday international flights had been hurt by worries over a possible war in Iraq and global economic sluggishness, while domestic demand had also been worse than expected. "We've seen a fall in international flight reservations in February and March with customers worried about the situation in Iraq," said Isao Kaneko, chief executive of the JAL group, adding that the Bali bombing and a typhoon in Guam had depressed demand. Passenger worries about a war in Iraq are hitting the global airline industry as it struggles to recover from hefty losses in 2001 and 2002, which totalled $30 billion, and with the industry expecting more losses this year. "Demand was hit hard by the September 2001 attacks but then started to recover from the spring of 2002. I thought the industry was on a recovery trend," said Sadaharu Nagumo, senior portfolio manager at Japan Investment Management. "But now airfares aren't rising and customer numbers are on the decline. The future doesn't look too bright." JAL also trimmed its sales forecast by one percent to 2.07 trillion yen, hurt by an estimated 15 billion yen decline in international flight revenue. On a net basis, JAL said it expects a full-year consolidated profit of eight billion yen from an earlier forecast of 24 billion yen. The JAL group said it plans to cut an additional 600 jobs, or 2.8 percent of its workforce, by March 2006. To reduce costs and overlap from the merger, it said last year it would reduce its workforce by 3,000 staff. "JAL has been restructuring for 10 years it now seems... but it looks like they may have more room to cut costs," Japan Investment Management's Nagumo said. "Until airfares and customer numbers recover, this is not on my shopping list as an investor." Shares downShares in Japan Airlines ended Tuesday trading down 1.64 percent at 240 yen, down 23 percent since it relisted as a holding company in October. The Nikkei average has fallen 14 percent during the same period. ANA also said last month it planned to cut four percent of its workforce in an effort to slash operating costs. Hong Kong's main carrier, Cathay Pacific Airways, last week said its 2002 net profit soared six-fold on stronger passenger demand, increased cargo revenues and cost-cutting. Thai Airways International said in February net profit jumped 233-percent from a year earlier for its first quarter, helped by a rise in revenues. Qantas Airways, Australia's biggest airline, last month reported record six-month net profits, but announced it planned to cut 1,500 jobs and reduce routes from March to brace for a possible war in Iraq. Copyright 2003 Reuters. All rights reserved. This material may not be published, broadcast, rewritten, or redistributed.
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