On May 2, JAL announced the “JAL Group Medium-Term Management Plan Rolling Plan 2023 for FY2021-2025,” which will further solidify the financial results for FY2022 (ending March 31, 2023) and the medium-term management plan for FY2021 to FY2025.
In attendance were Yuji Akasaka, President and Group CEO; Yuji Saito, Senior Managing Executive Officer and Group CFO, General Manager of Corporate Planning Division; and Masao Yumizaki, Executive Officer and General Manager of Finance & Accounting Division and General Manager of Business Administration Division.
In the consolidated financial results for the full year of FY2022, revenue increased 101.5% (692.8 billion yen) from the previous year to 1,375.5 billion yen, EBIT (Earnings Before Interest and Taxes. Operating income in the previous index) was 64.5 billion yen (up 304.0 billion yen) and net income was 34.4 billion yen (up 211.9 billion yen), recording a profit for the first time since the fiscal year ended March 2020. Although airline demand is on a recovery trend amid the easing of waterfront measures in various countries, fuel costs rose 122.3% (177.8 billion yen) from the previous year to 323.3 billion yen due to the fuel market and sharp yen depreciation, and operating expenses increased 43% (404.4 billion yen) from the previous year to 1,344.6 billion yen. The company explained that it worked to improve profitability by reducing real fixed costs to 492.5 billion yen, below the target of 500 billion yen, through thorough cost management.
By business segment, the full-service carrier business showed significant improvement on both international and domestic routes. For international routes, international passenger revenue increased 507% y-o-y (348.7 billion yen) to 417.5 billion yen, thanks to the capture of transit demand between Asia and North America and a recovery in inbound demand due to the relaxation of waterfront measures. Domestic passenger revenue increased 91.9% y-o-y (up 216.0 billion yen) to 451.1 billion yen, due in part to the demand stimulus from nationwide travel support and a recovery in high-demand periods. 31.7 billion yen was recorded for LCC business, partly due to the contribution of ZIPAIR, which turned profitable early.
Cargo business, which had been brisk even in the Corona disaster, has seen a decline in demand since the summer of 2010, but has remained strong, especially between Asia and North America, with cargo mail revenues up 2.9% (+6.4 billion yen) from the previous year to 224.7 billion yen.
He explained that the company’s financial situation remains sound, although the equity ratio declined slightly from 41% in the previous period to 39.3%. He said that the company has sufficient liquidity on hand, as it has maintained cash and deposits of 639.2 billion yen and unused committed lines of credit of 250 billion yen. With air passenger demand on the road to recovery, the company’s operating cash flow and free cash flow have improved significantly to 292.9 billion yen and 180.1 billion yen, respectively.
The company has announced the resumption of dividends for the current fiscal year, and will pay a dividend of 25 yen per share for the current fiscal year, having paid no dividend for the fiscal years 2008 and 2009.
For FY2023 (fiscal year ending March 31, 2024), the company expects revenue of 1,658 billion yen, EBIT of 100 billion yen, and net income of 55 billion yen. In terms of passenger demand, the company expects a recovery of about 94% on domestic routes and 65% on international routes compared to the pre-Corona FY2019 level. The company forecasts a dividend of 40 yen per share, with an interim dividend of 20 yen per share.
Mr. Akasaka presented the Rolling Plan 2023, a medium-term management plan to better ensure the achievement of JAL Vision 2030, which sets safety and security and sustainability as the two pillars guiding the JAL Group toward 2030. Last year’s Rolling Plan 2022 called for returning EBIT (Earnings Before Interest and Taxes) to the pre-Corona level of 170 billion yen by 2023, but after considering the recent global situation, price hikes, and human resource shortages, the target was revised to 100 billion yen. On the other hand, he explained that there will be no change in the target of more than 185 billion yen by 2025.
The key point of the Rolling Plan 2023 is to place the ESG strategy at the top of the plan, which is designed to create social connections through the movement of people and goods, and to link such movement and connections to the revitalization of the local economy, the resolution of various social issues, and the creation of social value. The movement of people and goods creates social connections. To promote its ESG strategy, the company will implement its business structure reform, DX strategy, human capital strategy (human capital management), and GX strategy.
The main points of the business structure reform are to expand the network by actively introducing fuel-efficient aircraft while taking environmental impact into consideration, to introduce a dedicated freighter (Frater) that has been upgraded from a Boeing 767-300ER, and to strengthen cargo transportation through an alliance with Yamato HD. In terms of human resource strategy, which is indispensable for implementing these strategies, the company will actively construct a personnel system that respects diverse values, conduct evaluations and training, and improve the productivity of each employee.
Mr. Saito explained the details by business segment. As for fuel-efficient aircraft, as already announced, a large Airbus A350-1000 is scheduled to be introduced on the Haneda-New York route this winter, and nine aircraft are planned to be introduced by the end of FY2013. The renewal will improve fuel efficiency per aircraft by about 20%, and the ratio of new Airbus A350s and Boeing 787s will be increased from 29% in FY19 to 47% by the end of FY25.
Another major point is the introduction of dedicated cargo aircraft. Three Boeing 767-300ERs currently in passenger service will be upgraded, with two to be operated as dedicated cargo aircraft by the end of FY2011 and one in FY2012. In addition, through a partnership with Yamato HD, the company will begin operating an Airbus A321 aircraft exclusively for cargo in FY2012. The decision to introduce this aircraft was based on the growth of e-commerce and the 2024 issue for parcel delivery. The company intends to operate the aircraft mainly for domestic use during the daytime and utilize it for e-commerce demand in East Asia during the nighttime. He explained that by doing so, the company hopes to bring its revenue from cargo mail, which is expected to decline to 172 billion yen in FY2011 due to a decrease in the volume of cargo handled, back to the 200 billion yen level again.
During the Q&A session, when asked about the outlook for future air passenger demand, Mr. Akasaka responded that domestic demand has mostly recovered, especially for tourism, but international demand “has not fully returned. He stated that unit prices have risen, partly due to the steep rise in fuel surcharges, and although international passenger revenues in the FY2011 forecast itself are higher than before the Corona, the situation cannot be said to have recovered yet. The company also believes that tourism demand is recovering strongly, but that business demand is still a bit weak.
When asked about the response to the “JAL Smiles Campaign” offering a flat rate of 6,600 yen for domestic flights, he first apologized for the initial system problems. He reported that although there were some stumbles at the start of the campaign, sales were very strong, with 70% of new reservations and 30% of repurchases contributing to the increase in revenue. The company said that the campaign was effective in stimulating demand during the off-season, and that it would continue to implement such campaigns in the future while keeping an eye on the situation.
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