Japan Airlines Reduces Loss In Q1: What You Need To Know

Tokyo-based Japan Airlines has reported a loss of US$758 million for the three months to June 30. The airline attributes the loss to the continuing impact of COVID-19, closed international borders in Japan and elsewhere, and repeated states of emergency imposed in Japan.

Japan Airlines lost US$757 million in the three months to June 30. Photo: Jay Singh/Simple Flying

An improvement against comparable 2020 quarter

It’s not all bad news. Japan Airlines lost US$1.2 billion in the first quarter of 2020. Compared to that quarter in 2020 – the first quarter to feel the full impact of COVID – the metrics at Japan Airlines have improved. Across the airline’s domestic business, available seat kilometers (ASK) are up 54.1% measured against the comparable 2020 quarter. Domestic passenger numbers increased by 120% and revenue passenger kilometers (RPK) increased by 120.7%.

As far as Japan Airlines’ international flying goes, ASKs were up 358.7% compared to the comparable 2020 quarter. International passenger traffic numbers increased by 341.3% and international RPKs increased by 412.2%.

While those international network statistics look impressive, it’s worth keeping in mind that Japan Airlines operated very few international flights across April – June 2020. Domestic passenger loads in the most recent quarter averaged 40.5% and international passenger loads averaged 19.5%.

“The spread of COVID-19 has been active even in the fiscal year 2021, and worldwide restrictions on international travel and restricted entrance to Japan have not been lifted yet,” Japan Airlines noted when releasing its quarterly results on Tuesday.

“Also, declarations of a state of emergency and strict measures to prevent COVID-19 infection have been imposed repeatedly in Japan. As a result, international and domestic passenger demand still remains at a low level.”

The metrics are improving at Japan Airlines, albeit off a very low base. Photo: Vincenzo Pace/Simple Flying

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Cargo comes to the rescue to Japan Airlines

The biggest earner at Japan Airlines across the three months to June 30 was cargo. International flying generated $102.8 million, domestic flying brought in $348.7 million, and cargo contributed $436.9 million to Japan Airlines’ coffers.

Japan Airlines attributes its cargo windfall to a general decrease in cargo capacity, leading to increased revenues for what capacity was available. The “demand-supply situation tightened,” the airline noted. Revenue from cargo was up 82.2% on the comparable 2020 quarter.

In the three months to June 30, 2020, Japan Airlines flew 1,265,198 passengers. That comprised 1,231,323 passengers on the airline’s domestic network and 33,875 passengers across the international network.

Fast forward 12 months, and Japan Airlines carried 2,857,897 passengers in the comparable 2021 quarter (an improvement of 225.9%). In the three months to June 30, 2020, 2,708,405 passengers flew on a Japan Airlines domestic flight, and 149,492 passengers flew on an international flight.

Japan Airlines hopes to see some improvements in demand by September. Photo: Vincenzo Pace/Simple Flying

As of June 30, Japan Airlines was flying around 30% of its 2019 domestic capacity and just 7% of its 2019 international capacity. Previously, the airline had said it needs to hit 80% and 40% respectively to return to profitability.

“It’s hard to predict a recovery in demand,” Japan Airlines’ Chief Financial Officer, Hideki Kikuyama, said on Tuesday.

“Depending on the return of domestic passenger demand, we are hopeful that operating cash flow will turn positive in September or so.”

No Olympic bounce

With tourists and locals banned from the Tokyo Olympics and competitors bundled home as soon as they finished competing, Japan Airlines won’t see much fillup from the $20 billion event.

The existing state of emergency, which covered Tokyo and Okinawa, is now expanded to take in Chiba, Kanagawa, and Saitama. Japan registered more than 10,000 additional daily COVID-19 cases between Thursday and Sunday.

Cargo might keep Japan Airlines flying, but Hideki Kikuyama could be optimistic, hoping passenger traffic will return to anything near 2019 levels anytime soon.