July 31, 2018 / 6:40 AM / 18 days ago

Japan Airlines first quarter profit rises on overseas flight gains; ANA sinks on oil costs

TOKYO (Reuters) - Fuller international flights and a tight lid on costs helped Japan Airlines Co (JAL) (9201.T) post a modest rise in quarterly operating profit while rival ANA Holdings Inc’s (9202.T) profits fell by 21 percent as higher oil prices squeezed margins.

FILE PHOTO: Newly hired employees of Japan Airlines (JAL) group fly paper planes during the company group's initiation ceremony at a hangar of Haneda airport in Tokyo, Japan, April 2, 2018. REUTERS/Issei Kato/File Photo

In results reported on Tuesday, JAL said it had filled a record 81.3 percent of seats on its international flights during the quarter ending on June 30, above the 75.3 percent reported by ANA, due to strong inbound demand and stable outbound demand.

Japan’s rising status as a tourist destination bolstered the international passenger numbers. JAL was freed in April 2017 from government-imposed restrictions on route expansions, more than seven years after filing for bankruptcy and receiving a taxpayer-funded bailout.

JAL reported operating profit for the quarter of 24.9 billion yen ($223.90 million), up from 24.7 billion yen in the same period a year earlier and above the 24.7 billion yen average estimate of two analysts polled by Thomson Reuters I/B/E/S.

JAL shares were 3 percent lower during trading on Tuesday afternoon, while ANA shares were 1 percent lower, although this year JAL has outperformed ANA.

PROFIT DROPS

ANA’s operating profit for the quarter was 20 billion yen, down from 25.4 billion yen in the same period a year earlier and below the 23.4 billion yen average estimate of two analysts polled by Thomson Reuters I/B/E/S.

ANA said margins were squeezed by higher oil prices and rising costs for investments in safety, quality and personnel.

ANA, which operates the biggest fleet of Boeing Co’s (BA.N) 787 aircraft, has been forced to cancel almost 1,000 domestic flights through July and August as it inspects the Rolls-Royce Holdings Plc (RR.L) engines on the planes for compressor issues that have affected airlines globally.

In September and October ANA will cancel an average of 15 domestic and international flights a day, affecting 1.5 percent of the total.

The airline said it has forecast revenue losses of around 5 billion yen over the three months to September because of the engine issues. ANA said it would claim back losses from Rolls-Royce without providing figures.

The two airlines maintained their full-year forecasts, with JAL expecting a 4 percent drop in operating profit to 167 billion yen and ANA forecasting 165 billion yen, roughly flat with last year.

JAL is expected to announce plans to extend its tie-up with China Eastern Airlines Corp Ltd (600115.SS) at a media event in Shanghai on Thursday. It already has a code-sharing arrangement with the Chinese airline.

Reporting by Sam Nussey in Tokyo; additional reporting and writing by Jamie Freed in Singapore; Editing by Nick Macfie and Christian Schmollinger

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