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The Honolulu Advertiser
Posted on: Tuesday, November 8, 2005

JAL cuts pay after losing $102M

Associated Press

TOKYO — Japan Airlines Corp. sank into a loss for the first half through September, thanks to soaring fuel prices and safety concerns, prompting the nation's top carrier to announce an average 10 percent pay cut yesterday for its workers.

The wage cuts will be introduced from Jan. 1, 2006, to March 2008, and the company will hold talks with labor unions, it said in a statement outlining reforms. Board members' pay will be reduced by 23 percent to 40 percent, it said.

Japan Airlines, known as JAL, posted group net loss of $102 million for the six months — the airline's first half-year loss in two years. The Tokyo-based company had recorded a profit the same period a year ago.

Sales for the period rose 3.4 percent to $9.4 billion.

Japan Airlines revised its earnings forecast for the full year ending March 31, 2006, to a $397 million loss. It had previously expected a $144 million profit.

It trimmed its revenue outlook to $18.6 billion, down from its earlier $18.7 billion prediction.

JAL has been plagued by a series of safety problems this year. In one, tires on the wheels came off during a landing. In another, a pilot attempted to take off without receiving approval from air traffic controllers.

The company said safety concerns cut passenger numbers by 1 percent to 29.5 million people during the period from 29.8 million the same period last year.

The rise in fuel costs also took a toll on earnings. Fuel bills for the first half were up by $372 million, or 32 percent from the same period a year ago, to $1.5 billion, JAL said in a statement.

Japan Airlines said it will invest about $507 million in safety-related systems and measures between fiscal 2006 and fiscal 2010, including strengthening technology and maintenance facilities. Under the plan, the number of technicians will be increased, and training programs will be reviewed, the company said.

To show its commitment to quality, JAL plans to introduce 23 new aircraft between 2006 and March 2009, including four Boeing 787s and 19 Boeing 737-800s and accelerate the retirement of older 747 jets, it said.

In fiscal 2007 and fiscal 2008, JAL plans to expand routes with medium-sized and small aircraft, mainly on Japan-China routes, it said. JAL will also upgrade services such as in-flight entertainment systems and in-flight meals.

The airline said demand on China and Asia routes is expected to stay weak while individual demand for travel in Japan remains stagnant.