Japan Airlines Co., Ltd. · TSE:9201
Japan Airlines — Q2 FY2016 Earnings Presentation
48 slides from Japan Airlines's earnings presentation, Oct 31, 2016
Slide 1: Financial Results 2nd Quarter Mar/2017 (FY2016)
JAPAN AIRLINES Co., Ltd. Financial Results 2nd Quarter Mar/2017 （FY2016） October 31, 2016
Slide 2: Today's Topics
Today’s Topics P.1 P.2 P.5 P.6 P.8 P.21 From the first quarter of this fiscal year, figures for Revenue Passengers Carried, ASK, RPK and Load Factor include “Marketing Carriers’ on code- sharing flights operated by JAL”. As a result, second-quarter ASK, RPK and Load Factor of the previous year refle
Slide 3: Overview of 1st Half FY Mar/17 Results
Overview of 1st Half FY MAR/17 Results Operating Revenue Operating Profit （JPY Bn） （JPY Bn） （OP Margin） 700 130 20% 687.9 ▲36.0Bn 119.9 ▲27.5Bn （▲5.2%） （▲23.0%） 110 651.9 17.4% 92.4 650 90 15% 14.2% 70 600 1st Half Mar/2016 1st Half Mar/2017 50 10% 1st Half Mar/2016 1st Half Mar/2017 Fuel/FX Markets
Slide 4: Operating revenue and profit commentary
Operating revenue declined 36 billion yen, down 5.2% year-on-year, to 651.9 billion yen. The drivers were a decrease in domestic passenger revenue caused by the Kumamoto earthquakes, lower international passenger and international cargo fuel surcharge revenues, and the stronger yen. Operating prof
Slide 5: Revised Consolidated Financial Forecast for FY Mar/17
Revised Consolidated Financial Forecast for FY Mar/17 Downward Revision in Operating Revenue and Profit Forecast The revision was made based on the results and Fuel/FX forecasts. New Operating Profit (JPY Bn) Previous Forecast Forecast Difference （JPY Bn） Operating （OP Margin） Revenue 1,343.0 1,28
Slide 6: Commentary on revised earnings forecast
Given our second-quarter results and exchange rate and fuel price projections, we have revised our earnings forecast for fiscal 2016. In our previous earnings forecast announced on April 28, we projected operating revenue at 1,343 billion yen, operating profit at 201 billion yen and net income at
Slide 7: Revised Forecast (Changes in Operating Profit)
Revised Consolidated Financial Forecast for FY Mar/17 (Changes in Operating Profit) We revised operating profit down 31 billion yen, as international passenger demand and revenue per passenger and domestic revenue per passenger are seen to fall below our projections. Impact From Currency Market +20.
Slide 8: Commentary on forecast revenue and profit changes
Revenues are expected to decline 63 billion yen. This is because international passenger revenue is expected to decline 37 billion yen in total, with a breakdown of 22 billion yen attributed to fuel surcharge and exchange rates and 15 billion yen due to a decrease in number of passengers and revenu
Slide 9: Progress of measures to improve profitability
Progress of measures to improve profitability Reinforce Divisional Profitability Management System and maximize profits Measures to increase revenue 第2四半期 FY2016Q2 下期 2nd Half FY2016 Increase unscheduled flights Increase flights on Honolulu and Bangkok routes Int’l Passenger Implement measures to bo
Slide 10: Commentary on revenue and cost measures
To increase revenue, we will operate unscheduled flights on international routes, implement demand boosting measures, and capture leisure demand on domestic routes, amongst other measures. To increase our cost effectiveness, we will strive to reduce mileage costs, review entrusted service costs an
Slide 11: Share repurchase
Share repurchase Decision to acquire 30 billion yen of own shares by March 31, 2017 Content of share repurchase （１）Type of shares acquired Common shares of JAL （２）Total number of shares acquired 15 million shares (maximum) （３）Total price of shares acquired 30 billion yen (maximum) （４）Period of acqui
Slide 12: Commentary on 30 billion yen share repurchase
We have decided to acquire up to 30 billion yen of our own shares with the aim to increase capital efficiency and flexibly enhance returns to our shareholders according to the needs of our shareholders and investors. Through the repurchase of our own shares, cash flows for this fiscal year will in
Slide 13: Recent Topics
Recent Topics International・Domestic JAL, British Airways, Finnair and Iberia launch joint Progressively introduced JAL SKY NEXT installed aircraft (seats, inflight Internet) on domestic routes (77 JAL SKY business between Japan and Europe. NEXT aircraft by 2016 fiscal year-end) JAL started co
Slide 14: Commentary on recent topics
On international routes, Iberia added a joint business between Japan and Europe with us, British Airways and Finnair. On domestic routes, we have been revamping our aircraft with the reputable JAL SKY NEXT cabin interiors. All applicable 77 aircraft will be revamped by the end of fiscal 2016. 6-S
Slide 15: Business Direction from FY2017
Business Direction from FY2017 Medium and long term Management Targets from FY2017 ～To increase corporate value～ We will appropriately respond to passenger demand growth and continue to grow based on profitability and stability, and thus increase corporate value Profitability Stability Growth Purs
Slide 16: Commentary on direction from fiscal 2017
This page shows the direction we are heading from fiscal 2017 onward, as announced on February 18, 2016. We are drawing up the next medium-term management plan so that we can announce it around February or March next year. From fiscal 2017, we will not merely seek to expand in scale. Our policy to
Slide 17: Consolidated Financial Results
Consolidated Financial Results Consolidated Financial Results 1st Half Mar/17 1st H FY 1st H FY 2 nd Quarter （JPY Bn） Diff. y/y ratio Diff. y/y ratio Mar/16 Mar/17 (Jul-Sep)(5) Revenue 687.9 651.9 ▲36.0 ▲5.2% 354.7 ▲21.1 ▲5.6% Air Transportation Segment 620.2 585.6 ▲34.5 ▲5.6% 317.3 ▲20.4 ▲6.0% Oper
Slide 18: Commentary on consolidated results
Operating revenue ended at 651.9 billion yen, 5.2% lower than the previous year. As for operating expenses, maintenance costs and personnel costs for focused investments in human resources to build the foundations of future growth increased; however, lower fuel prices brought operating expenses do
Slide 19: Changes in Operating Profit
Changes in Operating Profit 1st Half FY Mar/17 Impact From Currency Market +11.1Bn ▲27.5Bn （JPY Bn） Revenue ▲10.2Bn (▲23.0%) Cost +21.3Bn Fuel +10.7Bn Ex. Fuel +10.6Bn ASK y/y ： ▲0.4% RPK y/y ： ▲0.1% Int’l Maintenance Aircraft Passenger Fuel ▲2.4 ▲0.7 Domestic Personnel ▲22.5 Passenger Other Cost Ca
Slide 20: Commentary on operating profit changes
International passenger revenue declined 22.5 billion yen year-on-year due to lower fuel surcharge revenue and the stronger yen. Domestic passenger revenue decreased 3.4 billion yen year-on-year due to a decline of revenue per passenger caused by severer price competition, while individual passenge
Slide 21: International Passenger Operations (Operating Results)
International Passenger Operations(Operating Results) International Passenger 1st H FY 1st H FY y/y y/y ratio 2 (Jul-Sep) ndQuarter Passenger Revenue was Mar/16 Mar/17 (4) ratio 213.1 billion yen, declined Passenger Revenue 22.5 billion yen y/y basis. (JPY Bn) 235.6 213.1 ▲9.6％ 113.6 ▲10.0% ASK
Slide 22: Commentary on international passenger operations
While ASK on international routes rose 0.8% year-on-year, RPK slightly increased by 0.1%. As a result, the load factor was 80.0%, down 0.5 percentage points from the year before. Revenue passengers carried decreased by 1.6%. Revenue per passenger declined 8.1%. But as shown in the chart in the l
Slide 23: International Passenger Operations (Change in Revenue)
International Passenger Operations(Change in Revenue) 1St Half FY Mar/17 Although net revenue per （JPY Bn） ▲22.5Bn passenger increased through (▲9.6%) revenue management and the expansion of JAL SKY SUITE 235.6 operated routes, revenue per passenger declined due to ▲19.4 213.1 zero fuel surcharge
Slide 24: Commentary on international revenue change
In terms of revenue per passenger for international passenger operations, lower fuel surcharge revenue and the stronger yen led to a revenue decrease of 19.4 billion yen. However, the expansion of JAL SKY SUITE operated routes contributed to higher revenue per passenger . In terms of number of pa
Slide 25: Domestic Passenger Operations (Operating Results)
Domestic Passenger Operations (Operating Results) Domestic Passenger 1st H FY 1st H FY y/y ratio 2 (Jul-Sep) ndQuarter y/y ratio Mar/16 Mar/17 (4) Passenger revenue was Passenger Revenue 253.3 billion yen, down 3.4 (JPY Bn) 256.8 253.3 ▲1.3％ 143.9 ▲2.0% billion yen y/y. ASK (MN seat km) 18,267 17,
Slide 26: Commentary on domestic passenger operations
ASK on domestic routes fell 2.1% year-on-year, but RPK decreased only 0.4%. As a result, the load factor rose 1.1 percentage points to 68.0%. Revenue passengers carried increased 0.3%. On the other hand, both yield and revenue per passenger declined by 0.9% and 1.6% respectively due to price compe
Slide 27: Domestic Passenger Operations (Change in Revenue)
Domestic Passenger Operations (Change in Revenue) 1st Half FY Mar/17 Revenue per passenger mainly of （JPY Bn） ▲3.4Bn demand boosting fares decreased, (▲1.3%) due to price competition with other ・Price competition with other airlines（▲） airlines ・Holidays in September（▲） 256.8 Revenue per passeng
Slide 28: Commentary on domestic revenue change
In terms of revenue per passenger for domestic passenger operations, revenue declined 4.2 billion yen from the previous year due to price competition with another airline. In terms of number of passengers, individual passengers increased while tourism demand fell owing to the Kumamoto earthquakes,
Slide 29: Major Operating Expense Items
Major Operating Expense Items Operating Expenses 1st H FY 1st H FY 2nd Quarter Fuel costs dropped due to the (JPY Bn) Diff. y/y ratio Diff. y/y ratio Mar/16 Mar/17 (Jul-Sep)(4) stronger yen and lower fuel prices, but rising personnel Fuel 122.5 99.0 ▲23.4 ▲19.1% 49.7 ▲12.9 ▲20.6％ costs led to oper
Slide 30: Commentary on operating expenses
Fuel costs decreased 23.4 billion yen to 99 billion yen. Personnel costs increased by 12.9 billion yen over the previous year, as a result of reviewing the wage system and increasing basic wages to make focused investments in human resources to strengthen the foundations of our future growth. Ope
Slide 31: Impact of Fuel and FX Markets
Impact of Fuel and FX Markets Hedging Ratio of Fuel Costs Transition of Fuel Cost by Factors (As of End of 1st Half FY Mar/17) (JPY Bn) 100% FUEL FX 140 ▲23.4Bn 80% Market (▲19.1%) 120 Volume Approx. increase/ 60% ▲20.4 FX Approx. 50% Hedging 100 40% ▲10.7 +7.7 40% 122.5 Approx. Approx. 80 99.0 20%
Slide 32: Commentary on fuel and FX impact
The chart in the upper left corner shows a few factors to decrease fuel costs. Fuel costs dropped 23.4 billion yen from the previous year to 99 billion yen, which attributes to a decrease of 20.4 billion yen year-on-year due to lower fuel prices, a decrease of 10.7 billion yen due to stronger yen a
Slide 33: Major Balance Sheet Items
Major Balance Sheet Items Consolidated Balance Sheet Summary as of End of 1st Half FY2016 End of End of 1H (JPY Bn) FY2015 FY2016 Diff. 2016/3/31 2016/9/30 Total Assets 1,578.9 1,581.0 +2.1 The balance of interest- bearing debt decreased Cash and Deposits (1) 420.3 369.4 ▲50.8 by 18.6 billion yen
Slide 34: Commentary on financial condition
As for our consolidated financial conditions as of the end of the second quarter, the balance of interest bearing debt decreased by 18.6 billion yen from the previous fiscal year-end to 74 billion after repaying loans and lease obligations. Future rental expenses under operating leases decreased
Slide 35: Major Cash Flow Items
Major Cash Flow Items （JPY Bn） 1st H FY Mar/16 1st H FY Mar/17 Diff. Net income before income taxes and minority interests 123.6 89.2 ▲34.3 Depreciation and Amortization 43.4 46.9 +3.5 Other 10.6 ▲3.7 ▲14.4 Cash Flow from Operating Activities 177.7 132.4 ▲45.2 Capital Expenditure(1) ▲97.3 ▲127.9 ▲30
Slide 36: Commentary on cash flow
Cash flow from operating activities decreased 45.2 billion yen year-on-year due to lower operating income and more tax payments, resulting in a cash inflow of 132.4 billion yen. Cash flow from investing activities increased 20.1 billion yen year-on-year due to an increase in aircraft investments,
Slide 37: FY2016 Earnings Forecast (Consolidated)
FY2016 Earnings Forecast（Consolidated） Consolidated Financial Results Operational Preconditions Previous Mar/2016 Mar/2017 Forecast Previous （JPY Bn） Diff. Mar/2017 Forecast Results Forecast Announced on April 28, 2016 Forecast Announced on April 28, 2016 (4) Revenue 1,336.6 1,280.0 1,343.0 ▲63.0 AS
Slide 38: Commentary on revised forecast
We have revised our previous earnings forecast announced on April 28, 2016 with less operating revenue of 63 billion yen, less operating profit of 31 billion yen and less net income of 31 billion yen resulting in 161 billion yen. 18-S
Slide 39: Mar/2017 Earnings Forecast (Consolidated Balance Sheet)
Mar/2017 Earnings Forecast (Consolidated Balance Sheet) To improve financial stability, we aim to maintain the equity ratio at around 60% to improve our credit rating. Balance Sheet Fundamental Capital Policy End of End of Previous Accumulate retained earnings to （JPY Bn） Mar/2016 Mar/2017 Forecast
Slide 40: Commentary on forecast equity ratio
The projected shareholders’ equity ratio, share repurchase of our own shares by 30 billion yen included, will be 57.9%, down 0.9 percentage points from the previous forecast. 19-S
Slide 41: Mar/2017 Earnings Forecast (Cash Flow)
Mar/2017 Earnings Forecast (Cash Flow) Make relevant capital investments based on strict investment discipline. Secure return on investment and maximize Free Cash Flow Cash Flow Mar/2016 Mar/2017 Previous Forecast （JPY Bn） Announced on Diff. Results Forecast April 28, 2016 Cash Flow from Operating A
Slide 42: Commentary on cash flow forecast
Free cash flow is seen to decline by one billion yen from our previous forecast since cash flow from investment activities is expected to decrease due to stronger yen while cash flow from operating activities is also expected to decline. At the end of this material, we have provided some referen
Slide 43: Fly into tomorrow.
Fly into tomorrow. Finance & Investor Relations, Japan Airlines
Slide 44: Revenue of International Routes by Geographic Segment
《Supplemental Reference》 Revenue of International Routes by Geographic Segment Passenger Revenue - From the first quarter of this fiscal year, figures for Revenue Proportion of whole Int’l 1st Half 2nd Quarter Passengers Carried, ASK, RPK and Load Factor include “Marketing (%) y/y y/y FY Mar/16 FY M
Slide 45: Number of Aircraft
《Supplemental Reference》 Number of Aircraft End of Mar/2016 End of September/2016 Diff. Owned Leased Total Owned Leased Total Boeing 777-200 12 0 12 12 0 12 - Boeing 777-200ER 11 0 11 11 0 11 - Boeing 777-300 4 0 4 4 0 4 - Boeing 777-300ER 13 0 13 13 0 13 - Large-sized Total 40 0 40 40 0 40 - Boeing
Slide 46: Earnings Forecast Mar/2017: International Passenger Operations
《Supplemental Reference》 Earnings Forecast Mar/2017（ Air transportation Segment ） International Passenger Operations y/y （%） Mar/2016 Mar/2017 Results Forecast Full-year 1H 2H （Forecast） （Result） (Forecast) Passenger Revenue 448.7 413.0 ▲7.9% ▲9.6% ▲6.0% (JPY Bn) ASK 50,563 50,788 +0.4% +0.8% +0.1%
Slide 47: Earnings Forecast Mar/2017: Domestic Passenger Operations
《Supplemental Reference》 Earnings Forecast Mar/2017（ Air transportation Segment ） Domestic Passenger Operations y/y （%） Mar/2016 Mar/2017 Results Forecast Full-year 1H 2H （Forecast） （Result） (Forecast) Passenger Revenue 501.2 496.0 ▲1.0% ▲1.3% ▲0.7% (JPY Bn) ASK 35,869 35,628 ▲0.7% ▲2.1% +0.8% (MN s
Slide 48: Disclaimer
Disclaimer This contents contains descriptions of the future expectations, outlooks, objectives and plans etc. of Japan Airlines Co., Ltd. (hereafter "the company") and related Group companies (hereafter "the Group"). These are based on information available at the time when these materials were cre