Japan Airlines surprises with operating profit TOKYO (Reuters) =97 Japan Airlines System, Asia's biggest airline, delivered= =20 a surprise operating profit on Friday, defying expectations of a loss, as=20 strong cargo demand helped to offset a slump in international passenger=20 traffic. But it said it expected weaker revenues and a return to the red in= =20 the current year with an operating loss of 22 billion yen ($189 million),=20 mostly attributable to the SARS outbreak in Asia. International airlines=20 like Japan Airlines (JAL Group) have been hit hard by the Iraq war and the= =20 Severe Acute Respiratory Syndrome (SARS) virus just when it seemed=20 commercial air traffic was recovering from the devastating September 11=20 attacks in 2001. Regional rivals Cathay Pacific Airways Ltd, Qantas Airways, Thai Airways=20 and Singapore Airlines Ltd have also slashed capacity, and analysts have=20 cut profit forecasts in the wake of the SARS outbreak. JAL Group said the=20 SARS outbreak, coming on top of the effects of the war in Iraq, would shave= =20 around 162 billion yen ($1.4 billion) from operating revenues and reduce=20 international passenger traffic by 14% compared to the previous year. "With= =20 respect to China, Taiwan and South East Asia routes, we think the negative= =20 impact of SARS will last throughout the first half, and gradually dissipate= =20 in the second half of the business year," said Fumio Tsuchiya, executive=20 officer at JAL Group. The bearish outlook contrasted sharply with that of rival All Nippon=20 Airways, which two weeks ago posted its ninth net loss in the last 11 years= =20 =97 28.26 billion yen =97 but forecast a strong return to profit in the= current=20 year. Analysts cast doubt on ANA's rosy assumption that the effects of SARS= =20 would fade by June, ahead of the summer holiday season when Japanese=20 airlines normally make much of their profits. The SARS outbreak has dashed= =20 plans by JAL Group and ANA to boost flights this year to popular Asian=20 destinations such as Hong Kong and China, now the hardest hit areas by the= =20 outbreak, to make up for stagnant demand and falling prices at home. SURPRISE PROFIT JAL Group, the result of a merger of Japan Airlines and Japan Air System in= =20 October, posted a group operating profit of 10.6 billion yen for the year=20 ended March 31, compared with a combined JAL/JAS loss of one billion yen=20 the year before. The operating profit came in way above analyst estimates=20 and JAL Group's target for a two billion yen loss. The airline credited a=20 better-than-expected performance by its international cargo business and a= =20 change to its accounting methods for the surprise result. The company=20 booked the new airline's integration costs of 7.3 billion yen as an=20 extraordinary loss. It formulated its earnings forecasts by booking the=20 expenses as an operating cost. On Friday JAL announced plans to save 37=20 billion yen this business year through emergency cost cutting measures=20 including executive pay cuts and capacity reductions on some routes. That came after JAL Group said in April it would raise standard domestic=20 one-way ticket prices by an average 11% from July 1 in an attempt to shore= =20 up revenues. But analysts say these efforts will not be enough to attract=20 investors back to battered airline stocks. "It's just a matter of survival= =20 for airlines at the moment," said Akihide Kinugawa, fund manager at T & D=20 Asset Management. "Japanese airlines in particular suffer from high costs,= =20 and due to severe competition on international routes there is little=20 prospect of them being able to raise fares to restore profits." On a net=20 basis, JAL Group reported a profit of 11.65 billion yen due to one-off=20 rebates from manufacturers for the purchase of aircraft. It forecast a net= =20 loss of 43 billion for the current year. That compares to the year before=20 when JAL and JAS posted a combined loss of 35.8 billion yen. *************************************************** The owner of Roger's Trinbago Site/TnTisland.com Roj (Roger James) escape email mailto:ejames@xxxxxxxxx Trinbago site: www.tntisland.com Carib Brass Ctn site www.tntisland.com/caribbeanbrassconnection/ Steel Expressions www.mts.net/~ejames/se/ Site of the Week: http://www.cso.gov.tt TnT Webdirectory: http://search.co.tt *********************************************************