Japan Airlines' 17% margin may be envy of the industry, but JAL's outlook is less upbeat

Japan Airlines, with its recently achieved 17% operating margin, may be the antipode to Warren Buffet's advice about investing in airlines, but JAL is not in an entirely enviable position. The forthcoming entry of low-cost carriers, if initially small in number, will soon have a seismic affect.

While JAL is so far more assiduously managing this new prospect than is competitor All Nippon Airways, it is showing signs of buckling.

Despite FY2012 offering growth and recovery from the tsunami and earthquake-affected FY2011, JAL projects profit to decrease. Recent months show JAL is growing capacity ahead of demand, which when combined with LCC proliferation will suppress profits in a doubtful market. JAL's euphoria of a stellar year after its remarkable emergence from bankruptcy may be shortlived, for reasons beyond its control.