Japan Airlines abandons profit targets
Tokyo (XFNews-ASIA) - Japan Airlines Co Ltd (JAL) has abandoned, in effect, some of the targets set in the business plan it announced March 2 as they become increasingly unrealistic in a difficult earnings environment, the Nihon Keizai Shimbun reported at the weekend.
The newspaper, in a report carried on its website, said JAL's business plan had set a number of goals for each fiscal year it covers, including return on equity (ROE) of 6.5 pct by the fiscal year ending March 2009 and 18.3 pct by the year to March 2011. The plan also envisioned the reduction of the number of years JAL needs to pay off interest-bearing liabilities by using operating cash flow -- operating profit minus depreciation charges, taxes and dividends -- to nine by the year to March 2007 and seven by the year to March 2008.
In its financial statements from the year to March 2003 through the year to March 2005, after its merger with Japan Air System Co, JAL vowed to achieve ROE of over 10 pct and to pay off interest-bearing liabilities through operating cash flow over 10 years.
But in financial statements filed with the Kanto Local Finance Bureau, the airline refers to its main business objectives only as "improving medium- and long-term ROE " and "reducing interest-bearing liabilities."
In explaining JAL's failure to disclose any figures, an official at the firm said: "The hurdles are too high, the business conditions are no longer conducive to the establishment of numerical targets."
In the year ended last March, JAL suffered a group net loss of 47.2 bln yen due to surging fuel prices and a drop in domestic passengers. The firm's prospects remain grim after it reported a net loss of 26.7 bln yen for its fiscal first quarter ended last June, the Nikkei said.