JAL Group Announces Consolidated Financial Results for Third Quarter of Fiscal Year 2020

The JAL Group today announced the consolidated financial results for the third quarter of FY2020. Beginning this fiscal year, the Company will apply IFRS (International Financial Reporting Standards) to the consolidated financial results. In order to make a comparative analysis, IFRS will be applied to the figures from FY2019.

1) JAL Group Consolidated Results for the Period April 1, 2020 - December 31, 2020
Due to the global impact of COVID-19, the business environment has been extremely challenging for the airline industry. In response to the sharp decrease in international and domestic travel demand, the carrier continued to reduce variable and fixed costs to counteract the significant decrease in revenue. However, operating revenue decreased to 356.5 billion yen, down 68.0% year-over-year, EBIT recorded a loss of 294.1 billion yen, and profit/loss figures recorded a loss of 212.7 billion yen.

As strict travel and quarantine restrictions continue to be imposed on a global scale, international passenger demand decreased 96.6% and international passenger revenue recorded 18.8 billion yen, down 95.3% year-on-year. Domestic passenger demand in Japan gradually recovered, especially in leisure demand, since the government sponsored Go to Travel promotional campaign included the city of Tokyo from October 2020. However, due to the increasing number of COVID-19 cases reported in December, the government temporarily suspended the Go to Travel campaign during the year-end holidays, resulting in lower domestic passenger demand. As a result, domestic passenger demand decreased 66.7% and domestic passenger revenue recorded 136.9 billion yen, down 68.0% year-on-year. In order to maximize its revenue stream, the JAL Group continued to support domestic and global cargo logistics by utilizing passenger aircraft. As a result, cargo revenue increased 31.5% year-on-year, recording 90.9 billion yen.

Consolidated Financial Results for Third Quarter - FY2020

2) JAL Group's Consolidated Financial Forecast - FY2020
Due to the global impact of the COVID-19 pandemic and travel restrictions imposed by relevant government authorities, the following figures may be subject to fluctuation. The following forecast is based on the assumption that the current international and domestic passenger demand will remain constant until the end of the current fiscal year.

Note: Market Assumption for FY2020
Singapore Kerosene :42.4USD/bbl, Dubai Crude Oil: 40.9USD/bbl, FX Rate: JPY 105.7/USD

Consolidated Earnings Forecast - FY2020 (Demand/Revenue)

1) FY2019 figures are based on the revised forecast disclosed at the FY19Q3 Financial Results announced on January 31, 2020
2) Disclosed on October 30, 2020

While maximizing efforts to increase revenue, the carrier looks to minimize its losses by reducing fixed costs and flexibly adjusting capacity based on actual demand. Cash on hand will be 370 billion yen, as of March 2021, and equity ratio will be 44.3% and D/E Ratio will be 0.5x.

3) JAL Group Financial Position
In order to improve the airline`s financial structure, JAL initiated a public equity offering in November 2020 to secure the necessary scale of funds to realize a growth strategy once the pandemic subsides. Through the offering, equity capital increased to 1 trillion and 17.1 billion yen. JAL established a strong financial base and shareholders' equity ratio now stands at 47.6% and D/E ratio at 0.5x.

Interest-bearing debts decreased to 494.5 billion yen from the end of the second quarter. Required repayments within one year, including leasing, is set at 61.5 billion yen.

Operating cash flow improved to ▼29.9 billion yen in Q3 from ▼130.2 billion yen reported in Q1

Summary of Consolidated Statement of Financial Position and Cash Flow

4) Initiatives to Improve Performance
Expenses have been reduced by over 120 billion yen for the fiscal year, doubling the original target of 60 billion in reduction.

Due to the early retirement of the Boeing 777 aircraft, restructuring costs will increase by 10 billion yen, resulting in a total of 590 billion yen in fixed costs for the fiscal year.

Continue to aim for a cost reduction equivalent to 40% of the reduced revenue.

Based on the previous forecast, a CAPEX reduction of 90 billion yen is estimated.

The carrier will continue to carry out drastic cost and CAPEX reduction initiatives in a timely manner and make company-wide efforts to improve the financial performance.

Initiatives to Bolster and Secure Liquidity at Hand
As of the end of December, 2020, liquidity at hand is more than 750 billion yen, including unused credit line. During the third quarter, cash burn has steadily decreased to 10-15 billion yen per month. During the fourth quarter, cash burn expects to increase to 25 billion yen per month, half of the first quarter level, as cost reduction efforts have been made.

5) Dividends Policy
The global impact of COVID-19 has had a significant impact on the JAL Group. Therefore, in order to secure liquidity at hand, the Company has determined to not provide an annual dividend payment to the shareholders and have asked for their understanding during the unprecedented crisis.

Refer to full documentation in the attachments box below.