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Tuesday, April 20, 2010

March is a profitable month for JAL!!!

Congratulations! Japan Airlines (JAL) apparently has an operating profit in March! This is a big step in the right direction. Way to go JAL!

According to a court filing by ETIC, JAL International has secured an operating profit in March 2011 thanks to all the cost cutting measures and increase in the number of international passengers. As you might know, international flight revenue makes up of a big chuck of JAL income. It was also one of the main reasons JAL was in trouble in the first place. So it's encouraging to see the number of JAL international travelers recovers!

Also mentioned on the ETIC filing is that JAL has tapped 305 billion yen of bridge loan from Development Bank of Japan (DBJ) so far. The total credit line provided by DBJ back in January is 600 billion yen. However, JAL is unlikely to use the remaining 295 billion yen of credit line in the foreseeable future based on the current cash flow situation.

In other words, if nothing goes wrong, JAL should have enough money and is on the right track. However, there's a big IF in the statement. And we all know it, something has already gone wrong in April. Due to the volcanic eruption in Iceland, JAL has cancelled almost all flights to Europe in the last few days and that's not helping the situation. Even the court filing mentions this is hurting JAL's business at the moment. Hopefully things will get better. May should be good since there's Golden Week in Japan. But if the volcanic ash clouds continue to affect flights, it might affect people's travel plan too. End of April is the peak departure days for this year's Golden Week!

This is a good indication of JAL is heading the right direction. Hopefully this will give the bankers more confidence on JAL. But the key thing now is how to make JAL survive during crisis. We now know JAL is capable of making profit during good time but how about during the bad one? JAL needs a business model that is more flexible and can minimize loss during the bad time too. If the March operating profit is any indication, JAL is in good hands :)

Source: Nikkei via Reuters (Here is the google result for the original article in Japanese on Nikkei)

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