Japan Air Shares Have Record Jump on Profit Outlook: Tokyo Mover

Japan Airlines Co., the nation’s second-largest carrier, jumped the most since re-listing in 2012 after its full-year profit forecast beat analysts’ estimates.

The stock rose 5.1 percent, the most since Sept. 19 when it relisted, to 4,010 yen at the close of trading in Tokyo today.

The carrier also known as JAL raised its full-year net income forecast by 16 percent to 163 billion yen ($1.8 billion) yesterday as demand for travel to Europe and the U.S. outweighs the impact from the grounding of Boeing Co. 787s. Japan Air, whose seven Dreamliners make up about 3 percent of its fleet, also said the cancellation of 787 flights would probably cut 1.1 billion yen in revenue in the year ending March 31.

The company’s outlook is “definitely a positive,” said Ryota Himeno, an analyst at Barclays Plc in Tokyo. “I’m more cautious about the next fiscal year and what happens if the 787 problem drags on and the yen gets weaker.”

JAL earlier predicted net income of 140 billion yen for the year ending March 31. The new forecast beat the 156.7 billion yen average estimate of 11 analysts compiled by Bloomberg before the company’s announcement. The carrier also boosted its sales projection by 1.1 percent to 1.23 trillion yen, matching analysts’ estimates.

All Nippon Airways Co., the world’s biggest operator of 787s, and six other airlines have halted Dreamliner flights after the U.S. Federal Aviation Administration ordered the grounding following a lithium-ion battery fire and an emergency landing by an ANA plane on Jan. 16.

1.4 Billion Yen

The yen yesterday weakened beyond 93 per dollar for the first time since May 2010. The yen has declined more than 6.5 percent against the dollar since the start of this year, the most among 16 major currencies tracked by Bloomberg.

JAL’s announcement of a dividend of 180 yen a share is also positive for the stock, said Takashi Hiroki, chief strategist at Monex Securities in Tokyo.

ANA said last week that cancellations of 787 flights cut 1.4 billion yen from sales in January. The carrier, which has no buffer of planes to cover its 17 Dreamliners, has pulled 830 Dreamliner flights from Jan. 16 through Feb. 18.

JAL hasn’t started any compensation talks with Boeing on the 787s, President Yoshiharu Ueki told reporters yesterday.

Aviation regulators in the U.S., Japan and other nations ordered airlines to park their 787s after an ANA plane made an emergency landing in Takamatsu, Japan, on Jan. 16. A week earlier there was a battery fire on a Japan Air 787 in Boston.

Route Delay

JAL will delay the retirement of two Boeing 767 planes. The airline said it’s canceling six 787 flights in the second half of this month, and delaying the introduction of a new Helsinki route, after 36 cancellations since the emergency landing through Feb. 3.

Airlines so far have received 50 of the aircraft, which entered service 16 months ago and start at a list price of about $207 million. While deliveries have been halted, 787 production is continuing, Boeing said last week. The planemaker predicted shipments of more than 60 Dreamliners this year among a total of up to 645 commercial planes.

JAL yesterday said it was delaying the start of service to Helsinki with the 787, which was due to begin Feb. 25. The carrier started international flights to Boston with the 787 last year, and has since included service to San Diego, as well as adding the plane to current routes including Tokyo-Singapore.

Earnings Impact

The impact on JAL’s and ANA’s profits may not be that big even if they can’t fly the 787s for a year, said Yasuhito Tsuchiya, an analyst at Bank of America-Merrill Lynch. In such an event, operating profit at JAL would be reduced by 4 billion yen and at ANA by 5 billion yen, according to Tsuchiya.

The U.S. National Transportation Safety Board is working with Boeing to study the batteries’ history since the 787 entered service late in 2011, according to the investigative agency.

GS Yuasa Corp. and the batteries it supplied are at the center of the investigation by U.S. and Japanese authorities. U.S. investigators are asking for data on the performance of the devices as ANA said last week it had replaced 10 of the battery and charger systems on its planes.

The NTSB said it found “no anomalies” with the JAL 787 battery in tests that covered electrical, mass measurements and infrared thermal imaging of each cell, according to a statement on Feb. 1.

The 787 is Boeing’s most advanced jet and uses new technology such as carbon-fiber materials to save weight and improve efficiency. ANA and JAL together have signed up for 111 of the Dreamliners, about 13 percent of the 848 orders for the plane, according to Boeing’s website.