Japan Airlines Forecasts Decline in Operating Profit on Weak Yen

  • Weaker yen is increasing company's costs in foreign currencies
  • Carrier predicts equity ratio will rise to 58.4 percent

Japan Airlines Co. expects operating profit to decline slightly in the financial year starting in April as a weaker yen increases expenses paid in foreign currencies.

The company predicts operating profit of 201 billion yen ($1.8 billion) for the next business year, compared with 204 billion yen in the year ending in March, the carrier said Thursday in an update to its medium-term business plan released in Tokyo. The country’s second-largest airline forecasts sales will increase to 1.343 trillion yen from an estimated 1.337 trillion yen this year.

Japan is benefiting from a surge in tourism, with visitors to the country in 2015 exceeding those traveling abroad for the first time in 45 years as a weaker yen makes it cheaper to travel in the country. Still, a weaker yen raises costs for Japanese airlines paying for expenses such as fuel in foreign currencies.

The carrier emerged from bankruptcy protection in 2011 to become the world’s most profitable publicly traded airline by 2014. It started a rolling five-year business plan in February 2012 under former Chairman Kazuo Inamori that runs through next fiscal year.

The current year’s sales forecast is slightly reduced from an earlier projection, after the carrier eliminated fuel surcharges on flights originating overseas in December, Jian Yang, a spokesman, said by phone.

The carrier predicts net income will increase to 192 billion yen next fiscal year, from 172 billion yen this business year, it said in the statement. Its equity ratio will probably increase to 58.4 percent from 53 percent in the same period, it said.

Japan Airlines dropped 1.7 percent to close at 3,939 yen in Tokyo Thursday. The shares have fallen 9.6 percent this year, compared with a 15 percent decline in the benchmark Nikkei 225 Stock Average.

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