Japan Airlines Co. forecast Tuesday a net loss of 146 billion yen ($1.3 billion) for the business year ending March and said it will reduce its workforce by around 2,500 through attrition amid a later-than-expected recovery in air travel demand from the COVID-19 fallout.
Despite robust cargo demand and cost cutting, JAL will remain in the red for a second straight year. Excluding staff in its low-cost carrier business, the major airline will have a workforce of around 33,500 at the end of March 2023 through retirement and by curbing new hiring, down from around 36,000 in fiscal 2020.
JAL posted a net loss of 286.69 billion yen in fiscal 2020 that ended March, the first red ink since its 2012 relisting following a state-backed rehabilitation.
Japan's two major airlines -- JAL and ANA Holdings Inc. -- are similarly struggling to get out of the doldrums. Faced with the prospect of being mired in the red for another year, both have chosen to become leaner with fewer employees, underscoring the gravity of the COVID-19 hit to the airline sector.
Last week, ANA Holdings, the parent of All Nippon Airways Co., revised downward its fiscal 2021 earnings outlook to a net loss of 100 billion yen from its earlier projected profit of 3.5 billion yen.
Within five years, it will reduce the workforce in its mainstay airline segment by around 9,000, or about 20 percent from fiscal 2020, to emerge from what President and CEO Shinya Katanozaka has described as the "pandemic tunnel."
JAL's projected loss for fiscal 2021 is larger than ANA's 100 billion yen but director Hideki Kikuyama said Tuesday it will aim to return to profitability in fiscal 2022.
Fiscal 2021 sales were forecast to rise 59.2 percent to 766 billion yen.
"There are signs of a gradual recovery in demand, but it will take a while until we see a full recovery," JAL said.
In the six months to September, the airline logged a net loss of 104.98 billion yen, smaller than its 161.23 billion yen loss a year earlier. Sales grew 49.2 percent to 290.65 billion yen, JAL said.
A COVID-19 state of emergency was in place in many Japanese prefectures for most of the April-September period, limiting the recovery in demand for domestic flights.
Demand for international flights remains depressed due to cross-border travel restrictions. The Tokyo Olympics and Paralympics in the summer apparently had a limited impact because foreign spectators were barred.
In the first half of fiscal 2021, JAL handled around 6.2 million passengers on domestic flights, up from 4.6 million a year earlier.
The number on international flights stood at 353,640, roughly a 3.2-fold year-on-year increase.
In a positive development for the transport and tourism sectors, Prime Minister Fumio Kishida, fresh out of a decisive win in Sunday's lower house election, is planning to relaunch a subsidy program to spur local tourism in Japan following recent drops in coronavirus cases across the country.
Both JAL and ANA say they have secured enough funds to ride out the COVID-19 crisis. JAL had over 670 billion yen on hand at the end of September, including around 300 billion yen via commitment lines.
To strengthen businesses outside its core area of air transport, JAL said it will make trading house Jalux Inc. a consolidated subsidiary via a tender offer. The offer will be launched in February by a company jointly funded by JAL and trading house Sojitz Corp.
The global airline industry continues to face a severe business environment, though Japanese airlines have seen a slower recovery than major U.S. carriers.
The International Air Transport Association expects a $51.8 billion net loss at airlines this year, before shrinking to $11.6 billion in 2022.
In the July-September quarter, major U.S. airlines -- American Airlines Group Inc., Delta Air Lines Inc. and United Airlines Holdings Inc. -- all reported net profits.