Japan Airlines expects 2020-21 passenger income to drop by up to 65%

Tokyo — Japan Airlines expects its earnings from domestic and international passenger flight to drop by as much as 65% in fiscal 2020-21 (April-March) because of the coronavirus pandemic, a strong indication that a return to normal in air travel and jet fuel demand will be painfully slow.

JAL said August 3 its domestic and international passenger flight service income in 2020-21 would be about 35%-45% of the Yen 1.057 trillion ($9.97 billion) income from the segments a year earlier based on its simulated passenger demand recovery outlook.

Based on this outlook, JAL expects its 2020-21 income from international passenger services to remain 10%-20% of 2019-20's, with its domestic passenger service income 55%-65% of what it was a year earlier.

JAL said it expects the coronavirus pandemic to have a long-term impact on its international passenger flight services as strict quarantine measures will remain in place globally for the foreseeable future.

JAL also said a new wave of coronavirus cases in Japan had increased the uncertainty surrounding the recovery in domestic flight demand seen after the state of emergency was lifted on May 25.

JAL posted on August 3 a net loss of Yen 93.7 billion in the April-June quarter, compared with a Yen 13-billion net profit a year earlier, while its revenues plunged 78.1% to Yen 76.4 billion. It was JAL's first quarterly net loss since April-June 2010, when it lost Yen 99 billion.

While JAL declined to disclose its jet fuel loadings volumes for April-June, it said it had cut its jet fuel costs by 69.5% year on year to Yen 19.4 billion in the quarter.

Jet fuel loadings

Japan Airlines plans to boost its August jet fuel loading volumes by 37% from July due to expectations of a further recovery in demand, a company official told S&P Global Platts July 17.

JAL's planned hike in its jet fuel loadings in August is up from a 30% month-on-month jump in July, the official said. However, the month-on-month increase in its July jet fuel loading volumes is less than the 40% surge it had expected earlier due to the base effect. The month-on-month rise in its June loadings was 13%, more than double the 6% it expected, the official said.

For September, JAL expects its jet fuel loading volumes to drop 12% on the month due to it not running some of the special flights it operates during the peak holiday season in August, the official said.

The company also sees about a 50% year-on-year drop in demand for domestic flights in September and of about 80% for its international flights.

Fuel prices hammered

The coronavirus pandemic has had an unprecedented effect on the Asian aviation sector, and demand for air travel plunged as infections spread.

"On the whole, the jet fuel market is not doing well. I think a few countries are thinking or have already implemented lockdown measures once again to contain the coronavirus pandemic. Market participants are generally pessimistic on the market outlook," a Singapore based refining source said August 3. "Even as refiners, we are only producing enough for term buyers, and we try and keep jet fuel production to a bare minimum now."

Over April-June, the FOB Singapore jet fuel/kerosene price averaged $30.70/b, down $49.04, or 61.50%, on the year, S&P Global Platts data showed.

In the derivatives market, the FOB Singapore jet fuel/kerosene timespread remained in a contango averaging $1.98/b in the second quarter, $1.52 wider than 46 cents/b in Q1, Platts data showed.