Introduction
It has been a difficult year for airlines worldwide, with the pandemic pushing air travel to its lowest levels in decades. But despite the pandemic, Japan Airlines Co. (JAL) has managed to turn a profit in the third quarter, with their fuel strategy credited for the gains.
Japan Airlines Profits Surge in Q3
In the three months that ended in December, JAL reported a 7.1 billion yen, or $68.5 million, net profit. This is a marked improvement from the same period in 2019, where the airline reported a loss of 5.1 billion yen.
Revenues for JAL also rose in the third quarter, up 9.3% to a total of 709.4 billion yen, or $6.6 billion. This growth in revenues was due to the fact that JAL made more money per passenger, and also carried more passengers.
The airline also credited its fuel strategy for the gains, as JAL had hedged fuel prices in advance, allowing them to purchase fuel at a cheaper rate than their competition.
Revenues Climb Despite Pandemic
The pandemic has had a drastic impact on the airline industry, with many airlines reporting huge losses in the third quarter due to travel restrictions. But despite the restrictions, JAL was able to post a 9.3% increase in revenue, due in part to the fuel strategy.
The airline also benefitted from domestic travel, which was encouraged by the Japanese government. Domestic flights made up a whopping 87% of all flights for the quarter, with JAL’s international flights accounting for only 13% of all flights – a sharp decline from the prior year.
Success of Fuel Strategy Credited for Gains
The success of JAL’s fuel strategy was credited for the gains, as the strategy allowed the airline to purchase fuel at a cheaper rate than its competition.
The airline also took advantage of fuel hedging opportunities, which allowed them to lock in prices well before the pandemic hit. This allowed them to purchase fuel at a lower rate than their competition, allowing them to make more profit from each flight.
The airline also benefitted from other cost-cutting measures, such as reducing aircraft size and the number of flights, and reducing the number of employees.
Conclusion
Overall, JAL has managed to turn a profit despite the global pandemic, with their fuel strategy credited for the gains. The airline was able to take advantage of fuel hedging opportunities, allowing them to purchase fuel at a cheaper rate than their competition, as well as reduce their costs by reducing the number of flights and employees. This allowed them to post a 9.3% increase in revenue, and a net profit of 7.1 billion yen.
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