Jal To Write Off 54.6 B In Losses

Japan Airlines (JAL) said last week it plans to write off losses totalling 154.6 billion yen by using its capital reserves.

JAL president Akira Kondo said in a statement that the airline carrier would write off a special loss of 97 billion yen in 1997/98 from the planned restructuring of its loss-making hotel and resort operations, together with the firm's accumulated loss of 57.6 billion yen.

"Using shareholder equity is a serious matter and I have not taken this decision lightly," Kondo said in the statement. "But if we are to offset these deficits we have little choice but to use this method. To clear the debt by using future profits would take a considerable time and delay the resumption of dividends," he added.

 

JAL said it will seek approval for the loss write-off at an annual shareholders' meeting to be held in June and wanted to resume dividend payments in 1998/99.

Earlier, JAL said it would post larger losses on both a parent and group basis in the business year to March 31 in the face of dwindling international passenger demand and a special loss of 97 billion yen arising from a planned overhaul of its overseas hotel and resort business.

A JAL executive told reporters that the airline plans to withdraw from operations in some overseas hotels, especially those in the United States, and also plans a partial withdrawal from overseas resort business. He did not specify further details.

JAL saw a group net loss of 70 billion yen for 1997/98, sharply revising up its initial loss estimate of five billion yen, after an actual loss of 14.48 billion yen in 1996/97.

JAL said its parent-only net loss for 1997/98 would balloon to 97 billion yen from its initial nil estimate. It posted an actual net loss of 9.24 billion yen the previous year. The planned loss write-off would trim the firm's capital reserves by 132.8 billion yen from 161.8 billion yen as of end-March 1997.

JAL said the latest measures will strengthen the company at a time when the business environment is becoming increasingly competitive, with the start-up this year of new domestic airlines in Japan and the impact of a new US-Japan agreement.

"This new US-Japan agreement brings new benefits through code-sharing with a US partner and expanded flight rights, but at the same time competition will become more dynamic," the JAL president said.

Last month, JAL unveiled a broad code-sharing pact with American Airlines, a division of AMR Corp , which would allow each greater access to two of the world's most lucrative air traffic markets.