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Japanese airlines report earnings after Dreamliner woes

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(Globalpost/GlobalPost)

Japan's two-biggest airlines said Tuesday they would take a revenue hit of more than $200 million from the grounding of Boeing's Dreamliner as the troubled aircraft takes to the skies again.

All Nippon Airways (ANA) and rival Japan Airlines (JAL), which reported full-year earnings Tuesday, together account for half of the Dreamliners in service globally and had to cancel thousands of flights in the wake of the crisis tied to the next-generation jets' lithium-ion batteries.

JAL said it was "trying to minimise" the financial impact from the three-month Dreamliner grounding, but said its full-year profit dipped 8.0 percent as rising competition and soaring oil prices also took a bite.

"The three-month period was long, so I am relieved that there were no major troubles during that time so we could save customers' trust in us," said JAL president Yoshiharu Ueki.

ANA, which operates 17 of the Dreamliner's 50-strong global fleet, said its fiscal year net profit soared 53.1 percent, as cost-cutting and a boost in demand for international travel helped it shrug off its Dreamliner woes.

The firms said they expected revenue in the past and current fiscal year would come in about 22.5 billion yen ($230 million) lower due to the Dreamliner issue, though ANA said the pain would be lessened if it can restart flights by June as the next-generation aircraft undergoes a battery fix.

ANA Chief Executive Shinichiro Ito, who flew in a Dreamliner test flight Sunday with a top Boeing executive, said that "we also responded flexibly to minimise the number of cancellations affected by the grounding of the Boeing 787 from January, minimising its impact to profit".

The fleet grounding in January came after a number of incidents including a fire on a JAL plane in Boston, and an emergency landing on an ANA flight in Japan.

After months of investigations into the plane's powerpacks, US authorities on Thursday issued formal approval of Boeing's battery fix, followed by a similar move from Japanese regulators.

Ethiopian Airlines on Saturday become the first carrier to start using the aircraft again, while ANA ran its test flight the following day.

But it could still be at least a month before the whole Dreamliner fleet is back in the air.

Manufacturer Boeing took out full-page advertisements in major Japanese newspapers on Tuesday to atone for the troubles with its fuel-efficient plane.

"We deeply apologise to Japanese customers and companies affected for the trouble and concern caused by our new Boeing 787," it said.

JAL, which re-listed in Tokyo last year after a high-profile bankruptcy restructuring, said its net profit in the fiscal year to March came in at 171.7 billion yen ($1.8 billion), while it slashed its full-year earnings outlook by almost a third to 118 billion yen.

Sales rose 2.8 percent to 1.24 trillion yen in the 12 months to the end of March, it added.

ANA earned 43.1 billion yen in the year to March, up from 28.2 billion yen a year earlier, as revenue climbed 5.1 percent to 1.48 trillion yen, it said.

The carrier expects a 45.0 billion yen net profit in the current fiscal year.

A weaker yen, which helped Japan's exporters, has also marked a challenge for the country's airlines.

"Because they procure fuel in dollar-denominated prices, the cheaper yen weighs on Japanese carriers' earnings," said Nomura Securities analyst Masaharu Hirokane.

The Japanese currency has declined steeply in recent months as Prime Minister Shinzo Abe and his hand-picked team at the Bank of Japan roll out a big spending and aggressive monetary easing agenda that is aimed at stoking the world's third-largest economy.

Japanese airlines have also been hit by a row between Tokyo and Beijing over sovereignty of a group of islands in the East China Sea, which triggered anti-Japan rallies across China and a consumer boycott of Japanese brands.

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http://www.globalpost.com/dispatch/news/afp/130430/japanese-airlines-report-earnings-after-dreamliner-woes