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December 28, 2007 |
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JAPAN AIRLINES: Must Continue Implementing Reforms, Moody's Says Moody's Investors Service said, in a new report, that the credit gap between Japan's two major airlines continues to grow as All Nippon Airways Co., Ltd. has this year significantly improved its credit capital structure through the sale of its hotel assets. Accordingly, Moody's upgraded its rating of ANA to Baa3 from Ba1 in July, while that for Japan Airlines International Co., Ltd. has stayed at Ba3, the report says. The rating outlook for both companies is stable. The just-released report on Japan's airline industry says the difference in the ratings reflects Moody's recognition that ANA's stable profitability and strong financial profile will strengthen cash flow and allow for timely capital expenditures. Meanwhile, Japan Airlines Corporation, the parent company of JALI, has started to implement its restructuring plan with the support of its creditors. The Moody's report says that for JALI to maintain its rating it must be able to successfully implement this plan. At the same time, the report notes both airlines have been increasing unit prices and reducing the number of unprofitable routes to drive revenue growth as well as improve cash flow against the backdrop of increasing market pressure. For example, high fuel prices continue to pressure the airlines to cut costs. In Moody's view, it will be increasingly important for both companies to implement continuous cost reductions as well as maintain or improve their market positions as demand is expected to remain stagnant and the outlook for fuel priced is uncertain. The report, titled "Japan's Airline Industry: ANA Maintains Rating Lead Over JAL", can be found at http://www.moodys.com/ About Japan Airlines Tokyo-based Japan Airlines International Company, Limited -- http://www.jal.com/en/ -- was created as a result of the merger of Japan Airlines and Japan Air Systems to boost domestic coverage. Japan Airlines flies to the United States, Brazil and France. |
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