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March 4, 2008 |
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JAPAN AIRLINES: Moody's Changes Ba3 Rating Outlook to Positive Moody's Investors Service has changed to positive from stable the rating outlook for the Ba3 long-term debt rating and issuer rating on Japan Airlines International Co., Ltd. The outlook change reflects Moody's view that JALI is likely to improve its cash flow generation and strengthen its financial profile over the intermediate term, despite stagnant airline passenger demand and ongoing price hikes for aircraft fuel. Moody's also believes that the JAL group's financial profile is likely to be improved by its recent announcement of a planned issuance of new preferred stocks, to raise up to JPY153.5 billion, by the end of March 2008. JAL group aims at concentrating on individual high-price passengers to increase the unit revenue. The group also has been executing its business strategy of restructuring its aircraft fleet and route network to reduce overall fixed costs. Moody's also notes that the group has also raised fuel surcharges on several occasions, successfully shifting the burden of more expensive aircraft fuel onto its passengers. Moody's believes that JAL group's price initiatives have been facilitated by the company's stable and strong position in the domestic market, as one of the two oligopolistic airline groups -- JAL group and All Nippon Airways Co., Ltd. (Baa3). JAL group's operating profit for the nine months ended December 2007 jumped to JPY82.5 billion from an operating loss of JPY5.8 billion for the same period of the previous year. In Moody's opinion, the group's cost reduction measures taken place so far has contributed to its reforms of cost structure. JAL group announced its new business plan on February 29, 2008, including a capital injection from major creditor banks, trading companies and oil companies, of up to JPY153.5 billion. The group has announced that the new capital is for the purchase of cost-effective new aircraft for fleet restructuring, and that cash flow from operation and asset disposals will be used for debt reduction. This will contribute to further improve its cost structure and financial profile over the medium term. Moody's also notes that the allocation of the new capital to all the major creditor banks, including government-related financial institutions, implies that the relationship between JAL group and the Japanese government remains firm. Headquartered in Tokyo, Japan Airlines International Co., Ltd. is the country's largest airline company, fully owned by Japan Airlines Corporation. |
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