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March 6, 2008 |
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JAPAN AIRLINES: S&P Revises Outlook from Negative to Positive Standard & Poor's Ratings Services revised to positive from negative the outlook on its 'B+' long-term corporate credit ratings on Japan Airlines Corp. (JAL) and the company's wholly owned subsidiary, Japan Airlines International Co. Ltd. The outlook revision is based on the prospect that JAL will receive a capital infusion of more than JPY150 billion, which has eased concern over the company's financing plans over the next two to three years. The outlook revision is also based on increased certainty that progress in structural reforms will help the company improve its financial profile and stabilize its cash flow. At the same time, Standard & Poor's affirmed its 'B+' long-term corporate credit and senior unsecured debt ratings on both companies. On Feb. 29, 2008, JAL announced that it will allocate JPY153.5 billion in new shares to third parties, including general trading companies and the company's main banks. This announcement has greatly lowered Standard & Poor's concerns over the company's creditworthiness, specifically funding availability for capital investments planned for fiscal 2008 (ending March 31, 2009) and fiscal 2010. The capital infusion is also expected to improve the company's relationships with its main banks. JAL's cash flow generation is stabilizing. In November 2007, the company revised its operating profit for the current fiscal year to JPY48 billion from JPY35 billion, reflecting a faster recovery in performance than previously expected. It is also increasingly likely that the company will be able to reduce its personnel costs by JPY50 billion. The company has made steady progress in downsizing its fleet and revising flight routes, as well as increasing the competitiveness of products and services for higher paying passengers. In addition, the company plans to accelerate the pace of debt reductions beyond that previously planned. Although escalating fuel costs and fierce competition are expected to persist, Standard & Poor's has determined that it will be able to incorporate more strongly into its rating on JAL prospects for improvement in the company's financial profile and its cash flow stability. Standard & Poor's will consider raising its ratings on JAL if the company can maintain operating safety while continuing to curb costs, boost the efficiency of its fleet, and enhance the competitiveness of its services, and this in turn further stabilizes earnings and raises the likelihood for financial improvement. On the other hand, the rating on JAL may come under downward pressure if sudden changes in the competitive environment, a large escalation in fuel prices, acts of terrorism or an epidemic have a significantly detrimental effect on the business environment. In either scenario, Standard & Poor's believes it is likely that the gap between the ratings on JAL and All Nippon Airways Co. Ltd. (BB+/Stable/--) will narrow, in contrast to the diverging trend over the past few years. Ratings List Outlook Revised /Ratings Affirmed To From Japan Airlines Corp. Japan Airlines International Co. Ltd. Corporate Credit Rating B+/Positive/-- B+/Negative/-- Ratings Affirmed Japan Airlines Corp. Japan Airlines International Co. Ltd. Senior Unsecured B+ About Japan Airlines Japan Airlines Corporation is a Japan-based holding company that provides air transport services through its 247 subsidiaries and 87 associated companies. The company has five business segments. The Air Transportation segment is engaged in the operation of passengers and cargo planes. The Air Transportation-Related segment is engaged in the transportation of passenger sand cargoes, the preparation of in-flight food catering, the development and maintenance of aircraft and land equipment, as well as the fueling business. The Travel Planning and Marketing segment is involved in the planning and sale of travel packages. The Card and Lease segment is engaged in the provision of financial, card and leasing services. The Others segment is involved in businesses related to hotels, resorts, logistics, wholesale, retail, real estates, printing, construction, manpower dispatch, as well as information and communication. The company has numerous global operating locations. |
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