Japan Airlines May Cut Int'l Capacity 10 Percent

February 3, 2009

Japan Airlines (JAL) said on Tuesday it was considering cutting 10 percent of international capacity and 2-3 percent from domestic flights to adjust to weaker demand.

"For the capacity, we may cut almost 10 percent for the next fiscal year. For domestic routes we may also cut back, but very nominally, maybe 2 percent maybe 3 percent," JAL Vice President Tetsuya Takenaka said at a oneworld alliance meeting.

The airline has seen the sharpest drop in demand on international routes and in its premium classes -- business and first -- which it said was down by almost 20 percent.

"The (long haul) economy class is also declining but due to high position of the Japanese yen, holiday makers are spending more, so the decline has been around 15 percent," Takenaka said.

The airline's domestic routes have been stronger, with a 4 percent decline in demand in the last year, he said.

In December, JAL said it might slash its capital spending budget for the three years to March 2011 by nearly a quarter due to falling demand for international flights.

Asia's largest carrier also said in December it was reviewing its business plan and considering scaling back on new aircraft purchases.

Takenaka however said JAL had no plans to cancel the delivery of two Boeing 777s and nine 767s which it ordered after Boeing ran behind on the production of its 787 Dreamliner, nor cancel 787 orders.

"We have no plans to cancel the 787. We are patiently waiting", he said.

Takenaka declined to give any earnings' forecasts for the next fiscal year and said the company would announce its predictions when it reports quarterly results on February 6.

On fuel hedging, Takenanka said the airline had cut its hedging levels for the next fiscal year compared to this fiscal year which ends in April.

"We are hedged almost 80 percent for the remaining of this year. We have already hedged 65 percent for the next fiscal year," he said.