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World's sixth-largest airline takes off
By Alex Frew McMillan
TOKYO, Japan (CNN) -- Japan Airlines and Japan Air System formally merged to form Japan Airlines System Corp. on Wednesday. The airline is the sixth-largest airline in the world, as measured by total traffic, flying to 172 cities in 30 countries. On a consolidated basis, the company posted 2.03 trillion yen ($16.5 billion) in sales for fiscal 2001. That ranks it third in the world. Japan Airlines System launches at a tough time for the airline industry, which lost more than $7 billion last year. President Isao Kaneko said recovery in passenger traffic to the mainland United States and Hawaii has been slower than expected. An initial recovery in April and May has not continued. But the company is offsetting that sluggishness with increased cargo business, Kaneko said. The company's cargo operations are growing more than 10 percent, year on year, leading the company to forecast profits of 22 billion yen ($179 million) this year off 2.12 trillion yen ($17.2 billion) in sales. Watching oil pricesKaneko said the company is keeping a watchful eye on developments in the Middle East, where the possibility of war in Iraq has been driving oil prices higher. The company hedges half of its oil exposure, he said in a television interview, so the threat to the airline is limited.
The companies' original merger plan was rebuffed by the Fair Trade Commission, which warned it would flout anti-monopoly laws. The merger was approved in April after the airlines agreed to give up nine landing slots at Haneda Airport, Tokyo's domestic hub. No. 2 Japanese carrier All Nippon Airways Co. and JAS this week raised prices on several routes where they compete with discount carriers. The FTC had warned them that price cuts to match the discount airlines may violate anti-monopoly laws. Japan Airlines System stock debuted on Tuesday on the Tokyo Stock Exchange, where it is the third-largest listing by market capitalization, and closed at 310 yen. The shares are down 0.97 percent at 307 yen early on Wednesday afternoon. That's a marked break from the broader market, with the Topix up 0.29 percent at the same time.
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