JAPAN AIRLINES AND CONSOLIDATED SUBSIDIARIES RESULTS FOR THE YEAR ENDED MARCH 31 2002

1. Overall trends in consolidated results

In FY2001, international cargo demand was weak throughout the year due to the technology slump, and international passenger demand suffered a drastic downturn in the wake of September 11. Domestic passenger volume increased somewhat, as travelers took advantage of a wide range of discount fares, but earnings were slightly below last year.

Associated businesses revenue dropped substantially also because of falling passenger demand but measures to streamline and reorganize this sector of the JAL Group are continuing. These measures include the strengthening of Group management by making more extensive use of systems such as consolidated supervised accounting and performance evaluation of Group companies.

Immediately after the attacks JAL established an emergency counter-measures team headed by president Isao Kaneko, which implemented measures in the areas of security, capacity, sales, business results, personnel and government relations. The measures thus implemented were effective and demand is reviving at a healthy pace. 

JAL/JAS integration

Plans for integration with Japan Air Systems, with the establishment of a joint holding company in October 2002 as the first step, are moving on schedule. JAL Group aims to reorganize the merged airlines' operations by April 2004 at the latest, setting up separate companies Japan Airlines International, Japan Airlines Domestic and Japan Airlines Cargo, for international passenger, domestic passenger, and cargo operations respectively. 

These companies will be managed efficiently in accordance with the characteristics of each business.

Each operating company will concentrate on its area of business, maintain safety, adopt and execute its operations plan, and propose and carry out marketing strategies, in order to maximize operations revenue. The holding company will manage the Group as a whole and handle Group strategy, apportioning of financial resources, and government relations, to boost the overall value of the Japan Airlines Group.

Business Performance and Financial Results

(1) Results by business segment

Air transport

International passenger traffic held steady on the Europe, Korea and China routes, but plunged on the mainland-U.S. and Honolulu routes after September 11. To improve efficiency and maximize revenue JAL added or reduced flights in accordance with passenger demand, and by offering additional discounted fares. Nevertheless, the number of passengers dropped by11.7% compared to last year, and revenues stood at 612,727 million yen.

International cargo volume fell by 11.2% year on year, due to slack demand caused by the IT slump and the events of September 11, and revenues were 133,725 million yen.

Although affected by the customer reaction to terrorism and despite the ongoing recession, domestic passenger traffic increased by 1.5% over last year, thanks to improved efficiency in route operations, a variety of special fares including discounts for flights booked via the Internet and 'Bargain Sale' fares and total domestic revenue was 324,950 million yen.

Total air transport revenue was 1,236,009 million yen, with an operating loss of 13,600,000 yen.

Aviation-related business

In-flight catering sales by catering subsidiary TFK were badly hit following the decline in international passengers after September. In the trading and distribution segment, subsidiary JALUX sales related to handling of aircraft parts grew compared to last year, but total sales grew only 2% year on year, held back by a downturn in in-flight sales and sales at airport shops after September. JALCard business was steady, and the number of JALCard members grew by 12% compared to March 2001. Aviation-related business earnings were 425,937 million yen, and operating profit was 7,118 million yen.

Travel planning and sales

Following initiation of operations in Hokkaido and central Japan (Chubu) last year, sales and marketing subsidiary JAL Sales Network established a nationwide framework by taking over operations of the Tokyo, Osaka and Fukuoka sales offices and headquarters' sales planning department. JALPAK sales of travel and tour products were hit badly by the terrorist attacks particularly to the USA and Europe and as a result the total number of customers handled fell by 28% compared to last year. Travel planning and sales segment revenue was 359,996 million yen while operating loss was 5,068 million yen.

Hotels and resorts

JAL Hotels' business performance overseas, and notably properties in Europe and the United States, fared poorly in the aftermath of September 11, although business was steady within Japan. Revenue in the hotels and resorts segment was 38,331 million yen and operating profit was 183 million yen.

(2) Dividend payment

Due to the large drop in revenue and with the severe business environment continuing for the foreseeable future, we have been forced to forgo the dividend payment at the end of FY2001. We will continue our efforts to boost performance so that dividend payments can be resumed in the near future.

2. Forecast for the Coming Fiscal Year (April 1 2002-March 31 2003)

The events of September 11 last year dealt a grave blow to worldwide aviation demand and greatly weakened the management of many airlines. JAL's business results also suffered greatly and we expect that the business environment will remain severe for some time. But through the active efforts of the JAL Group to address the issues mentioned above and with a revival of demand, we will strive to make the JAL Group strong and healthy and respond to shareholders' expectations.

Our forecast for FY2002 is 1,706,600 yen million in sales revenue, a current profit of 30,000 million yen, and a net profit of 23,000 million yen, all on a consolidated basis. These estimates are based on an exchange rate of 130 yen to the U.S. dollar and a market price of US$25 for benchmark Singapore kerosene for aviation fuel expenses.

Consolidated Financial Forecast for the Year Ending March 31, 2003