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Japan airlines post falling profits on high fuel costs

Japan's two biggest airlines said Wednesday that their full-year net profit had tumbled despite higher demand for air travel, blaming high fuel costs for shrinking their bottom line.

TOKYO: Japan's two biggest airlines said Wednesday that their full-year net profit had tumbled despite higher demand for air travel, blaming high fuel costs for shrinking their bottom line.

All Nippon Airways (ANA) took the biggest hit with its operator saying that net profit nosedived by 56 per cent to 18.89 billion yen ($185 million) in the fiscal year to March.

Revenue, however, came in at a record 1.60 trillion yen, up from 1.48 trillion yen in the previous 12 months, "helped by a gradual recovery in the Japanese economy", ANA Holdings said.

ANA's biggest domestic rival Japan Airlines said its fiscal year net profit slipped 3.2 per cent, and warned that earnings this year would also stumble.

The carrier said it booked a 166.25 billion yen net profit in the year to March, down from 171.67 billion yen a year earlier, while revenue ticked up to 1.31 trillion yen from 1.24 trillion yen.

For the current year to March 2015, JAL forecast that net profit would come in lower at 115.0 billion yen.

"The escalation of fuel costs due to the weak yen may prevail and competition may intensify in both international and domestic markets," it said.

A sharp drop in the yen, while giving a boost to Japanese exporters, has hurt the country's airlines by pushing up the cost of fuel, often a carrier's single biggest expense.

The yen has lost about a quarter of its value against the dollar since late 2012 following a policy blitz launched by Japanese premier Shinzo Abe and his hand-picked team at the Bank of Japan, aimed at kickstarting economic growth and beating deflation.

ANA said its fuel costs jumped 22 per cent from a year earlier, as it forecasted a net profit of 35 billion yen on revenue of 1.7 trillion yen in the current year to March.

A recovery in demand for flights on Chinese routes has been one bright spot after a longstanding Tokyo-Beijing territorial dispute erupted anew in late 2012, sparking a consumer boycott of Japanese brands that hurt firms for months.

Relations remain tense, but Japanese companies have reported that sales are returning to pre-dispute levels.

"The business on Chinese routes remains fragile," Mitsuru Miyazaki, analyst at SMBC Friend Securities in Tokyo, told AFP.

"The diplomatic factor may also weigh on Japanese travellers' interest in China. Looking ahead, the domestic economic recovery as well as an expansion of slots for international flights should be positives for the current year."

Both ANA and JAL have been working to recover from the global grounding of Boeing's 787 Dreamliner last year.

The pair are the US-based firm's biggest customers for the state-of-the-art plane, which only resumed flying after a months-long grounding -- caused by a series of battery problems -- forced the cancellation of hundreds of flights.

The firms are also fighting off increasing competition from a handful of low-cost carriers that have sprung up in recent years in a market they have long dominated.

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