GO
Loading...

Japan Airlines CFO: Airbus was just 'better'

After French aviation manufacturer Airbus won a tense battle against Boeing for the business of Japan's second largest airline last year, the firm's chief financial officer told CNBC Airbus was just "better."

Japan Airlines announced its first jet order for the French aircraft manufacturer in October for 31 A350 aircraft worth $9.5 billion, breaking into an aviation market which had been dominated by rival Boeing.

(Read more: Airbus CEO defends outlook, ramps up A320 production)

"We needed a successor to our largest aircraft, the 777. When we compared what both Boeing and Airbus had to offer, Airbus was better," managing executive officer of finance & accounting Norikazu Saito told CNBC. "It may have been a disappointment to Boeing, but they of course understand that business is business."

Japan Airlines (JAL) jetliners are parked at Tokyo's Haneda airport on January 31, 2014.
Kazuhiro Nogi | AFP | Getty Images
Japan Airlines (JAL) jetliners are parked at Tokyo's Haneda airport on January 31, 2014.

Saito told CNBC that the biggest payoff from working with Airbus would be increased economic efficiency, although there would be some complications with owning two different brands of aircraft.

"Pilots need to have different licenses; you need to have spare parts for both manufacturers. But even taking all those things into account, Airbus was the better choice," he said.

JAL faced some negative publicity earlier in the year when it temporarily grounded one of its Boeing 787 Dreamliners at Tokyo's Narita International Airport in mid-January, after white smoke was spotted outside the plane and a battery cell showed clear signs of leaking.

(Read more: Airbus heading back to number 1 in deliveries: CEO)

The incident stoked fresh fears about the safety and reliability of the 787 model one year after the global Dreamliner fleet was grounded by regulators following the overheating of two such batteries.

Saito told CNBC the matter was still under investigation.

"Fortunately, compared to last year - when the batteries heated up so much that it was virtually impossible to look inside them - this time the batteries are intact. That allows us to conduct a very detailed investigation," he told CNBC.

Saito admitted that JAL, which filed for bankruptcy protection in 2010 and was later bailed out by the government, is struggling with the impact of a weaker yen and is nowhere near a stage where the company could raise wages.

"When business improves, we will reward employees through higher bonuses. We are not at all at a stage when we can raise base salaries," he said.

"The headwinds from a weaker yen are strong and we're up against more and more competition at both Narita and Haneda," he added, referring to the Japanese airports.

JAL has been locked in a tense battle with its chief competitor All Nippon Airways (ANA) - Japan's largest airline - in recent weeks over landing slots at Tokyo's Haneda airport, the world's fourth busiest airport hub.

(Read more: Airbus considers A380 revamp to lift sales)

Saito said fuel costs and a weaker yen were the largest risks to his company's business.

"Fuel costs are about 250 billion to 280 billion yen a year. That's a challenge because that portion of the operation is completely exposed to volatility in the exchange rate," he added.

Saito said he expected the yen to continue to weaken, as interest rates both in the U.S., and at home, are set to head higher, while further monetary easing by the Bank of Japan combined with a stubbornly high trade deficit, also heap downward pressure on the currency.

"As of the end of last year, we were 65 percent hedged on our currency exposure and we will be 80 percent hedged by the end of March," he added.

(Read more: Japan Airlines orders 31 A350 jets from Airbus)

However, Saito was optimistic about the Japanese economic recovery in 2014, although he acknowledged that the consumption tax hike scheduled for April could hurt demand.

— By CNBC's Katie Holliday: Follow her on Twitter @hollidaykatie

CNBC Global CFO Council

Video