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Japan's JAL Swings Back to Operating Profit

Japan Airlines (JAL) the country's biggest airline, said it swung back to a quarterly operating profit as cost-cutting helped offset high fuel prices and an economic slowdown that have
bruised its global rivals.

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JAL announced plans to cut flights on 15 routes and reduce the number of flights on another four routes to cope with high jet fuel prices, and said it expected the changes to save it 4 billion yen this year.

JAL kept its full-year operating profit forecast at 50 billion yen, above a market estimate of a 40.3 billion yen profit, according to 10 analysts polled by Reuters.

For the three months that ended on June 30, JAL posted an operating profit of 3.9 billion yen ($35.6 million), up from a loss of 8.55 billion yen a year earlier.

"The situation is tough as we are estimating fuel prices at the $160 level, as opposed to an
initial $110, and unprofitable routes are increasing," Isamu Jinguji, JAL's vice president
and general manager of finance, told reporters after an earnings briefing.

"We can't do stable business unless fuel prices stabilise."

Jinguji added that the airline would continue to consider changes to its routes, while planning to raise its fuel hedging and lift fuel surcharges to deal with its soaring costs.

JAL said it expected additional fuel costs of 22 billion yen this business year, bringing
its total projection to 532 billion yen compared to about 413 billion yen last year.

For the three months that ended on June 30, JAL posted an operating profit of 3.9 billion
yen ($35.6 million), up from a loss of 8.55 billion yen a year earlier.

Revenues from international travel routes rose 4.8 percent during the quarter from a year
earlier to 180.4 billion yen thanks partly to business demand.

All Nippon Airways (ANA), Japan's second-largest airline, reported a 10 percent rise in quarterly operating profit last month on an uptick in international routes and as hedging cushioned the impact of high oil prices.

But ANA later said it would reduce or halt services on 11 routes, including those to Guam and Taipei, due to the soaring cost of aviation fuel.

The world's airlines stand to lose more than $6 billion this year if fuel costs remain at about $135 a barrel, according to an estimate by the International Air Transport Association, and many are cutting routes and staff to stay afloat.

AMR, parent of American Airlines, and Delta Air Lines have both said they would trim capacity and slash headcount.

Shares of JAL fell 1.4 percent, in line with a fall in the benchmark Nikkei 225 average.