Japan's two largest carriers are projecting lower profits for the fiscal year ending March 2027 even as they voice confidence in their underlying resilience amid geopolitical uncertainty.
Japan Airlines and ANA Holdings released their outlooks following strong results in fiscal 2025, which saw record revenues boosted by robust international travel demand. JAL is guiding for a full-year net profit of ¥110 billion, down approximately 20 percent from the previous year. ANA Holdings expects ¥96 billion, marking a steeper 43 percent decline.
Executives at both groups highlighted surging crude oil and jet fuel prices linked to the Middle East conflict as the primary drag. ANA quantified the gross fuel cost increase at around ¥140 billion, with the net impact on operating profit estimated at ¥60 billion after hedging, cost management and pricing actions. Roughly 90 percent of its domestic fuel needs are hedged.
JAL similarly noted monthly expense increases of around ¥28 billion under certain oil and currency assumptions but expects government support, revenue gains and surcharges to substantially limit the net effect from the second quarter onward.
The carriers urged vigilance regarding political and economic shifts, citing the prolonged Ukraine conflict alongside Middle East tensions. ANA's projection assumes the regional situation improves by the end of June, though ripple effects on fuel markets could linger. The group said it will focus on revenue management, cost controls and selective fare increases beginning in May for its mainline operations.
Both airlines noted potential softening in passenger and cargo demand during the six months to September as higher ticket prices take hold, which is expected to result in weaker first-half results before a second-half rebound.
Interestingly, the conflict initially provided some uplift. Airspace closures near major Middle East hubs led to spillover traffic on Asia-Europe routes for the Japanese carriers. JAL, which suspended flights to Doha, was able to capture additional connecting traffic between India and North America. These gains helped offset some direct losses but were ultimately outweighed by elevated maintenance activity and unfavorable foreign exchange moves tied to yen depreciation.
The Japanese majors' decision to maintain formal guidance stands in contrast to several global peers that have suspended forecasts amid the heightened volatility. Industry analysts had projected record global airline profits before the latest surge in energy prices put those expectations at risk.
ANA Holdings is forecasting full-year revenue growth of more than 9 percent to ¥2.77 trillion, with operating profit down 31 percent to ¥150 billion. The company said it will continue monitoring demand trends closely and adjust capacity where needed to protect yields.
Longer term, both carriers remain upbeat about international recovery and network expansion opportunities. JAL, a member of the oneworld alliance, and ANA, part of Star Alliance, have benefited from pent-up demand in recent years following the lifting of pandemic restrictions.
The announcements come as airlines worldwide grapple with fuel price volatility. Japanese carriers are passing on some costs through international fuel surcharges updated in May and considering further domestic adjustments in the following fiscal year.
While short-term profits face pressure, the groups emphasized proactive steps to safeguard financial performance. These include careful capacity management, enhanced ancillary revenues and continued cost discipline outside of fuel.
Aviation observers note that the Japanese market's relative insulation from some global shocks, combined with strong corporate travel and leisure demand in Asia, supports the carriers' cautious optimism. However, any prolongation of the Middle East situation beyond current assumptions could prompt revisions.
For now, JAL and ANA are navigating the challenges while keeping their focus on sustainable profitability through the end of the decade.