Annual Report Profile JAL Group Overview Consolidated Financial Highlights Consolidated Operating Highlights Message from the Group CEO Interview with the Group CEO Spreading New Wings of Trust Review of Operations Fundamental Policies and Actions Regarding Corporate Governance Management's Review and Analysis of Financial Position Consolidated Balance Sheets Consolidated Statements of Operations Consolidated Statements of Stockholder' Equity (Note8) Consolidated Statements of Cash Flows Notes to Consolidated Financial Statements Report of Independent Auditors Consolidated Subsidiaries JAL and Its Subsidiaries and Affiliates Directory JAL Group Route Network Board of Directors Investor Information

Review of Operations

Domestic Passenger Operations Starting in April 2004, we brought all domestic flights, operated by Japan Airlines Domestic Co., Ltd., under the JAL brand, and established a new destination-based flight naming system. We integrated reservation desks and airport counters, enhancing the convenience of the customer experience.

ACTIONS AND ACCOMPLISHMENTS FOR YEAR UNDER REVIEW

Route operations

We added flights and deployed larger planes on trunk routes, also expanding regional coverage with additional Nagoya- Fukuoka and Sendai-Sapporo flights. At the same time, we suspended or reduced services on unprofitable routes to improve profitability. In conjunction with the opening of the Central Japan International Airport, we moved most existing flights from Nagoya Airport to the new airport, while taking advantage of the proximity of the newly renovated Nagoya Komaki Airport (Nagoya Prefectural Airport) to the Nagoya city center by continuing service from that airport with J-AIR 50-seater CRJ200 model aircraft for the convenience of customers in the central Japan region.

Marketing

We worked towards a fare system which is competitive and attractive to our customers, continuing to offer popular fares such as "Bargain Fair" and "Birthday Discount" as a means of encouraging demand.
  On the marketing front, we continued our existing Okinawa and Hokkaido campaigns, kicked off our "JAL Uraraka (bright) Shikoku" campaign starting April 2004 to encourage tourism, and carried out marketing promotions emphasizing the breadth of the JAL Group's network.
  One of our aggressive product development initiatives was the introduction of Class-J in June 2004, giving passengers a more comfortable seat for a ¥1,000 fare increment. Offering a new style of relaxation, Class-J has been extremely popular since its introduction, with reliably high occupancy rates.
  We remodeled Terminal 1 at Haneda Airport in December 2004. Laying emphasis on speeding customers "spaciously, easily, and smoothly" through the boarding process, we added many more counters and security gates.
  In February 2005, we also introduced at major domestic airports our "JAL IC Check-in Service," using an IC-card or IC-equipped mobile phone, allowing passengers to board easily without stopping at a check-in counter and without a boarding pass. This service is an advanced system which JAL is the first domestic airline company to introduce, and which represents a dramatic leap forward in customer service. Usage is growing steadily as more and more passengers discover its convenience.
  Implementing these strategies allowed us to grow per-passenger revenue 4.7% year-on-year. The total number of passengers flying on JAL Group domestic routes totaled 44.7 million, a 3.7% year-on-year decline attributable to an increased number of cancelled flights resulting from the typhoons, but revenues grew 0.9% year-on-year to ¥674.7 billion.

FUTURE DEVELOPMENTS AND STRATEGY:
MEDIUM-TERM BUSINESS PLAN

We ensured that we remained competitive from both cost and network perspectives through the expansion of JAL Express operations, the rebranding of J-AIR flights under the JAL name, and the cooperation of all the airline companies in the Group. In the future we will continue to raise basic service quality levels through "intimate and warm" human service, bring added convenience to our customers through e-marketing, and further differentiate our products through the continued rollout of Class-J and IC Check-in.

JAL's convenient IC Check-in service We launched our JAL IC Check- in ser vice in February 2005 at Haneda Airport. This service permits passengers to board easily without stopping at the check-in counter or holding a boarding pass, simply by holding up a JAL-issued IC card or an IC-equipped mobile phone. We rolled this service out to all 44 domestic airports in April 2005. Applications for the JAL Card Suica which we introduced in December 2004, allowing passengers to use the same card to pay fares on both JAL domestic flights and trains in the JR East/Tokyo Monorail Suica area and JR West ICOCA area, have exceeded expectations.