Operating Environment and Financial Strategy

During the year under review, the global economy showed recovery momentum, with growth picking up in the U.S. and China and signs of economic recovery emerging in Europe. The Japanese economy too saw significantly improved corporate earnings and increased capital investment, but personal spending was anemic. Overall, the national economy showed moderate recovery momentum.

Economic growth in the U.S. and China caused international freight demand to soar above last year’s levels, and international travel demand depressed by the outbreak of SARS and other events in fiscal 2004 recovered steadily. However, growth in domestic passenger operations demand was blunted by the impact of typhoons. We were also hit by further historic hikes in fuel prices. For these reasons, the operating environment surrounding the JAL Group remained severe.

To deal with these increasingly difficult conditions, the Group worked to maximize enterprise value, by improving asset efficiency and strengthening the bottom line through enhanced profitability.

Our yardsticks for achieving this goal are return on equity (ROE) of at least 10% on a consolidated basis, and reducing the repayment period for interest-bearing debt from operating cash flows within 10 years.

In the year under review, we achieved ROE of 17.0% compared with negative ROE of 42.9% in the previous year.In addition, we reduced the repayment period for interest-bearing debt from operating cash flows from 22 to 11 years. Although we did not reach our target here, we aim to continue to bolster our financial position.