Japan Airlines Group appears to have made significant progress in its restructuring with a fiscal first-quarter loss of 26.7 billion yen ($233.2 million) set against sharply increased fuel costs, an improvement over the year-ago period's 38.3 billion yen loss.Over the past 12 years JAL typically has posted a loss in the quarter ended June 30. All numbers in the recently completed quarter were positive. Operating revenues were up 3.7% to 522.2 billion yen and international traffic revenue rose 5.2%, reflecting a focus on high-profit and high-growth-rate routes. Cost-structure reforms limited the negative impact of an 11.6% increase in fuel costs and an unfavorable US dollar-yen exchange rate. Operating expenses rose only 3.5% to 554.1 billion yen.

The company's international restructuring resulted in better numbers. Higher demand for first and business class travel and fuel surcharges combined to raise yields 11.2%. That was offset by a 5.8% decline in passenger numbers to 3.2 million brought about by an 11.6% reduction in ASKs due to network and fleet restructuring. International load factor climbed 4.6 points to 69.9%. On the domestic front, traffic fell 1.6% to 10.37 billion ASKs while yield lifted on fare increases. Domestic revenue was up 0.4% to 150.9 billion yen.

Cargo results were mixed. Demand out of China and Hong Kong was weak but demand from Japan was buoyant. Overall traffic was down 3.4%, but yield rose 10.3% due to an increase in the percentage of high-yield cargo and fuel surcharges.

JAL management has not changed its forecast for the full fiscal year. It is expecting a modest net profit of 3 billion yen built on an increase in revenues to 2.3 trillion yen. The group also is looking to its oneworld membership to improve revenue streams, while a major restructure of its fleet will help rein in costs. It is building its fleet around smaller types including the 737-800, 767-300ER, 777 and 787. This year it will complete the retirement of the A300 and YS-11. Thirty 747 Classics will be retired by FY09. At the same time it is converting eight 747-400s to 747-400BCFs. The 747s are being replaced by 777s.