Japan Airlines Looks to Second Half of 2025 for Growth

Japan Airlines is optimistic about its prospects in the second half of 2025. The airline has seen a surge in international demand, thanks to an increase in inbound tourism, and its domestic traffic remains strong. To continue its growth, the airline has made several upgrades to its long-haul aircraft, including new premium cabins, and has expanded its network with the addition of ZIPAIR Tokyo.

While the airline’s cargo revenue has decreased from its pandemic peak, it continues to generate income through unique partnerships, such as its joint venture with Yamato Holdings. However, there are some potential risks that may affect the airline’s growth, including fluctuations in the yen and jet fuel prices, as well as increased regulatory scrutiny on Sustainable Aviation Fuel (SAF) mandates.

Strategies for Growth

Japan Airlines has made significant efforts to upgrade its long-haul fleet by replacing older aircraft with the Airbus A350-1000. These jets feature upgraded premium cabins and will be used on routes from Tokyo’s Haneda Airport to Paris’ Charles de Gaulle Airport. The airline also plans to use these jets on routes to major cities in the US, including New York, Dallas, and Los Angeles. Additionally, the airline’s low-cost subsidiary, ZIPAIR, has expanded its network, providing the airline with greater market coverage.

Potential Risks to Growth

The airline’s growth could be impacted by macroeconomic factors in the second half of 2025. While inbound travel demand remains strong, changes in the value of the yen could affect the number of tourists visiting Japan. A stronger yen may lead to a decline in inbound tourism, while a weaker yen may decrease business travel and outbound tourism.

Jet fuel prices, which are a major variable cost for any airline, are also a concern for Japan Airlines. While fuel prices are expected to remain low in the second half of the year, any increase could have a negative impact on the airline’s finances, according to the International Air Transport Association (IATA). Additionally, Japan has a mandate to increase the use of SAF to 10% by 2030, which could result in higher costs for the airline.

Investor Confidence

Despite these potential risks, investors seem confident in Japan Airlines’ growth prospects. Over the past year, the airline’s stock has provided investors with returns of over 25%, driven by positive macroeconomic conditions. While there was a period of uncertainty due to economic turmoil, the airline has seen restored confidence from investors, with its stock trading at a higher price-to-earnings multiple.

However, some portfolio managers may still be hesitant to invest in the airline due to concerns about macroeconomic uncertainty. With only two major competitors in the Japanese airline market, any changes in supply-side dynamics tend to occur slowly.