With the recent relisting of Japan Air Lines in the Tokyo Stock Exchange since filing for bankruptcy two years ago a sign that the airline industry is still profitable?
By: Ringo Bones
With an IPO valued at 8.5 billion US dollars – second only to the recent Facebook IPO as the biggest share sale for 2012 - and currently the most actively traded stock in the Tokyo Stock Market as of September 19, 2012, JAL, Japan Air Lines is now relisted and back in the black. It seems like one of Asia’s biggest airlines was destined for a “disappearing act”, but will this recent rally be the signal that the global airline industry is still profitable?
Around the start of the global economic downturn back in 2008, the two biggest “threats” endangering the long-term profitability of the airline industry are sky-high fuel prices and the decline in international tourism – which is primarily caused by the global economic downturn in the first place. Japan Air Lines was delisted back in February 2010 and had been running on Japanese government bailout money since. Thankfully, JAL’s profitability is now on a level that not only enables the airline company to pay back the government bailout funds but also to be able to have it relisted on the Tokyo Stock Market and issue IPOs.
Potential investors are warned, though, because tenured financial analysts still have caveats over the rather short return to profitability of JAL given the size of the airline company and the scope of its financial losses back in 2010. And given that the Japanese government had recently given the green light for a quantitative easing to stimulate flagging business in the country, JAL’s position of being the most actively traded stock in the Tokyo Stock Exchange today could, hopefully, last for sometime.