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ANA returns to profitability in the second quarter for the first time in three years. Full-year forecast is up 40 billion yen to 1.7 trillion yen in sales due to recovery in airline demand.

Posted on 2022-11-022022-11-02 by Editor in Chief

On October 31, ANA Holdings announced its financial results for the second quarter of the fiscal year ending March 31, 2023. The presentation was led by ANAHD President and Representative Director Koji Shibata and Senior Executive Officer and Group CFO Kimihiro Nakahori.

This second quarter saw a continued steady recovery in passenger demand on international and domestic routes, and a 38.8% increase in operating expenses in line with revenue growth, resulting in the first positive second quarter results in three years for operating income, ordinary income, and net income, all for the first time since FY 2019.

Net sales increased 83.4% year-on-year to 790.7 billion yen, operating income turned around from a loss of 116 billion yen to a positive 31.4 billion yen, and net income for the quarter was also positive at 19.5 billion yen. President Shibata commented on these results, “I would like to thank our customers, our holders, and our employees who work hard day and night to achieve these results. I would like to express my sincere gratitude.

By business segment, the number of passengers on international flights increased 5.1 times year-on-year to 1.66 million, due to a significant increase in demand for connections between North America and Asia, which was boosted by the easing of entry restrictions in various countries, and a stronger recovery trend in business demand from Japan and temporary return of expatriates in Japan due to the relaxation of border control measures in Japan since September. As a result, the number of passengers increased to 1.66 million, approximately 5.1 times that of the same period of the previous year. As a result, passenger revenue increased 430.9% y-o-y to 161.4 billion yen.

On the other hand, on domestic routes, leisure demand steadily increased mainly during the Golden Week and summer vacation periods in an environment with no restrictions on activities. In addition, business demand is gradually recovering, resulting in a 112.2% increase in passenger volume to 15.15 million. As a result, passenger revenues increased 117% to 242.8 billion yen, a record high for the Corona Disaster on a half-year basis.

In the route network, the airline adjusted the scale of its operations to meet airline demand, such as by offering extra flights mainly on weekends and consecutive holidays, etc. In June, the Boeing 777 aircraft, whose engines had been refurbished, was put back into service in stages, in an effort to capture demand.

International cargo, which had been strong, was down 10.8% y-o-y to 424,000 tons due to a decrease in dedicated cargo flights as passenger demand recovered, a decline in demand for automotive parts, and reduced sea freight congestion. On the other hand, international cargo revenues increased 32.6% y-o-y (+45.2 billion yen) to 183.5 billion yen due to aggressive efforts to capture high unit-price cargo such as large-sized specialty products and efforts to expand the scale of operations on highly profitable North American routes.

Peach Aviation’s (Peach) LCC business saw a significant increase in passenger volume to 3.684 million, up 137% from the same period last year, due to efforts to strengthen promotions targeting leisure and return travel demand on domestic routes in an environment where there are no restrictions on behavior. Passenger revenue increased 211.7% (+27.8 billion yen) to 40.8 billion yen.

As a result of the above, consolidated group sales were 790.7 billion yen, operating income was 31.4 billion yen (an improvement of 147.4 billion yen), and net income was 19.5 billion yen (an improvement of 118.3 billion yen). On the financial side, operating cash flow was 190.9 billion yen due to an increase in income before income taxes and a steady increase in the number of ticket reservations issued since October. Real free cash flow increased by 276.0 billion yen from the previous year to 150.2 billion yen, mainly due to the thorough curbing of capital investment.

The company has revised its full-year earnings forecast upward, as Q2 profit results exceeded the forecast. The company now projects net sales of 1.7 trillion yen, up from the original plan of 1.66 trillion yen, operating income of 65 billion yen, up 15 billion yen, and net income of 40 billion yen, up 19 billion yen.

With regard to the outlook for passenger demand, the Company expects domestic demand to return to pre-Corona disaster levels by the end of the fiscal year, despite the impact of the 7th Wave, due to the favorable response to the nationwide travel support that began in October and the expected demand during the year-end and New Year holidays, when there are no restrictions on activities. For international flights, the company expects inbound demand to recover to 60% of the pre-Corona disaster level by the end of the fiscal year due to the gradual recovery trend in inbound demand resulting from the easing of waterfront measures. President Shibata stated, “We expect international flights to return to pre-corona disaster levels by the end of 2023,” and commented, “Since the G7 countries are allowed to enter Japan with either two vaccinations or unconditional entry, I think it would help promote inbound travel if Japan would relax its measures as well.

He also explained that the company expects to formulate and announce its next medium-term management strategy by the end of the fiscal year. The direction of the strategy is to return to the pre-Corona disaster level in a short period of time from FY2023 to FY2025, and to return to a growth trajectory from FY2026. In order to achieve this, the company will simultaneously pursue improvements in profitability and the restoration of its financial base over the three-year period in order to solidify its footing.

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