On February 2, ANA Holdings announced its financial results for the third quarter of the fiscal year ending March 31, 2023. The presentation was led by Kimihiro Nakahori, ANAHD Senior Executive Officer and Group CFO; Naoaki Takayanagi, Executive Officer and General Manager of Public Relations and Corporate Brand Promotion Department; and Kohei Morimoto, Group Accounting and Finance Office Financial Planning and IR Department Financial Results Team Leader.
In this third quarter, passenger demand on both international and domestic routes recovered steadily, and operating expenses increased 35.8% in line with revenue growth, resulting in a positive third quarter financial result for operating income, ordinary income, and net income, all of which followed the previous year’s results.
Sales increased 70.5% y/y to 1,258.6 billion yen, operating income turned positive at 98.9 billion yen from a loss of 115.8 billion yen, and net income was positive at 62.6 billion yen for the quarter.
Commenting on the results, Mr. Nakahori said, “While the steady recovery in passenger demand was the most significant factor, we believe that this was also the result of the concerted efforts of all Group employees to increase revenues and reduce costs, supported by government support such as tax exemptions and subsidies for jet fuel.
By business segment, international flights enjoyed strong demand for connections between North America and Asia, which increased significantly due to the easing of entry restrictions in various countries, as well as business demand originating from Japan.
In Japan, the number of passengers reached 2.81 million, about five times that of the same period last year, due to the relaxation of waterfront measures in September and the beginning of a recovery in demand for inbound travel to Japan from October onward. As a result, passenger revenue was 290.3 billion yen, a 501.9% increase over the same period last year.
In the route network, the number of flights on North American and Asian routes to/from Narita was increased, and the scale of operations on routes to/from Haneda was expanded to capture demand originating from Japan and demand visiting Japan. On European routes, the scale of operations is gradually recovering despite the impact of the situation in Ukraine. The return of flights to China has been delayed due to the continuation of the zero-corona policy.
On the other hand, on domestic routes, demand steadily increased amid the progress in balancing the prevention of the spread of infection and socioeconomic activities, and the limited impact of the eighth wave of the new coronavirus, and passenger volume increased 88.4% to 24.87 million, partly due to the nationwide travel support that stimulated leisure demand from October onward. As a result, passenger revenues increased 89.9% to 392.1 billion yen, approximately 1.9 times that of the same period last year in both passenger volume and revenues.
In the route network, the Boeing 777, whose engines have been refurbished, is now fully operational, and the airline aggressively increased the size of its fleet and set up extra flights, mainly on weekends and consecutive holidays. In October, JAL began code-sharing with Amakusa Airline and Japan Air Commuter on routes between Fukuoka and Amakusa, Kagoshima and Tanegashima, and other remote islands.
International cargo, which had been strong, saw a decrease in dedicated cargo flights due to the return of passenger flights following the recovery of passenger demand in the second quarter. In addition to this, a decline in demand for automotive parts and reduced sea freight congestion resulted in a 16.3% year-on-year decrease in transported weight to 622,000 tons.
On the other hand, international cargo revenues increased 7.7% (up 18.4 billion yen) to 256.1 billion yen due to aggressive intake of high-unit-value cargo such as large special commercial items and tri-nation cargo.
Peach Aviation’s (Peach) LCC business saw a significant increase in demand due to the easing of restrictions on domestic activities and water border measures in various countries. As a result, the number of passengers increased significantly to 5,613,000, up 92.1% from the same period last year, and passenger revenue rose 152.5% (up 37.5 billion yen) to 62.0 billion yen.
As a result of the above, consolidated group sales were 1,258.6 billion yen, operating income was 98.9 billion yen (an improvement of 214.7 billion yen), and net income was 62.6 billion yen (an improvement of 165.4 billion yen). On the financial side, operating cash flow was 339.2 billion yen due to an increase in income before income taxes and an increase in airline ticket sales. Real free cash flow was 257.8 billion yen, up 366.8 billion yen from the previous year, as the company continues to curb capital expenditures.
The company has further revised its full-year forecasts upward from the revisions announced in the second quarter, as third-quarter profit results exceeded forecasts. The company now expects net sales of 1,710 billion yen, up from 1,700 billion yen in the previous forecast, operating income of 95 billion yen, up 30 billion yen, and net income of 60 billion yen, up 20 billion yen.
Regarding future passenger demand, he said, “The number of flights on our China routes remains less than 10% of what it used to be due to remaining restrictions,” and he would like to increase the number of flights as soon as demand recovers. He explained that fuel prices remain higher than before, but that even under such circumstances, they would like to prepare a system to ensure that they can capture the recovering passenger demand.
The company plans to announce its next medium-term management strategy on February 15. Although the recovery of aviation demand is becoming clearer, geopolitical and other risks still remain. The strategy will include investments in human capital and aircraft, as well as the restoration of the company’s financial base, including the repayment of interest-bearing debt that increased due to the Corona disaster.
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