ANA Holdings Financial Results for the First Half of FY2013

Tokyo October 30, 2013 – ANA Holdings (hereafter “ANA HD”) today reports its consolidated financial results for the first half of fiscal year 2013 (April-September) and its revised financial outlook for FY2013.

In the first six months of fiscal 2013 (April 1, 2013 – September 30, 2013) ANA HD achieved a 5.9 per cent increase in operating revenues to ¥797.6 billion year on year, which reached a record level. However, operating expenses rose by ¥76.4 billion yen or 11.3 per cent, resulting in a reduction in operating income, recurring profit and net income for the period. The main reason for the increase in operating expenses was a rise in fuel costs caused by the weakening of the Japanese yen.

For the six month period, operating income was 42.5 per cent lower at ¥43.3 billion, recurring profit fell 49.7 per cent to ¥31.8 billion and net income reduced by 45.7 per cent to ¥20 billion year-on-year.

ANA HD’s financial performance in the three months to the end of September, was better than in the previous quarter, with operating revenues up by ¥29.2 billion on the same period the previous year to ¥439.2 billion and operating income down to ¥48.9 billion after an increase in operating expenses of ¥44.5 billion to ¥390.3 billion.

ANA HD has decided that it is prudent to revise its financial forecasts for the fiscal year as a whole, taking into account its performance in the first half. Accordingly, ANA now expects operating income and recurring profit for FY 2013 to be ¥50 billion lower than previous forecast.

The reduction in the forecast reflects higher fuel costs because of the weakness of the yen, a slower-than-planned roll-out of ANA’s network expansion because of delays to the delivery of Boeing 787 aircraft and sluggish recovery in leisure traffic to China from Japan. To offset these headwinds, ANA HD will implement further cost-efficiency measures and improve profitability as it works to achieve its vision of becoming “the world’s leading airline group”. It will achieve this by promoting a multi-brand strategy, expanding into new areas of growth, and diversifying further into airline-related businesses through strategic investments, primarily in Asia. The Japanese economy itself continues to improve with a recovery in both consumer spending and capital investment.

Air Transportation

Domestic Passenger Services

Domestic passenger revenues increased by ¥1.2 billion year-on-year, an increase of 0.4%. Domestic passenger numbers also increased as ANA introduced new routes and increased the frequency of certain services in order to improve convenience for customers and capture business and leisure demand. ANA also increased the available discount fares on some services, targeting passengers travelling during the busy summer season.

International Passenger Services

International passenger revenues increased by ¥16.7 billion year-on-year, up 9.3%, despite an overall reduction in passenger numbers. While business demand remains strong, leisure demand from Japan to China was weak. In order to stimulate demand for flights originating in Japan, discounted fares were introduced across the board for the busy summer season which partly mitigated declining demand.

ANA continues to see growing demand for travel between North America and Asia, via Narita, and has responded by enhancing its North American route network. From July, a daily service was introduced on the Narita-San Jose route and flights on the Narita-Chicago route were increased to two per day from September.

ANA has also introduced a number of service enhancements to strengthen its customer offer and achieve its vision of becoming “the world’s leading airline group” in terms of customer satisfaction. This included upgrades to in-flight meals, bedding, and other services, primarily in first and business class. Enhancements to in-flight meals on some economy class services will also be introduced in December 2013, following a customer vote via the company’s Facebook page.

Cargo Services

In domestic cargo services, cargo volume fell below levels achieved in the same period last year and revenues decreased by ¥0.5 billion, down 3.6% year-on-year. Performance was affected by sluggish demand for air cargo, driven by a shift towards land transportation, the impact of poor crops on fresh food deliveries and a drop in unit prices driven by intense competition from land transportation and other competitors.

However, international cargo services saw a year-on-year increase in volume and revenues, with turnover up ¥7.6 billion, or 18.6% year-on-year. This was a result of strong demand to move goods from China and Asia to North America and ANA’s ability to capture cargo demand across Asia by utilizing Okinawa as a hub.

The company expanded its cargo route network during the period on the Narita-Okinawa and Narita-Chubu-Okinawa, with re-opening of Bangkok and Taipei routes.

Others

Consignment handling revenues and revenue contributions from other air transportation ventures, including AirAsia Japan, was \86.9 billion, up 18.3% year-on-year.

From July to September, AirAsia Japan carried 344 thousand passengers on domestic routes, with 553,287 thousand available seat-kilometers, 367,779 thousand revenue passenger-kilometers and a passenger load factor of 66.5%. It carried 140 thousand passengers on international routes, with 284,613 thousand available seat-kilometers, 187,055 thousand revenue passenger-kilometers and a passenger load factor of 65.7%.

At the end of June, AirAsia Japan was made a wholly-owned subsidiary of ANA HD, after dissolution of the joint venture between ANA HD and AirAsia Berhad. On November 1, the Low Cost Carrier will be re-launched as ‘Vanilla Air’ and services will commence from Narita Airport from December 20.

Airline Related, Travel Services, Trade and Retail and Other

In the first six months of the year, revenues from ANA HD’s airline related businesses reached ¥93.0 billion, an increase of 6.4% year-on-year, with operating income of ¥3.7 billion, up 21.8% year-on-year. This was driven by an increase in contracts for ground support operations as well as increased revenue from Overseas Cargo Services Co., Ltd., which is responsible for international express shipping.

Revenue for both domestic and international travel services exceeded the levels in the same period last year, reaching ¥90.7 billion, an increase of 7.6%. However, due to increased expenses for overseas travel products, stemming from rising costs, operating income fell 6.9% year-on-year, to ¥2.7 billion. In overseas travel services, whilst demand continued to decline for travel to China and East Asia, visitor numbers to Japan reached a record high and contributed to the strong revenue performance. The ANA WONDER EARTH campaign, which launched during the period, was well received and awarded the Japan Tourism Agency’s Commissioner Award, Tour Grand Prix 2013.

In trade and retail, sales from airport duty free and retail stores increased with a strong performance from both channels. This led to first half revenues of ¥53.8 billion, an increase of 9.3% year-on-year, while operating income rose by 27.1% year-on-year to ¥1.8 billion.

In other services, the building maintenance and real estate businesses delivered sound performances, resulting in revenues for the first six months of ¥14.2 billion, up 2.4% year-on-year. Operating income was ¥0.4 million, a decrease of 11.4% compared to the same period in the previous year.

Outlook for FY2013 (April, 2013 – March, 2014)

- Although operating revenues for the first six months increased by ¥44.4 billion, ANA is reducing its FY2013 operating revenue forecast by ¥30.0 billion. This revision is based on delays to network expansion, because of unexpected problems with the Boeing 787, and the slow recovery of leisure demand for China routes originating from Japan. In addition, there was fierce price competition in the domestic market, resulting in lower unit revenues.

- ANA HD also anticipates cost increases of about ¥20.0 billion, mainly fuel, because of the weakness of the yen over the next six months.

- ANA HD will reduce costs by adjusting capacity and aircraft size to meet demand and by controlling expenses. However, it is estimated that operating income and recurring profit in FY2013 will be ¥50 billion lower than previous forecast.

- Given those circumstances, and after a careful review of the outlook going forward, ANA HD’s forecast for consolidated operating results for the current fiscal year will be revised as noted below. The projected dividend will be ¥3 per share compared to a previous forecast ¥4 per share.