ANA Holdings Financial Results for the Third Quarter of FY2013

TOKYO January 31, 2014 – ANA Holdings (hereafter “ANA HD”) today reports its consolidated financial results for the third quarter of fiscal year 2013 (April – December).
• Increased operating revenues across all divisions
• Operating income reduced due to the weak yen increasing fuel costs
• FY2013 earnings guidance remains unchanged
• Continued international expansion and diversification into airline-related businesses

In the first nine months of the fiscal year 2013 (April 1, 2013 – December 31, 2013) ANA HD achieved a 7.1% increase in operating revenues to ¥1,212 billion ($11.5 billion) year-on-year, with all segments of the group contributing to the improvement. However, operating expenses rose by ¥118.3 billion ($1,122 million) or 11.5%, 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 nine month period, operating income was 35.8% lower at ¥69 billion ($654.7 million), recurring profit fell 39.8% to ¥53.6 billion ($508.6 million) and net income reduced by 36.2% to ¥33.3 billion ($316 million) year-on-year.

In the Air Transportation segment, fuel costs (which account for roughly one-quarter of the cost base) increased by approximately 25% year-on-year due to the declining value of the yen. Additional costs were also incurred due to business expansion. ANA HD expects this trend of rising costs to continue for the remainder of the fiscal year.

ANA HD expects passenger demand for business travel and leisure to remain robust. At the same time it is reducing the company’s cost base and driving profitability as management delivers on ANA HD’s goal of becoming the world’s leading airline group. In parallel with this, ANA HD is pursuing a multi-brand strategy, expanding into new areas of growth and diversifying into airline-related businesses through strategic investments, primarily in Asia.

Air Transportation

Domestic Passenger Services
ANA’s domestic passenger numbers and revenues increased year-on-year as it capitalized on the steady increase in business and leisure travel demand.

ANA enhanced its domestic network by introducing more frequent flights between Haneda-Hiroshima/Tokushima, Itami-Fukuoka/Akita, and Sapporo-Sendai, improving convenience and choice for passengers.

ANA has also introduced targeted discount fares, such as Tabiwari 60 and Tabiwari 21, to drive growth in demand. These fares extend the reservation and purchase period to up to six months in advance of departure.

ANA is committed to delivering the highest possible standards of customer service and improved passenger experience. This includes the renovation of ANA Lounges at Fukuoka and Sapporo Airport and the upgrade of information boards in Haneda Airport to provide clearer communication.

As a result, domestic passenger revenue rose by ¥2.1 billion ($19.9 million), an increase of 0.4% year-on-year.

International Passenger Services
Revenues from international passenger services increased by ¥32.4 billion ($307.4 million) or 12.2% year-on-year. Passenger numbers during the period remained broadly flat as steady business demand helped offset reduced leisure traffic on routes to China.

In response to burgeoning demand in Asia, ANA expanded services to the region, increasing the frequency of flights and introducing larger aircraft on its Narita-Yangon route and increasing the frequency of flights on its Narita-Bangkok route.

ANA has also actively targeted leisure travellers offering discount fares during the high demand holiday season. Meanwhile, ANA continued to capture traffic from passengers visiting Japan and connecting between North America and Asia via Tokyo’s Narita airport.

In order to serve passengers better, ANA ran an online poll inviting customers to vote for their favorite in-flight meal on the airline’s Facebook page.

Cargo Services
In domestic cargo services, volumes exceeded levels for the same period last year due to a recovery in courier services. However intense competition from other cargo operators led to a decline in unit prices and overall revenues fell by ¥2.4 billion ($22.8 million) or 0.5% year-on-year.

In international cargo services, both volume and revenue increased year-on-year as a result of a recovery in demand for shipment of automobile parts from Japan to North America and increased shipments of game consoles and other electronic equipment from Asian markets, including China, to Europe and America. International cargo revenues increased by ¥13.5 billion ($128.1 million), up 21.2% year-on-year, while cargo volumes rose by 14.0%. ANA also made aggressive efforts to increase its share of cargo transported within the Asian region. Extra flights were introduced on the Narita-Taipei/Hong Kong/Seoul (Incheon) route.

Others
Revenue from other air transportation business, including aircraft maintenance and Vanilla Air, was ¥132.3 billion ($1,255 million), up 18.2% from the same period the previous year.

AirAsia Japan was renamed ‘Vanilla Air’ and started operation from December 20, using Narita Airport as its hub.

Airline Related, Travel Services, Trade and Retail and Other
In airline-related businesses, revenue of ¥142.2 billion ($1,349 million) was achieved in the first nine months of the year, an increase of 8.1% year-on-year, 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. Operating income grew 9.4% year-on-year to ¥6.2 billion ($58.8 million).

In the travel service segment, revenues for domestic and international travel services grew by 7.9% year-on-year to ¥133.5 billion ($1,267 million). This was due to an increase in domestic travel, especially to attractions in the Tokyo area such as Tokyo Disneyland, and a record volume of international travellers visiting Japan. Despite improved sales trends, expenses increased for overseas hotels due to the falling yen, and operating income fell 3.1% year-on-year to ¥4.2 billion ($39.9 million).

In the trade and retail business, revenues for the first nine months were ¥82.6 billion ($783.8 million), up 9.3% year-on-year, while operating income was ¥2.9 billion ($27.5 million), an increase of 9.8% compared to the same period in the previous year.

In other services, the solid performance of the building maintenance business resulted in revenues for the first nine months of ¥21.7 billion ($206 million), up 2.6% year-on-year, while operating income was ¥0.9 billion ($8.5 million), an increase of 15.1% compared to the same period in the previous year.

Outlook for FY2013 (April, 2013 – March, 2014)
The economic recovery in Japan is anticipated to continue supported by government policies.

The weaker yen and persistently high fuel prices will result in increased operating costs despite decisive action by management. However, ANA HD will reduce costs by adjusting capacity and aircraft size to meet demand and by controlling expenses.

As a result, the consolidated FY2013 earnings forecasts ANAHD provided on October 30, 2013 is unchanged.