All Nippon Airways (ANA) returned to profitability for the first time in ten quarters this Q1 (April-June), but only at a tiny margin. The carrier reported ‘just’ a ¥1.002 billion net profit, which compares to ¥-51.159 billion for the same quarter last year. ANA also updated its sustainability roadmap towards 2050. ANA back to tiny profit and updates ESG targets.
The recovery of the Japanese economy in the first quarter and the opening up of the country from the frequent state of emergencies have helped ANA to improve its results. Executive Vice President and CEO Kimihiro Nakahori is “pleased to see the results of the first quarter with the increased passenger demand for domestic and international travel, and increased revenue in all of our business segments,” he said in a media statement.
The operating income was ¥-1.3 billion compared to ¥-64.6 billion, but revenues were up to ¥350.4 billion versus ¥198.9 billion in the first quarter last year, backed by a significant increase in traffic. Operating revenues from air transportation were ¥314.2 billion versus ¥-1.9 billion.
On its international routes, ANA carried 684.000 passengers compared to 131.000 a year earlier. Revenues increased to ¥62.2 billion from ¥12.9 billion. Traffic to North America and within Asia/Oceania was strong and ANA responded with increased frequencies. The carrier also reinstated the Tokyo-Haneda to the London-Heathrow route that had been suspended during the pandemic. Capacity in available seat kilometers (ASK) was 6.2 million and the load factor was 70.7 percent, well over 19.8 percent reported in Q1 2021.
Domestic traffic benefited from the first quarter in three years that no restrictions were in place. Consequently, passenger numbers grew to 6.5 million from 3.2 million, ASKs to 11.1 million from 7.0 million. Revenues were up to ¥102 billion from ¥50.2 billion. However, ANA kept adapting its network and frequencies to fluctuating demand, which was the strongest in the Golden Week (late April-early May).
Low-cost subsidiary Peach also benefited from the sharp increase in demand in Japan, carrying 1.7 million passengers compared to 498.000 in Q1 last year at a 67 percent load factor. Revenues soared to ¥15.5 billion from ¥3.9 billion. Peach specifically targeted leisure and homecoming demand to increase revenues and also benefited from domestic routes that were previously operated by the parent airline. Peach still didn’t operate on its international network.
Cargo
ANA earned some good money from cargo in previous quarters. Revenues from international cargo were up again this quarter to ¥94.7 billion from ¥66 billion, but tonnes carried were lower at 215K from 233K tonnes last year. This reflects the suspension of routes to Europe via Russia since the war in Ukraine. Although Japanese airlines are allowed to overfly Russia, ANA and Japan Airlines have elected not to do so. Revenues from domestic cargo were static at ¥5.9 billion while tonnes carried were slightly higher to 59.5K from 56.9K.
Like all airlines, ANA suffered from skyrocketing fuel prices that together with higher (personnel) costs from increased operations drove expenses up to ¥351.7 billion from ¥263.5 billion. These were partly offset by strict control of fixed costs. Free cash flow was at a positive ¥97.6 billion, up from ¥-59.4 billion in Q1 last year. All Nippon ended June with ¥1.031 billion in liquidity, up from ¥950.9 million in March, while the interest-bearing debt was slightly down to ¥1.727 from ¥1.750 billion.
At the end of June, the ANA fleet was unchanged at 239 aircraft while Peach was up by two to 278 thanks to the delivery of one Airbus A321LR and one A320neo. ANA is gradually bringing back some of its Pratt & Whitney-powered Boeing 777s to the domestic network. One 777-200 was back in service in June, but the plan is to grow this to fifteen -200s and -300s in October after maintenance on all aircraft has been completed. This includes fan blade inspections, reinforcing the inlet and fan cowl, and the thrust reverser.
For the financial year 2022, ANA is expecting a further recovery, which should result in a net profit of ¥21 billion compared to ¥-143.6 billion last year. This is in line with its guidance for FY22 in April. The operating income is guided ad ¥50 billion, up from ¥-173.1 billion. Revenues should be up to ¥1.660 billion from ¥1.020 billion. Fuel expenses have been hedged at only 35 percent for FY22, which leaves around ¥2.6 billion in unhedged costs. As announced on July 11 and confirmed a week later in Farnborough, ANA has confirmed its order for twenty Boeing MAX 8s and converted two 777-9s into 777-8Fs.
Sustainability roadmap
Following a similar initiative from JAL in May, All Nippon Airways has now also updated its long-term ESG targets. The airline now joins most others by targeting to be net zero on carbon emissions in 2050 which compares to its previous target announced in 2020 of a fifty percent CO2 reduction in 2050. Its 2030 target seems less aggressive when it says that emissions should be less or equal to those in FY19. Non-aviation emissions should be reduced by at least one-third on FY19 in 2030 and also get to net zero in 2050.
To get emissions down, ANA wants to improve flight operations, air traffic management, and aircraft with the latest technology. ANA will also invest more in sustainable aviation fuels (SAF), with a target for 2030 of ten percent SAF and “almost all” in 2050. The carrier has had various offtake agreements on SAF since 2019, including those with LanzaTech and Neste. It also is a founder of the Act for Sky initiative that is actively promoting and pushing for the production of SAF in Japan. ANA will enhance its SAF initiatives through its new Green Bond Framework. For CO2 emissions that can’t be reduced with these measures, ANA will study direct carbon capture initiatives like those recently announced by Airbus and a number of airlines at the Farnborough Airshow.
ANA is also stepping up its collaboration with airframers to “jointly conduct research projects on cutting-edge technology to advance the airline’s sustainability efforts.” This includes a project with Airbus for the development of hydrogen aircraft and their infrastructure identical to those between the OEM and Airbus, SAS, and Air New Zealand.
The carrier and Boeing announced that they will collaborate on the development and utilization of sustainable technologies in Japan, including electric, hybrid, hydrogen, and other novel propulsion systems. Boeing said today that it will open a Boeing Research and Technology Center in Nagoya in an enhanced partnership with Japan’s Ministry of Economy, Trade, and Industry. The new agreement signed today covers the study of advanced sustainable technologies that include “electric, hybrid, hydrogen, and other novel propulsion systems in an endeavor to reduce the carbon footprint of aircraft,” says Boeing.
