With further signs of recovery visible, All Nippon Airways (ANA) expects to return to profitability again in the new financial year 2022. The Japanese carrier will try to maximize revenue by capturing recovering passenger demand, strengthening its position in the cargo market, and continuing to keep a strict eye on costs, it said on April 28. ANA optimistic about a return to profitability this year.
ANA reported a ¥143.6 billion net loss for FY21 that closed on March 31, slightly better than the ¥-145 billion it gave in its revised guidance only last week. The loss compares to ¥-404.6 billion for FY20. The carrier suffered a ¥-173.1 billion operating loss compared to ¥464.8 billion in the previous year, with an operating margin of -17 percent versus -63.8 percent. Total revenues improved to ¥1.020 billion from ¥729 million. The Group reduced costs by ¥600 billion, of which ¥255 billion in fixed costs.
Despite sluggish demand in the first months following repeated Covid-related state of emergency declared by the Japanese government, ANA improved its results on the domestic market. It carried eighteen million passengers compared to 12.7 million in FY20 and grew revenues to ¥279.8 billion from ¥203.1 billion. Capacity in available seat kilometers (ASK) increased by 27.5 percent to 34.3 million, revenue passenger kilometers (RPK) by 41.6 percent to 16.4 million. Load factors still lacked behind at just 47.8 percent.
Following the lifting of travel restrictions, traffic took off in the third quarter, which was the strongest in FY21. ANA tried to capture as much traffic as possible by scheduling extra flights in October on weekends and holidays. Further recovery was blocked by the emergence of Omicron and new restrictions, but there was pent-up demand in March with the end of restrictions in sight.
International traffic almost doubled, with passengers up to 825.000 from 427.000, RPKs +95.4 percent to 5.5 million, ASKs up 41.9 percent to 20.5 million, and revenues to ¥70.1 billion from ¥44.7 billion. However, the load factor was still down at just 27 percent, up from 19.6. There was an uptick in demand on the network to North America and Asia as well as some recovery in business travel from Japanese expats. Following the war in Ukraine and sanctions on Russia, ANA suspended its services to London Heathrow and Paris that used to fly through Russian airspace. Services to Frankfurt and Brussels were upheld and used different routes.
ANA is optimistic about the recovery in all key segments. (ANA)
Cargo reported the highest-ever revenues
ANA reported its highest ever cargo revenues of ¥353.6 billion compared to ¥181.3 billion in FY20. International revenues soared by 104.8 percent to ¥328.7 billion, domestic revenues by only 19.4 percent to ¥24.9 billion. Tonnes carried were up to 1.2 billion from 873 million. The busiest routes were those to Los Angeles, Hong Kong, Taipei, and Qingdao.
Like ANA domestic operations, low-cost subsidiary Peach was hit by the restrictions on its home market. Still, passengers carried grew by 105.1 percent to 4.3 million, with Q3 proving the strongest quarter. RPKs improved by 101.7 percent to 4.8 million, with capacity in ASKs up 59.4 percent to 7.9 million. Load factors were up to 61.6 percent from 48.7 percent. Revenues improved to ¥37.8 billion from ¥22 billion. March was the first month when traffic levels exceeded those of 2019 again. In 2021, Peach took over some flights from the parent airline which helped it expand domestic capacity from 22 to 37.8 percent.
In its outlook for FY22, ANA expects a significant impact of Covid-restrictions in many markets its serves but at the same time is seeing the reopening of many countries. It expects revenues to grow to ¥1.660 billion, end the year with a small profit of around ¥21 billion, and create positive free cashflow. The guidance includes the effects of high fuel prices (it has hedged twenty percent) and those of other commodities and the weaker yen.
In its financial statements, ANA CEO Kobi Shijata says: “We intend to both definitively capture passenger demand, which is seeing recovery, with dynamic adjustments to the scopes of flights, and enhance marketing for, and maximize revenue from, cargo services, the demand for which remains solid. In terms of costs, we will improve the break-even point by maintaining the effects of fixed cost reductions implemented in the previous period.”
Introduction planned of eighteen new aircraft
ANA and Peach plan to introduce eighteen new aircraft to the fleet this year, including five Boeing 787-9s and five -10s, six Airbus A321neo’s, and two A321LRs. It will retire three 767-300ERs, two 777-300ERs, and three A320s. This brings the fleet to 235 aircraft in FY22, down by two on FY21. The plan sees growth to 245-250 aircraft in FY25 for ANA, with Peach growing to between 35-45 from the current 35 aircraft.
The airline introduced the 787-9 with the latest cabin specs on its domestic network and plans to resume 777 services on the domestic network in the peak season. Until demand for Hawaii recovers to meaningful levels, ANA will continue to offer domestic excursion flights with its three Airbus A380s, which have proved to be very popular and generate extra revenues.
Slide showing ANA’s strategy to recovery (ANA)
ANA Group ended the year with ¥621 billion in cash and cash equivalents, up from ¥370.3 billion at the end of FY20. Total liabilities increased to ¥2.4 billion from ¥2.2 billion. The Group issued new bonds to raise ¥150 billion in capital to redeem maturing bonds, repay long-term debt, and invest in its new, third, airline AirJapan for which it has delayed the launch until late 2023. It took a ¥9.4 billion impairment loss but hasn’t specified this.
Active as a journalist since 1987, with a background in newspapers, magazines, and a regional news station, Richard has been covering commercial aviation on a freelance basis since late 2016.
In 2022, he has gone full-time freelance. Richard has been contributing to AirInsight since December 2018. He is also writing for Airliner World and Aviation News and until July 1 2023 in a part-time role with Dutch website and magazine Luchtvaartnieuws. Twitter: @rschuur_aero.