Strict reductions of fixed costs have helped All Nippon Airways (ANA) to reduce its net loss for its first six months of the financial year 2021. The Japanese carrier reported a net loss of ¥98.8 billion, an improvement over the ¥188.4 billion loss between March and September 2020. Cost reductions help ANA to lower losses.

The operating result was a negative ¥116 billion compared to ¥-280.9 billion last year. Total revenues were ¥431.1 billion, up from ¥291.8 billion.

Cargo got priority in ANA’s flight operation scheduling, confirming the importance of the segment for the airline just as in 2020.  International cargo revenues grew by 172.4 percent to a record high ¥138.3 billion thanks to strong demand for medical supplies, automotive parts, and semiconductors from China/Asia to Europe and North America. ANA introduced its Boeing 767-300F on the Tokyo-Beijing route in July. Tons carried was 476 million, up from 227 million. Domestic cargo reported 40.1 percent higher revenues to ¥12.1 billion and 29.1 percent higher tons carried at 120 million.

International demand remains very low

ANA suffered from the continued travel restrictions and new Covid outbreaks, which curtailed its international passenger network. It primarily operated repatriation flights to Japan, but from July saw recovering demand when it reinstated services from Tokyo Narita to North America. The Olympic and Paralympic Games in Tokyo attracted only limited traffic as both events were not open to the (foreign) public. ANA carried 327.000 passengers on its international network, up from 193.000 the previous year. The load factor was a meager 23.8 percent.

The domestic network was severely affected by the state of emergency after rising Covid cases, which covered over ninety percent of the financial first half-year. Still, passengers carried grew by 52.8 percent to 7.1 million. Revenues were up by 41.7 percent to ¥111.8 billion. The domestic load factor was also low at 43.8 percent.

Low-cost subsidiary Peach was confronted with an identical situation: low demand but still better results over 2020. The airline only operated domestic services and carried 1.6 million passengers, up 90.2 percent at a 54.6 percent load factor. Revenues were 54.6 percent higher to ¥13 billion.

ANA pursues further cost reductions to ¥ 315 billion

ANA reduced its costs on all fronts: personnel, depreciation, amortization, and maintenance costs. This delivered ¥340 billion in savings in the first six months, of which ¥130 billion in fixed costs. The airline will pursue further fixed cost reductions of a combined ¥315 billion this year on maintenance and outsourcing to lower operating expenses as well as further reducing staff numbers. While the carrier is seeing a slow recovery of demand in its domestic network, it is delayed compared to initial expectations. International demand continues to be sluggish and will only recover once travel restrictions worldwide and on entry into Japan are relaxed.

ANA has set out a number of initiatives for the second half of this financial year until April 2022. These include strengthening the cooperation with Peach by transferring some flights of the equivalent of five narrow-body aircraft from ANA to the low-cost carrier this coming winter season. ANA will expand its cargo services with the Boeing 777F, adding Hong Kong, Taipei, and Qingdao to the network.

All Nippon will also convert some aircraft from its international fleet for domestic services and accelerate the downsizing of its fleet as it early-retires wide-body (767-300, 777-300s) aircraft. It has also postponed new aircraft deliveries. By the end of September, ANA’s fleet included 243 aircraft, twelve fewer than in March. Peach had two fewer at 36.

Also part of its strategy is a revised service model, which pursues higher business efficiency while at the same time improving customer satisfaction. Higher productivity per employee should allow ANA to reduce its staff numbers from 38.000 last year to 29.000 in 2025.  

In its outlook for the rest of FY21, ANA revised the guidance of its net results from a ¥3.0 billion net profit in April to a ¥100 billion net loss now. The operating result has been revised from ¥28 billion to a negative ¥125 billion on revenues of ¥1.060 billion, down from ¥1.380 billion.

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