ANA Group has reported a loss of ¥280.9bn (approx. $2.7bn) for the six months ended Sept. 30, 2020. Operating revenue during the period fell by 72.4% to ¥291.8bn. The net loss attributable to owners of the parent company was ¥188.4bn due to the recording of a ¥76bn deferred tax asset. ANA implemented cost reduction measures of ¥333bn by decreasing fixed expenses, in addition to reducing variable expenses by curbing the scale of operations.
Despite the loss, ANA has seen improvement during the past quarter. Ichiro Fukuzawa, executive vice president and chief financial officer of ANA Holdings, said: "Compared with the first quarter, the second quarter has recovered significantly, which proves that we've already bottomed out and are seeing dramatic recovery….Though we have faced cumulative losses in the first half of the fiscal year, the entire organization has shown strength and resolve in uniting to make the necessary sacrifices and support the required changes to get us through this COVID-19 outbreak and positioned for the future. I am confident that the shared spirit of the ANA Group and its employees, combined with our Business Structure Reform Plan, we will lead to future growth and success."
Although passenger demand for domestic routes has recovered steadily since the emergency travel restrictions were lifted in May, ANA stated that demand for international routes remains greatly diminished. International passenger revenue was down 94.2% during the first half of FY2020 for ANA to ¥19.6bn from ¥338.5bn a year ago. Capacity was down by 84.4% during the half-year period to 5,426 available seat km (ASKs), with only 24.2% load factor.
In addition to reducing fuel costs and airport landing fees by constraining the scale of operations to match the decline in demand, ANA reduced personnel costs, such as remuneration for officers, wages of managerial personnel and bonuses.
ANA states that domestic passenger numbers and revenues have decreased significantly since May passenger demand has steadily recovered. The airline’s domestic route network is 26.7% the scale of last year, and in the second quarter this was up to 50.7%.
Revenue from domestic passenger service decreased by 78.6% to ¥78.9bn. ASKs for domestic services dropped by 61% to 11,789, with load factors at 36.3%.
ANA has reported an uptick in demand for international cargo, especially emergency cargo such as PEE, and a steady recovery in demand for completed vehicles and vehicle components, as well as semiconductors and other electronic equipment. The airline has pivoted to temporary cargo flights using passenger aircraft as well as charter flights using cargo aircraft, which has helped revenue from international cargo service to remain largely flat, down 0.6% - to ¥50.8bn, with domestic cargo revenue down 31.6% year-on-year to ¥8.6bn.
ANA’s low-cost carrier, Peach Aviation, has been impacted by the suspension and reduction of flights. Revenue fell by 81.7% in the six months to end Sept 2020, with ASKs down 64.3% and load factors at 44.1%. Domestic operations in the first quarter were 42% of the previous quarter in 2019, which increased to 112% of 2019 levels in the second quarter due to the addition of new routes from Narita to Kushiro and Miyazaki; all international flights remain suspended.
Other ANA revenue, including revenue from the mileage program, in-flight sales and maintenance contracts, was down 37.5% to ¥68.1 billion.
ANA expects operating revenues for the year to be 60% lower than FY2019 – equating to a net loss of ¥510bn (approx. $4.12bn) – as well as a special loss of ¥110bn, which include impairment loss of ¥73bn due to the large-scale retirement of aircraft ANA has announced as part of its transformation plan.
ANA plans to retire a total of 35 aircraft in 2020, an addition of 28 aircraft from its initial plan of seven. Out of the 35 aircraft to be retired, 22 are 777s. Delivery has been delayed for 777 and one A380 aircraft. ANA also plans to reduce or delay capex investments for pre-existing aircraft orders. The cost reduction effects is expected to be approximately ¥150bn for this fiscal year, and approximately ¥250bn in FY 2021/2.
ANA expects business travel to decrease and not fully recover at all due to the “popularity of online conferences and meetings” but does expect leisure to remain robust, “with potential growth from new segments including new working environments and multiple residency”.
As a result, ANA is creating a third airline brand, using the Air Japan entity as its foundation, which will be a low-cost carrier for medium-haul routes to destinations in Southeast Asia and Oceania that will utilise 787 aircraft configured in two classes. The new airline is expected to launch in FY2022.
Peach will continue to serve the short-haul LCC market but with the addition of certain medium-distance routes being served by the A321LR aircraft, while also entering the air cargo business. ANA will continue as the long-haul, full service carrier.
"ANA HD is embarking on an ambitious transformation that will strengthen operations and position it for long term growth and success in a market still reeling from COVID-19," said Shinya Katanozaka, President and Chief Executive Officer of ANA Holdings. "As we work to fully account for the current situation, we will introduce a new business structure based on two major strategies. This comprehensive transformation initiative is not simply about cutting costs, instead it will address how travel has changed so that ANA HD has a framework for an entirely new, future-oriented operational strategy."
ANA also plans to launch a data platform business based on the point-of-contact with its customers to increase profits from non-airline operations and to leverage its customer data assets.
ANA Group further plans to reduce labour costs through shifting outsourced business to in-house development and temporarily relocating employees, while wages will be reduced via a proposal with unions.