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Japan’s ANA Turns First Post-Pandemic Annual Profit

Edward Russell

May 1st, 2023

ANA planes at Tokyo's Haneda airport

All Nippon Airways beat profit expectations during the fiscal year ending in March as travelers eagerly returned to Japan.

Tokyo-based ANA said inbound international travel demand increased “dramatically” in the fourth quarter. This helped propel its full year operating profit 120 billion Japanese yen ($875 million), and operating margin to 7 percent. In February, ANA forecast a roughly 90 billion Japanese yen operating profit and margin of around 5.6 percent. The airline reported a net profit of 90 billion Japanese yen for the year ending in March.

The turnaround is good news for Japan’s largest airline. Unlike competitor Korean Air, which posted profits on the back of strong cargo demand throughout the pandemic, travel restrictions and a smaller cargo business kept ANA in the red for two years. However, beginning in October, Japan ended its final Covid entry restrictions and lifted caps on inbound tourist numbers. That allowed travel to the country to surge, even during the historically lower demand winter season.

The number of visitors entering Japan has picked up dramatically since October. Nearly 1.48 million foreign visitors entered the country in February, according to the latest data available from Japan National Tourism Organization. That is equal to 57 percent of 2019 levels, and a dramatic 48 point rebound since September.

ANA recovered to nearly 68 percent of its pre-pandemic international capacity in the March quarter. Traffic recovered to 65 percent of 2019 levels, and all-important yields were 45 percent above four years earlier.

The airline did not single out China, or any other specific market, in terms of demand trends. ANA, as well as Korean Air and Japan Airlines, stand to benefit geographically from continued limits on nonstop flights between North America and China. What ANA did say was that so-called “trilateral demand” — or travelers that originate and end their trips in countries other than Japan — recovered during the year ending in March. That’s notable given overall capacity remained well below 2019 levels.

ANA will further expand its schedule to China, which was all but closed off to international travelers until January, beginning in May. Flights between Osaka Kansai and Shanghai Pudong will resume June 5, and between Tokyo Haneda and Shenzhen on May 20. The updated schedules will see ANA operate 32 percent of its 2019 flight levels by June, instead of a planned 22 percent at the beginning of April, Diio data show.

Looking ahead, ANA expects strong inbound visitor demand to Japan in its 2023 fiscal year that ends next March. Outbound travel demand is forecast to “recover gradually;” something that has hit carriers dependent on Japanese travelers, Hawaiian Airlines for example, particularly hard. ANA expects international passenger numbers to rise to roughly 80 percent of 2019 levels by the March quarter of 2024, and domestic passenger numbers to plateau at around 95 percent.

One big project for ANA will be implementing its strategy for three passenger airline brands. Flying today is its namesake ANA operation, as well as its leisure carrier Peach, which serves both domestic and near-international markets. In the works is Air Japan, which ANA describes as an “international middle haul” airline that will slot in between full-service ANA and low-cost Peach on, for example, routes to Southeast Asia. Air Japan is set to launch next February.

ANA forecasts a net profit of roughly 80 billion Japanese yen in the 2023 fiscal year. It anticipates a 140 billion yen operating result and a 7.1 percent operating margin. One challenge for ANA this year, as for nearly every other airline, is rising costs. Expenses are forecasted to rise at least 15 percent year-over-year.

Edward Russell

May 1st, 2023

Tags: Asia-Pacific

Photo credit: ANA planes at Tokyo's Haneda airport Flickr / Kwok Ho Eddie Wong

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