ANA Announces First Half Results - Progress in the Face of Stiff Competition - Japan's economy during the first half of the fiscal year ending March 31, 1999 was characterized by sluggish personal consumption, sharp declines in capital investment and other factors that stretched out the recession and created an extremely severe economic climate. In the airline industry, the number of overseas travelers dropped below last year's levels, while competition on domestic routes stiffened as new entrants commenced operations. ANA sought to tackle these challenges through more aggressive sales activities. As a result of these activities, the company was able to increase the number of ANA passengers on both domestic and international routes. Even so, the increasingly competitive operating environment still caused a slowing of growth in revenues. Mixed Fortunes for International Passenger Operations A protracted recession and the weakening of the yen combined with economic turmoil in Asia to cause negative growth in international passenger numbers, weakening demand for Japan's airline services. ANA inaugurated 5 new routes to China during the first half of the fiscal year under review, including a service to Tianjing from May and flights to Xiamen and Shenyang in July. ANA also increased the number of flights on some U.S. and European routes as part of the company's continued emphasis on expanding high-revenue routes. Conversely, ANA reduced or discontinued service on several routes as part of its network restructuring strategy based on demand and supply considerations. From April, ANA decreased the number of flights between Osaka and Bangkok, and in July, the company discontinued its Tokyo-Brisbane/Sydney service. In sales, ANA kicked off its "Power Up Campaign" in April. This campaign offers a limousine service from the airport to Tokyo for round-trip first- and business-class travelers on U.S. and European routes upon their return to Japan. May saw the inauguration of a mileage service tie-up with Lufthansa. Also, in September, the ANA Mileage Club was made even more attractive by making "ANA Hello Tour" international fares eligible for mileage accrual parallel to fares for the domestic "Sky Holiday" product. The result was that first-half passengers numbered about 1.69 million, up 14.3 percent year-to-year, while operating revenues declined by 2.9 percent to ¥90.6 billion. Strong Results in International Cargo and Mail Operations Boosted by the yen's ongoing weakness, export shipments of auto and high-tech equipment parts to North America and Europe performed relatively well. However, cargo shipments to Asia were hurt by economic difficulties in the region. The weaker yen and the ailing domestic economy also resulted in a substantial downturn in cargo imports, although strength continued to be seen in Japanese exports from Asia to North America and Europe, or third-country shipments. These factors combined to bring cargo volume up by 9.4 percent to 72,367 tons, and operating revenues up by 7.5 percent to ¥16.7 billion. Mail volume, a separate category, climbed 19.3 percent to 2,876 tons, generating a revenue gain of 31.6 percent to ¥865 million. Aggressive Sales Campaigns and New Routes Counter Fierce Domestic Competition In addition to new industry entrants, existing domestic carriers competed on discounted fares in a move to spark demand. Despite the slumping domestic economy, these efforts were successful: passenger demand rose over the previous year's levels. ANA opened new Tokyo-Saga and Tokyo-Yonago routes in July-the latter a seasonal route-and increased flight frequencies on such high-demand loops as Tokyo-Sapporo, Tokyo-Fukuoka, Tokyo-Okinawa and Osaka (Itami)-Sapporo. ANA augmented its fleet with 6 state-of-the-art Boeing 777-300s and other aircraft types, including the Airbus A321 in April which, along with the 777-300s in July, represented Japan's first use of these aircraft types on scheduled flights. To help stimulate domestic demand, the A321 fuselage was painted with photographic images of ANA destinations. Another innovation well received by the traveling public was the decoration in July of 3 aircraft, including a Boeing 747-400, featuring the very popular "Pocket Monster" cartoon characters. These "ANA Pokemon Jets" were used on ANA's domestic routes. To help increase sales and sharpen competitiveness with other airlines and high-speed rail services, ANA substantially boosted the number of flights designated for special discounts. Furthermore, with its "One More Dial Service", ANA made it possible to reserve hotels and rental cars anywhere in Japan through the same phone call used to reserve seats on a flight. From April to July, a "Power-up Mileage Campaign" was also launched, whereby domestic travel mileage was tripled for ANA Mileage Club members. "ANA's Paradise Okinawa Campaign," undertaken in May, was another successful promotion of ANA's designated routes. Discounted "Paradise Flights" carried summer vacationers to Okinawa from both Tokyo and Osaka. These and other aggressive sales campaigns resulted in a 2.6 percent gain in domestic passenger numbers to about 19.7 million. Operating revenues were off by 1 percent to ¥307 billion. Domestic Cargo Operations Perform Well in Recessionary Climate ANA implemented measures to counter the impact of the recessionary economy on domestic cargo demand. In and after April, ANA improved the functions of the company's "ASTRO" Internet-based air cargo information service, the only one of its type in the industry. September saw an expansion in the number of airports served by another ANA innovation, the combination of air cargo and motorbike delivery called the "BY Kubin" service. These actions to strengthen services to customers resulted in a 0.2 percent gain in domestic cargo volume to 192,931 tons, and a 9.3 percent increase in operating revenues to ¥13.3 billion. Domestic mail volume handled declined by 4.0 percent to 30,471 tons, with operating revenues down by 4.7 percent to ¥4.4 billion. Other Operations See Revenues Climb ANA performs various services for other airlines on consignment, or as an outsourcing contractor. These include aircraft maintenance, passenger check-in and cargo mounting. ANA also leases aircraft to other companies, carries out in-flight sales of duty-free merchandise and undertakes other such ancillary businesses. Operating revenues from these activities were ¥35.3 billion, 16.3 percent higher than in the same period a year earlier. Strategies in Place to Carry ANA's First-Half Momentum Forward Despite government policy efforts to alleviate financial instability and high expectations for emergency pump-priming measures, the outlook is for negative growth in Japan's economy in the fiscal year's second half. As the Japan airline industry faces difficult times due to recessions at home and in Southeast Asia, expectations are for a slowing of demand on international routes. Domestically, the competitive environment for both fares and supply of services appears poised to become yet more challenging in light of the scheduled abolition next fiscal year of restrictions on demand-supply adjustments. ANA will meet those challenges. The company's "ANA Restructuring Plan," ending in fiscal 2000, mandates cutting costs and improving the flexibility of operations to better satisfy customer needs. Progress has been made on both of these fronts. In international operations, the provisional agreement reached at the U.S.-Japan aviation talks in January this year enabled ANA to open a Tokyo-Honolulu route. In addition, December 1998 will see the inauguration of Tokyo-San Francisco and Osaka-Denpasar services. Furthermore, through a tie-up with United Airlines, ANA will operate a total of 20 U.S.-Japan joint routes on a code-sharing basis starting in October. ANA intends thereby to strengthen its competitiveness in transpacific service. Domestically, more flights will be added on high-demand routes, and other routes that show slower demand during the winter season will be reduced or suspended. The "Kitakippu" campaign on Hokkaido routes, another exclusive ANA discount fare, will also be promoted to stimulate demand. In recent weeks, ANA has decided to participate in the "Star Alliance," which is made up of a group of 6 internationally renowned airlines that includes United and Lufthansa. With competition in the airline industry heating up and the world becoming a borderless market, it is more important than ever to respond to customers' needs globally-and through more efficient operations. ANA believes that participation in an international alliance that leverages the inherent strengths of each participant's networks and sales capabilities is essential to making this happen. Through its participation in the "Star Alliance," ANA is committed to transforming the company into a more competitive airline based on the goals set out in the "ANA Restructuring Plan.
ends
|