FY2014-16 ANA Group Corporate Strategy
In the fiscal year 2013, we addressed several pressing issues, such as the grounding of Boeing 787 aircraft and sudden yen depreciation. However, the entire ANA Group made efforts to the recovery of revenues and earnings, helped by steady demand of passenger and cargo from the second half of the fiscal year.
Guided by FY2014-16 ANA Group Corporate Strategy, we will step forward to a new growth stage with the expansion of our international route network at Haneda Airport from the end of March 2014.
FY2014-16 ANA Group Corporate Strategy: Background and Direction of Strategy
Eyeing the Tokyo 2020 Olympic and Paralympic Games, the Japanese government aims to increase the number of inbound tourists visiting Japan to 20 million. Coupled with the Japanese economic recovery and vitality, the continuing rapid pace of Asian economic growth, and deregulation in ASEAN’s airline industry, we believe these developments will provide tailwinds that will significantly increase airline demand in Japan and Asia. Clearly, the ANA Group will see a growing number of business opportunities in this environment.
Meanwhile, the airline industry in Japan will enter the final stage of expansion of slots from/to the Tokyo metropolitan area airports, which has been phased in over the past few years. One eagerly awaited recent development was the increase in international daytime slots at Haneda Airport from the end of March 2014 and also slots at Narita Airport are slated to increase in March 2015. We have formulated FY2014 E6 ANA Group Corporate Strategy to ensure that we steadily capitalize on these business opportunities to drive our growth.
Under our current corporate strategy, the major initiatives are “Enhancement and Development of Revenue Platforms Eand “Expansion and Diversification of Revenue Domains Eto push forward with our business portfolio strategy. We will also promote “Brand New Cost Restructuring Initiatives Eto enhance our profitability, with the aim of becoming a truly tough airline group that is resilient to any change the environment may throw at us.
In the air transportation business, our greatest source of earnings, we will leverage business expansion on International Passenger Operations, a core driver of growth. In parallel, we will work to maintain and stabilize business on Domestic Passenger Operations. In addition, we intend to pursue earnings growth in the airline related, travel services and trade and retail businesses. We will strive to diversify operations while optimally allocating management resources, with a view to increasing the group’s overall earnings.
Meanwhile, we have decided that it is imperative to step up Cost Restructuring Initiatives in terms of both substance and scope. These initiatives will be essential to steadily enlarging our earnings capacity as our businesses expansion. In the three years through the fiscal year 2013, we have reduced costs by ¥52.5 billion and budgeted for a reduction in costs by ¥34.0 billion in the fiscal year 2014. Also, under our current Corporate Strategy, we are planning additional cost reductions of ¥50.0 billion. This will result in total planned cost reductions of ¥136.5 billion in the six years through the fiscal year 2016. All group companies will make a concerted effort to enhance productivity and achieve their cost restructuring targets. By doing so, we expect to reduce unit cost of the air transportation business (operating expenses per available seat-kilometers, excluding fuel expenses) by around ¥1.5 compared to our initial plan laid out in the fiscal year 2011.
Furthermore, focusing on the future of the ANA Group 15 years from now, we unveiled plans at the end of March 2014 to procure five different types of 70 aircraft. From a mediumto long-term perspective, we plan to steadily procure the aircraft needed to drive future growth and replace the fleet while maintaining our stable financial condition.
Initiatives for the Second Year as a Holding Company Structure
One year has passed since the ANA Group shifted to a holding company structure led by ANA HOLDINGS INC. in April 2013. There has been no change in our policy of separating management policy decision-making from business execution, while optimizing the allocation of management resources and pushing forward with our business portfolio strategy. We will strive to outperform the competition in terms of safety, quality and cost competitiveness, not only in the air transportation business, including cargo and LCC operations, but also in airline related, travel services, trade and retail and other businesses. At the same time, we aim to enhance the value of ANA and our other brands and ensure they contribute to group-wide earnings. We must also cautiously yet boldly advance a host of initiatives. These include developing new businesses and opening up new markets in collaboration with group companies, and making external investments that expand the reach of the group’s businesses. Steady earnings growth will pave the way for us to invest in the future and give back to shareholders, employees and society at large, thereby creating a positive cycle of continuous growth.
In our first year under the holding company structure, we successfully executed initiatives that would have been difficult based on the previous management framework. For example, we determined that it was necessary to reform the business model of AirAsia Japan Co., Ltd., which entered service in August 2012, to turn around business performance. Accordingly, we dissolved this joint venture between ANA HOLDINGS INC. and AirAsia Berhad in June 2013, and launched Vanilla Air Inc. as a wholly owned subsidiary of ANA HOLDINGS INC. The series of measures that led up to repositioning this business as a Japanese LCC operation was based on our perspective as a holding company. Other such actions include our pursuit of optimal costs based on benchmarks reflecting an independent viewpoint and the initiation of plans to expand earnings through business diversification.
Since we were used to the airline structure for 60 years before the adoption of a holding company structure, it is also true that it took us some time to shift to the mindset of a holding company.
In light of what we learned from our first year under the holding company structure, we will work on the following two priorities in the second year: optimize group costs and fully introduce the Individual Performance Evaluation System. Based on the benchmarking activities conducted in the fiscal year 2013, we intend to carry out inter-group transactions at competitive prices, in an effort to increase external revenues. Furthermore, as a means of confirming each operating company’s degree of achievement against targets, we will aim at maximizing group-wide earnings by accelerating PDCA (Plan-Do-Check-Act) cycles at each operating company.
We plan to continue strengthening corporate governance to support the group’s growth under the holding company structure. The supervision and monitoring of external directors and external corporate auditors will help us to enhance the fairness of decision making and transparency of management, as we work to further increase corporate value.
Working as One ANA Group to Prevail Against Tough Competition
In my New Year’s Address this year, I called upon all group employees to join me in “Creating a new ANA Group. EGoing forward, we expect further competition within the airline industry in Japan, compounded by new entry and capacity expansion, including overseas airlines. In the domestic passenger market, the reality is that aggregate demand is decreasing due to the aging of Japanese society and low birthrate, along with a decline in the working age population. However, there are now countless opportunities for expanding our business, primarily in Asia. We still have many agendas that we need to resolve such as utilizing the international slots at Haneda Airport effectively that we have recently obtained. The capabilities of group companies will be vital to achieving these priorities.
I consider that I want to make the ANA Group even stronger. Strengthening each group company is bound to strengthen the group as a collective whole. It will be imperative to push ahead with our “human resources Ethat are the foundation of our growth strategies under the current Corporate Strategy. We will share among all ANA Group employees the ideas codified in the ANA Group’s Mission Statement and Management Vision, as well as the ANA Group’s Core Value (ANA’s Way), as we develop “human resources Ewho can overcome barriers created by such factors as nationality, organizations and type of work, and respond flexibly to changes in the times. We have a duty to achieve sustainable growth and contribute to society as well as enhance our economic and social value, while earning the trust of the international community through all manner of corporate business activities. Our “human resources Ewill be the engine behind these efforts.
We must ensure that we make “our people, our organization, our company, our brands Eand “our group even stronger. EWe will strive to steadily achieve these five goals, as we work to become an integrated airline group.
Creating Value Unique to the ANA Group
A core strength of the ANA Group lies in its service quality as a leading airline in Japan, in addition to operational aspects such as its expanding network of International Passenger Operations. The ANA Group’s service quality has earned strong recognition worldwide. Notably, the ANA Group became the only airline in Japan to receive the highest 5-Star rating for the second consecutive year from SKYTRAX, a U.K.-based airline consulting and rating company.(For more information)
Meanwhile, the top priorities for attaining our medium-term value creation goals in terms of business and financial indicators are to achieve the earnings targets set forth in the current Corporate Strategy, and to ensure a solid financial condition for steadily expanding business.
The ANA Group delivered operating income at the ¥100.0 billion level in the fiscal year 2012. However, operating income in the fiscal year 2013 was forced to decline due to various factors. During the period covered by the current Corporate Strategy, we plan to restore operating income to the ¥100.0 billion mark. In the fiscal year 2016, we are targeting operating income of ¥130.0 billion. This will be a key milestone to attaining our medium-term value creation goals: operating income of ¥150.0 billion or above, ROA of 8% or above, and ROE of 10% or above. We believe that it will be crucial to provide steady, substantive returns to shareholders by further strengthening our resilience to business volatility, while maintaining a stable financial condition.
We will endeavor to develop our businesses by taking full advantage of all the management resources in our group. At the same time, we aim to make the ANA Group well-admired by customers around the world. By honing services and quality with safety as our basic principle, we will meet the expectations of customers and steadily grow and move forward even in the face of fierce competition. As stated in our Management Vision,“It is our goal to be the world’s leading airline group in customer satisfaction and value creation. EWe will make effort to respond to anticipations of shareholders.
President & Chief Executive Officer