Aiming for Growth of the Top Line and Profit through Steady Strategy Execution

We decided to formulate our business plan in stages because delays in resuming Boeing 787 service and delivery were longer than we originally assumed. ANA Group FY2013-2015 Corporate Strategy therefore only has an earnings plan for the year ending March 2014.

Boeing 787 aircraft resumed scheduled service from June 2013. However, our earnings plan for the year ending March 2014 assumed service would resume in July 2013. Incorporating factors such as depressed demand on China routes and the trend toward a weaker yen, we forecast that operating revenues will increase 8.5% compared with the year ended March 2013 to ¥1,610.0 billion, operating income will increase 5.9% to ¥110.0 billion, and net income will increase 4.3% to ¥45.0 billion. We have expanded capacity on both domestic and international routes, so we expect available seat-kilometers on domestic routes to increase 4.5%* year on year, on international routes to increase 13.8%,* and available ton-kilometers on international routes to increase 14.6%.

We plan to update the details of our business and earnings plan for the year ending March 2015 onward once the Boeing 787 delivery schedule is settled and the allocation of international arrival and departure slots at Haneda Airport scheduled for 2014 is decided.

The constant management reforms we implemented in the challenging operating environment of the past several years strengthened our fi nances. We therefore believe we should place additional emphasis on the distribution of profi ts to shareholders. We will generate growth in earnings over the medium-to-long term and increase shareholder returns while making capital expenditures to ensure growth potential and future earnings and enhancing the internal capital resources that support stable operations. We paid cash dividends of ¥4.00 per share in the fi scal year ended March 2013, for a consolidated payout ratio of 29.6%, and plan to pay cash dividends of ¥4.00 per share in the fi scal year ending March 2014.

Our medium-term value creation targets have not changed since we announced ANA Group FY2012-2013 Corporate Strategy: operating income of ¥150.0 billion or above, operating margin of 10.0% or above, ROA of 8% or above and ROE of 10% or above.

As I discussed earlier, we are holding off on announcing performance targets for the year ending March 2015 onward. However, we are already in range to achieve the above medium-term value creation targets during ANA Group FY2013-2015 Corporate Strategy.

While we need to stay abreast of trends in the external environment and risks associated with fl uctuating conditions in the fuel and foreign exchange markets, by resolving the issues we are dealing with now and steadily executing the strategy I have outlined, we will achieve our targets by the year ending March 2016.
* Including AirAsia Japan

Generating Reliable Free Cash Flow While Continuing Investment in Aircraft

We have not changed our commitment to ensuring that we produce free cash fl ow by steadily generating cash from operations to fund ongoing capital expenditures that will support earnings growth over the medium and long term.

The ANA Group had to revise some components of its former capital expenditure plan to accommodate changes in the Boeing 787 aircraft delivery schedule. We will concentrate on obtaining competitive aircraft by continuing with planned introductions and upgrades of highly economical aircraft.

We plan to introduce a total of 17 aircraft during the year ending March 2014: 10 Boeing 787s, three Boeing 777-200ERs, three Boeing 737-800s and one Bombardier DHC-8-400. At the same time, we plan to retire a total of 16 aircraft, including all fi ve of the Boeing 747-400s we own.

Promoting Enhanced Global CSR to Fulfill Our Mission Statement and Management Vision

The ANA Group formulated a new Group Mission Statement and Group Management Vision in April 2013 given changes in our operating environment and our shift to a holding company structure.

The ANA Group sees CSR as the achievement of its Mission Statement and Management Vision. We believe that we must put them into practice in the course of our daily corporate activities to help to create the society of the future by growing sustainably while earning the confi dence and trust of society. Above all, we are expanding our business globally, so we believe that we must promote global-level CSR that contributes to the creation of corporate value while guarding us against various risks in Japan and around the world. We have therefore formulated eight key CSR policies over the medium term for the priority issues we have identifi ed. We then drew on the ISO26000 international guidance for social responsibility to collate a new set of the target vectors for each ANA Group company by clarifying what stakeholders expect from the ANA Group. We aim to strengthen our management fundamentals and increase the value of our brands with CSR policies at the core by deepening CSR management across the entire ANA Group.

The grounding of Boeing 787 aircraft may have troubled our stakeholders, but we fi nally resumed service in June 2013 without incident. Naturally, we continue to maintain safe service within a highly competent organization centered on the Maintenance Division. Further, the ANA Group is fulfi lling its responsibilities as the launch customer for the Boeing 787. We want to earn the confi dence of our customers, so our activities include safety publications and appropriately themed and timed presentations for interested parties.

Moreover, we have specifi cally targeted positive evaluations of customer satisfaction and on-time performance by external institutions. This ongoing focus generated excellent results in the year ended March 2013. Among other honors, the ANA Group became the fi rst Japanese airline to receive SKYTRAX’s highest 5-Star Airline Rating. Moreover, Flight-Stats Inc. recognized the ANA Group as world number one for on-time arrival performance and lowest in global cancellations among network global airlines, and Air Transport World magazine gave the ANA Group the Airline of the Year Award. We are grateful for the support of our stakeholders, and proud of the ceaseless efforts of each and every employee. We are committed to devoting ourselves to succeeding at new challenges while valuing our people, who are the source of further international growth.

A Corporate Culture That Takes on Challenges and the Power to Execute Steadily Will Increase Corporate Value

The ANA Group began making further signifi cant progress in April 2013 under a new management structure.

Our efforts to date have established the foundation to move to the next stage in achieving further growth. We built this foundation by quickly accommodating changes in demand, working vigorously to transform ourselves, and completing all of our various reforms as planned while dealing with numerous event risks.

Passenger and cargo fl ows that are now global in scale, the globalization of the economy, astonishing growth in Asia, capacity expansion at metropolitan-area airports, and airline deregulation are bringing an era of mega competition to the airline industry. We must now take on the challenge of proving we can become one of the world’s leading airline groups and that we have the fundamental confi dence and trust of people to connect the world and contribute to its future.

The ANA Group has a history of taking on challenges. We went into business 60 years ago with two helicopters, then began serving international routes as restrictions fell away and became the fi rst Japanese airline to join an alliance. We were fi rst in the world to introduce the Boeing 787, and the fi rst airline in Japan to enter the LCC business.

The ANA Group will be able to achieve sustained growth and increase corporate value if we devote ourselves to executing ANA Group FY2013-2015 Corporate Strategy and unite in continuing to take on challenges.

As we do so, we are counting on the continued goodwill of our stakeholders.

July 2013
Shinichiro Ito
President and Chief Executive Offi cer