ATW Daily News

Steep first-half loss to result in 1,000 job cuts at ANA

Monday November 2, 2009

ANA reported a ¥3.8 billion ($42.2 million) profit in its fiscal second quarter ended Sept. 30, a 75.2% drop from the ¥15.3 billion earned in the year-ago period, but its inability to recover adequately from a steep first-quarter loss prompted it to predict a ¥28 billion deficit for the full year (reversed from its original forecast of a ¥3 billion profit) and to unveil a revised business plan that includes 1,000 job cuts.

"While we have implemented a range of measures to boost revenues and cut costs, we were unable to offset the slump in demand and fall in unit prices," ANA said. Second-quarter revenue slumped 16.1% to ¥341.9 billion while operating costs were down 12% to ¥327.7 billion, producing an operating profit of ¥14.1 billion that compared to a ¥21 billion loss in the three months ended Sept. 30, 2008.

But it was not enough. ANA's half-year loss reached ¥25.3 billion, reversed from a ¥22 billion profit in the year-ago semester. Operating result swung to a ¥28.2 billion loss from a ¥49.8 billion surplus last year.

"The fall in unit prices has been more severe than expected, due to a demand slowdown following the spread of H1N1 influenza, as well as the increasingly low-cost orientation of consumers and companies associated with the continued decline in demand since last year," it said. It has unveiled ¥103 billion in cost-cutting initiatives since the spring (ATWOnline, Aug. 4) but said, "We believe it will take more time than we originally envisaged for demand and unit prices to recover."

On Friday, ANA announced additional efforts to negotiate the "even more severe" business environment. Its "radical reform and restructuring" will focus on leveraging the increasing capacity at Tokyo Narita and Haneda, deepening cooperation with partner airlines, expanding fee-based services, streamlining its management and subsidiary structure and eliminating 1,000 positions, or 20%, by the end of 2011.

It did not provide additional details on the job cuts. The new a la carte program, called ANA My Choice, will begin Dec. 1 and will offer lounge access at NRT and HND for ¥5,000, business class wines and "light meals" in economy, plus additional services beginning next year.

ANA flew 10.01 billion domestic RPKs in the fiscal second quarter, down 4.3%, against a 1.9% fall in capacity to 15.24 billion ASKs. Load factor dipped 1.7 points to 65.7% and revenue was down 9.9% to ¥185.7 billion. International RPKs rose 0.9% to 5.3 billion while ASKs dropped 4.7% to 6.81 billion and load factor climbed 4.3 points to 77.9%. Revenue plunged 34.4% to ¥57.1 billion.

The company now expects a full-year operating loss of ¥20 billion, as opposed to the ¥35 billion profit projected earlier, on a 9.5% year-over-year decline in revenue to ¥1.26 trillion.

by Brian Straus

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