ANA Holdings is predicting a return to profitability in the next financial year despite losing 404.6 billion yen ($3.72 billion) for the 2020 fiscal year thanks to the Covid-19 pandemic.
The owner of the Japanese airline ANA said that, like the rest of the aviation sector, it was severely impacted by the crisis as passenger demand collapsed thanks to a combination of immigration restrictions and stay-at-home orders in many countries.
This led to a 92.7 per cent fall in international passenger service revenue to 569.1 billion yen ($5.2 billion) generated for the year ending 31 March, 2021.
The airline reported that domestic passenger services were also hard hit, albeit not to the extent that international services were.
Despite growing its domestic network capacity from 26.7 per cent of 2020 levels in Q1 to as high as 61.4 per cent in Q3, revenues generated were 476.8 billion yen ($4.4 billion), down 70.1 per cent on the previous year.
However, like many other airlines around the world, the collapse in passenger revenue was offset by an increase in cargo revenues as demand for emergency supplies and other things like vehicle components grew.
The demand for air freight solutions also grew as shipping began to encounter congestion around the world.
To take advantage of the demand, ANA Cargo began operating a Boeing 777F freighter aircraft on the Narita-Frankfurt route in October and on the Narita-Bangkok route in December, while additional one-time cargo flights and the use of preighters also proved beneficial.
This accounted for a year-on-year increase of 56.3 per cent in international cargo revenues to 57.8 billion yen ($530 million), a record high for the airline.
And it is this increase in cargo revenues that is underpinning its prediction that it is set to return to its profit-making ways this year.
ANA is also basing its prediction on the fact that operating revenues decreased to 728.6 billion yen ($6.7 billion) in 2020 while ANA HD implemented further cost reduction measures totalling 590 billion yen ($5.4 billion).
The cost reduction measures were achieved by cutting variable costs through limiting the scale of operations while reducing fixed costs like personnel.
The airline also retired 28 mainly widebody aircraft earlier than planned, although this led to a special loss of 86.3 billion yen ($790 million) for Business Structure Reform Expenses such as impairment loss.
These are just some of the reasons why the airline is confident that, as people return to the skies in 2021 as vaccination programmes roll out globally, the airline group will make a profit again this year.
ANA Holdings executive vice president and chief financial officer Ichiro Fukuzawa said: “Though we faced numerous and complex challenges this year, it is evident that ANA HD took the necessary steps to strengthen operations and that we are on track for recovery.
“Everything that we did, from raising capital through the public offering to securing cash through subordinated loans and including the strategic recording of special losses on the value of our widebody aircraft, was done to strengthen our finances.
“Now that we see the light at the end of the tunnel, ANA HD is in a position to meet rising demand by providing safe, reliable and convenient travel options at the same level of customer experience we are recognized for.
“Our employees have endured a challenging year, but Covid-19 did not stop us from continuously improving our services, and we are ready to welcome back our customers.
“We are forecasting a return to profit for the fiscal year of 2021 and are confident that the actions we took during this past year will guide us.”