ANA profit misses estimates on low demand, higher costs

ANA Holdings Inc.’s operating profit plunged in the first quarter, failing to meet analyst estimates on increasing costs and weak domestic travel demand. Japan’s largest carrier reported a profit in the three-month period through June of ¥30.4b ($196m), a decline of 31% year-on-year and lower than the lowest analyst estimate. The fall comes as fewer passengers traveled on domestic routes in April and May compared to the year prior. The company kept its projection for full-year profit unchanged at ¥170b, which is lower than the market consensus of ¥190b, as demand from international travelers remained robust and a weak yen contributed to higher yields, especially on North American routes. “A rise in oil and engine maintenance cost, as well as aggressive investment for human resource weighed on the first quarter earnings,” CFO Kimihiro Nakahori at a press conference on Tuesday. The weak yen exacerbated the airline’s fuel expenses as the price of oil rose versus the same period last year. A company-wide wage hike in March and a hiring spree also contributed to high costs. While domestic demand remains weak, ANA saw a 16% rise in passengers on international routes on strong demand for travel to Japan and outbound itineraries showed signs of recovering, the company said. The airline plans to start three new European routes from Haneda to Milan, Stockholm and Istanbul this winter, underscoring the boom in demand for travel to Japan. The planned 30% increase in operations on European routes will help ANA achieve its full-year profit target, the company said in a statement. The yen has plummeted in value against the US dollar since the beginning of the year before strengthening again over recent weeks, adding to the risks the airline faces. In April, CEO Koji Shibata said ¥125 to the dollar would be an ideal rate for the airline. <br/>