Dreamliner causes million-dollar hole for ANA

2013-07-31 17:08
Tokyo - All Nippon Airways said Tuesday that it had swung into a loss for the April-June quarter as it was hit by soaring fuel costs caused by the weaker yen and the grounding of Boeing's Dreamliner aircraft.

The Japanese carrier lost 6.6bn yen (R659m), reversing a small year-earlier profit, despite a 4.4 percent rise in revenue to 358.3 billion yen.

"The primary reason for the increase in operating expenses was a rise in fuel costs due to the weakening of the yen," it said in a statement.

"Operating revenues were also held back by the suspension of Boeing 787 services for part of the period."

ANA and domestic rival Japan Airlines, which reports its quarterly results Wednesday, were sideswiped by the grounding of Boeing's new aircraft that began in January. After a long-running probe the planes were allowed to fly again in June.

The carriers at the time operated about half the Dreamliners in service and had to cancel hundreds of flights in the wake of the crisis, which was caused by problems with the plane's lithium battery.

ANA said the Dreamliner crisis had wiped eight billion yen off its quarterly profit.

The carrier and Japan Airlines have said they will seek compensation from Boeing having lost a combined total of more than 22.5 billion yen in revenue.

"The impact of the problems was bigger than originally expected," said Kei Yamamura, an aviation analyst with SMBC Friend Securities.

"But this factor will fade toward the end of the fiscal year as long as these issues don't come up again."

Kiyoshi Tonomoto, ANA's executive vice president, offered a blunt assessment of the carrier's performance.

"It was a tough result - there is no doubt about it," he told a press briefing Tuesday.

But the airline kept its full-year profit forecast unchanged at 45 billion yen, saying Prime Minister Shinzo Abe's bid to stoke the Japanese economy, the world's third-largest, would help its prospects.

"Although the global economic outlook remains uncertain and exchange rates are having an adverse impact, the stimulus measures implemented by the Japanese government are expected to bring about an economic recovery," it said.

Meanwhile, rising competition in the domestic market saw revenue decline 1.3 percent in the latest quarter, but the carrier's international business booked a 7.5 percent rise in sales on the back of steady demand for flights to Europe and North America, it said.

ANA added that a territorial row between Tokyo and Beijing that sparked a consumer boycott in China of Japanese brands was still hurting business in that country.

"ANA is suffering a slower-than-expected recovery in its China routes, which may affect its entire revenue for the rest of the fiscal year," Yamamura said.

In a separate business strategy paper released with its earnings, ANA said it placed orders for three Boeing 777's as new airport slots open up in Tokyo, and that it would buy flight training school Pan Am Holdings for $139.5 million.

It also outlined plans to set up a new company that would operate its budget carrier businesses after scrapping a joint venture with low-cost carrier AirAsia of Malaysia.

ANA said it would announce the new brand in the middle of August followed by details of its flight plans the following month. Operations were expected to begin in December on unspecified domestic and international routes, it added.

ANA and AirAsia agreed to terminate the venture as business slumped amid management clashes, dealing a blow to Japan's fledgling low-cost sector.

AirAsia Japan is expected to stop operations by the end of October, just over a year after it started flying out of Tokyo's Narita airport.

ANA's Tokyo-listed shares rose 0.96 percent to 209 yen before the results were announced.

Read more on:    flights  |  air

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