ANA Announces Record Consolidated Financial Results: Operating Revenue Up 5.8% Operating Profit Up 160.6% to 82.2 Billion

Operating Revenue Up 5.8% Operating Profit Up 160.6% to 82.2 Billion

All Nippon Airways (ANA), today reported its consolidated financial results* for fiscal year 2000, which ended March 31, 2001.

Despite a challenging operating environment, the ANA Group announced record consolidated operating revenues of \1,279.6 billion (5.8%) and highest-ever operating profit of \82.2 billion (160.6%).

Consolidated recurring profit reached new heights at \63.5 billion (4,178.6%) due to higher profits at ANA and consolidated subsidiaries, with net profit for the term also a record \40.2 billion. However, All Nippon Airways Co. reported a net loss of \29.0 billion following extraordinary losses including loss on the sale of securities and appraisal loss on securities; income taxes; and deferred income taxes stemming from the application of the inter-period allocation method.

For the year, ANA Group airlines – All Nippon Airways Co., Air Nippon Co., Air Japan Co.** and Air Hokkaido Co.***- carried over 49.9 million passengers: 45.5 million on domestic routes, an increase of 0.2%, and 4.4 million on international routes, up 9.5%.

* ANA Group consists of 113 consolidated subsidiaries.

** Air Japan Co. only operates on international routes.

*** Air Hokkaido Co. only operates on domestic routes.

OVERVIEW

In the year under review, the Japanese economy continued to show indications of an internally led recovery, centered on the corporate sector. At the end of the fiscal year, however, there were signs that cast doubt on the undertone of recovery, such as a reduction in exports caused by the slowdown in the U.S. economy. In addition, the unemployment rate reached record high levels and consumer spending remained sluggish.

On a consolidated basis, ANA's operating revenues rose 5.8%, to ¥1,279.6 billion, operating income increased 160.6%, to ¥82.2 billion, and recurring profit was ¥63.5 billion, up 4,178.6%. After extraordinary profits, such as gains on sales of fixed assets and securities; extraordinary losses, including loss on the sale of securities and appraisal loss on securities; income taxes; and deferred income taxes stemming from the application of the interperiod allocation method, ANA's net income for the term was ¥40.2 billion.

On a parent company basis, operating revenues were up 6.0% from the same period in the previous year, to ¥966.5 billion, operating income rose 222.4%, to ¥66.4 billion, and recurring income was ¥53.3 billion. Following an appraisal loss on the stock of related companies, net loss for the fiscal year was ¥29.0 billion.

OPERATING RESULTS BY BUSINESS SEGMENT

(Sales figures include inter-segment sales.)

Air Transportation

Japan’s airline industry enjoyed favorable tourism demand, with record numbers of passengers traveling to and from Japan, as well as a large-scale recovery in business demand. On domestic routes, tourism demand declined in the first half of the year due to the eruption of Mt. Usu and to the Okinawa summit meeting. With fares deregulated, however, competition among airlines resulted in the availability of a wide variety of special fares, which led to increased demand for personal travel. Overall, the number of passengers increased from the previous year.

The ANA Group enhanced its fleet during the term by purchasing one Boeing 747-400 and three Boeing 777-200s for international routes and two A321-100s, four Boeing 737-500s and one Boeing 737-400 for domestic routes.

ANA took a number of steps to improve its profit structure. On international routes these measures included inaugurating Osaka (Kansai)-Honolulu service, suspending flights from Kansai International Airport to Europe, and reducing operating costs by transferring the Kansai-Seoul route to the newest edition to the ANA Group, Air Japan Co., Ltd. At the same time, by expanding cooperative ties with partner airlines of Star Alliance, the world’s largest airline alliance, the Company bolstered its competitiveness and increased passenger convenience. On domestic operations, ANA reevaluated its allocation of domestic routes to ANK and worked to increase cooperation in certain operational areas. In these ways, the Company strove to achieve an operating structure with better overall, groupwide balance and to further improve profitability.

Revenues from air transportation operations totaled ¥1,038.2 billion, an increase of 5.9%, and operating income expanded 181.6%, to ¥72.3 billion.

Domestic—Passenger Services

After take-off and landing capacity was expanded at Haneda Airport in July 2000, ANA responded flexibly and quickly to establish operations and flight frequencies that were appropriate for demand trends. Service increased on eight routes, including Tokyo-Matsuyama while other routes were transferred to ANK. In addition, in July, ANA and two other airlines inaugurated a jointly operated shuttle service between Tokyo and Osaka. To boost demand aggressively the Group increased flights and continued to enhance convenience for customers.

Deregulation that accompanied the revision of the law regulating the airline industry in Japan enabled ANA to develop and expand demand with unprecedented flexibility by introducing special fares. New special fares included Chowari (¥10,000 on all flights on all routes). We implemented a number of sales campaigns, including one that utilized ANA’s Pokemon jet, and the operation of ANA’s ANA Woody (Woodpecker) Jet received considerable attention. This aircraft has a special livery commemorating the opening of Universal Studios Japan, for which ANA is the official airline.

For members of our frequent flyer program ANA Mileage Club (AMC), a service was started enabling them to complete ticket reservation and payment over cellular phones, a first for the airline industry in Japan.

Due to the increase in demand for personal travel, the number of passengers on domestic routes totaled 45.51 million, an increase of 0.2%, and revenues rose 2.9%, to ¥672.5 billion.

Domestic—Cargo and Mail

The number of takeoffs and landings at Haneda Airport increased, and parcel shipments and IT-related cargo shipments continued to show favorable growth. As a result, cargo demand on domestic routes was firm throughout the year.

The eruption of Mt. Usu disrupted the rail shipping network, and it required about two months before service was restored. Air cargo was used as a substitute shipping route between Honshu and Hokkaido, leading to a significant increase in cargo shipments.

The volume of domestic cargo handled by ANA in the past fiscal year was 434 thousand tons, up 3.2% from the previous year, and cargo revenues totaled ¥28.2 billion, an increase of 2.0%. Domestic mail volume rose 4.6%, to 78 thousand tons, with revenues reaching \10.6 billion, up 2.2%.

International—Passenger Services

To increase profitability, we reorganized operations out of Kansai International Airport. Specifically, beginning with the summer schedule, we inaugurated service to Honolulu and suspended European operations, and from January, Air Japan, a subsidiary operating on international routes commenced service between Osaka (Kansai)-Seoul.

We also began a number of code share flights, including Tokyo-Bangkok service with Thai International Airways and Osaka (Kansai)-Seoul/domestic operations with Asiana Airlines. By further strengthening cooperative ties with Star Alliance partners, we expanded our global network and enhanced competitiveness. In February, late night/early morning international charter flights from Haneda were approved, and ANA subsequently operated charter flights to Honolulu and Guam.

Sales-related activities included offering the Star Alliance Round The World Fare and through code-share agreements with Star Alliance partners, resourced overseas sales channels that we had previously been unable to access. As a result, the number of foreign passengers increased significantly. We also implemented sales promotion activities, including a wide range of campaigns, such as a summer campaign targeting family travel and a new type of proposal-based travel product for trips to Europe.

The number of passengers on international routes in the year under review increased 9.5%, to 4.38 million, and operating revenues rose 14.8%, to ¥207.4 billion, primarily as a result of increased passenger yields against a background of rising demand for business travel.

International—Cargo and Mail

Favorable economic conditions in North America and Asia contributed to strong demand for cargo shipments, especially for IT-related semiconductors and electronic equipment. In the second half of the fiscal year, however, the U.S. economy decelerated, and demand for shipments to North America and Asia, which is a major production base for goods destined for the U.S., declined significantly from the previous term. Looking at inbound cargo, imports of IT-related products, such as personal computers and cellular phones, remained firm. Demand was also strong for shipments of textiles and fresh foods from China and Southeast Asia and, due to the depreciation of the Euro, for shipments of general consumables from Europe. ANA strove to improve services for its customers. In April we introduced PRIO, a priority service for international cargo, and we worked to further expand our services in response to new corporate strategies for cargo shipments.

International cargo volume in the year under review totaled 193 thousand tons, a decrease of 1.2%, and revenues were ¥40.4 billion, up 0.8%. International mail volume rose 5.1%, to 7,900 tons, with revenues reaching ¥2.1 billion, up 1.0%.

Incidental and Other Revenues

The ANA Group worked to expand revenues from the provision of ground support services, including the maintenance of other airlines' aircraft and check-in and baggage handling services, and from in-flight sales. Revenues in the year under review totaled ¥76.8 billion, an increase of 17.1%.

Travel Services

ANA continued striving to increase convenience for its customers. For example, the August 2000 establishment of atour, an Internet web site for domestic and international travel, enabled customers not only to make reservations and inquiries over the Internet but also to search for tours and to request brochures for the approximately 7,000 travel products offered by the ANA Group, such as ANA Sky Holidays and ANA Hallo Tours. With an emphasis on customer satisfaction, detailed sales activities closely linked to the needs of each region were also conducted. As a result, favorable results were recorded in both sales and number of customers.

In domestic travel operations, ANA Sky Holiday Tours Co., Ltd., was spun off from ANA Trading Co., Ltd., and began operations in April 2000. Although tourism demand declined temporarily due to the eruption of Mt. Usu and the Kyushu-Okinawa Summit 2000, the aggressive Destination Campaign, which targeted the creation of new demand, resulted in increased sales of package tours, namely to Hokkaido and Kyushu. Sales of personal travel products also increased.

Sales of ANA World Tours’ “ANA Hallo Tours” were favorable, with sales of travel products from Narita Airport to Europe recording especially robust growth. Sales of tours to China were also strong, due primarily to the lasting popularity of the Three Gorges Cruise Charter products. ANA World Tours recorded record high sales during the year under review.

As a result, operating revenues from travel services rose 12.5%, to ¥152.8 billion, while operating income was down 55.6%, to ¥1.4 billion.

Hotel Businesses

Notable developments in ANA’s hotel operations included the implementation of concrete measures for restructuring domestic hotel operations. Overseas, a golf course property held by ANA Hotels Hawaii, Inc, was sold in December 2000 and subsequently the company was liquidated in March 2001.

Domestically, ANA completed preparations for restructuring. Plans for hotel operations are based on the separation of ownership and operations. In December 2000, we established ANA Hotels Co., Ltd., which will focus on enhancing chain hotel functionality. In March 2001, we took three more key steps. First, we established ANA Hotel Management Co., Ltd., which will assist individual hotel companies by furnishing support services, providing human resources, and meeting the responsibilities of ownership. Second, we established ANA Hotel Tokyo Co., Ltd., which will focus solely on the operation of the ANA Hotel Tokyo. Third, we transferred and placed in trust the ANA Hotel Tokyo removing the assets from our balance sheet and reducing our interest-bearing debt and consolidated deficit.

In overseas markets, demand was firm, our management initiatives were aligned with market needs, and we continually implemented appropriate cost controls. As a result, record profits were recorded at ANA hotels in Vienna and Sydney, where each hotel turned in a performance placing it in the top regional rank.

For the fiscal year under review, operating revenues in the hotel segment were up 8.2%, to ¥83.6 billion, while operating income declined 0.2%, to ¥3.8 billion.

Other Businesses

ANA Trading Co., Ltd., recorded increased revenues for the year under review due to higher sales in both its aircraft parts division and pulp and paper division. Infini Travel Information Co., Ltd., provides a reservation and ticketing system for international flights. During the past year, Infini suffered a temporary decline in reservation-related system usage fees immediately after it changed its host computer, and as a result, the company registered a decline in revenues. ANA Information Systems Planning Co., Ltd., which develops, maintains, and operates information systems, posted record sales levels and operating profit. This performance was attributable to the receipt of orders from within the Group for large-scale system development, the expansion of the scope of the company’s maintenance and operation activities, and increased sales to customers outside the ANA Group. ANA Real Estate Co., Ltd., which conducts the sale, rental, and management of real estate, performed renovation work on a number of leased office buildings and improved tenant services. As a result, office building occupancy was maintained at high levels. At the same time, the company performed strongly in the leasing of dormitories and company housing to ANA Group companies as well as in sublet housing for the general public. In February 2001, ANA Real Estate increased its operational efficiency by acquiring ARE Co., Ltd., a consolidated subsidiary in the same industry.

Operating revenues in the other businesses segment totaled \191.1 billion, up 8.5% and operating income reached \6.3 billion.

CASH FLOWS

Due to a significant improvement in revenues, centered on air transportation, net cash provided by operating activities totaled ¥148.7 billion.

In accordance with the principle of “selection and concentration” outlined in its medium-term corporate plan, the Company invested in aircraft and aircraft parts and sold hotels and other assets. As a result, net cash used in investing activities was ¥17.9 billion. In addition to free cash flow of ¥130.8 billion, the Company used a portion of cash and cash equivalents to reduce interest-bearing debt (loans and debentures), which at year-end was down ¥176.6 billion from the end of the previous fiscal year.

As a result, net cash provided by financing activities was ¥158.3 billion, and the year-end balance of cash and cash equivalents was ¥207.7 billion, a decline of ¥29.7 billion from the previous year-end.

DIVIDEND PAYMENT POLICY

The Company places a high priority on providing a return to shareholders while working to secure a stable foundation for future growth.

In the year under review, the Company booked an extraordinary loss in order to recognize evaluation loss on stock of consolidated subsidiaries and thereby strengthen its financial position. As a result, the Company recorded a net loss on a non consolidated basis, and accordingly decided to continue the suspension of dividend payments.

FISCAL YEAR 2001 ENDING MARCH 2002－FORECAST

There is cause for concern about a slowdown in the U.S. economy and a downturn in private-sector capital investment in the United States, where investment has been growing steadily. The short-term outlook for business conditions remains uncertain.

In the domestic airline industry, tourism demand on domestic routes is expected to expand, while growth in business demand is likely to be moderate due to uncertainty about future economic conditions. Since the revision to Japan’s civil aviation laws in February 2000, competition on domestic routes has continued to intensify. ANA’s operating environment does not lend itself to optimistic forecasts.

In this environment, we will be guided by our medium-term corporate plan, which covers the period through FY2002 ending March 2003. We will strive to achieve further improvement in basic quality, with top priority given to the maintenance of safe operations. At the same time, guided by the principles of “selection and concentration” efforts to raise profitability and improve financial condition, and well continue to be implemented to build a stronger corporate structure that will enable the stable payment of dividends.

In travel services, hotel operations, and other businesses, ANA will work to further improve profitability by increasing revenues through focused management efforts and continued cost cutting.

For the fiscal year ending March 31, 2002, ANA anticipates sales of \1,260 billion, a decline of \19.6 billion, recurring income of \39 billion, down \24.5 billion, and net income of \18 billion, a decrease of \22.2 billion.