Cost cuts push ANA back into black

All Nippon Airways Co. said Friday it returned to the black for the first time in three years in fiscal 2003 due to rigorous cost-cutting that offset the negative effects of the Iraq war and severe acute respiratory syndrome.

The nation's No. 2 carrier said that for the current fiscal year, it expects its international flight division to post its first profit since launching regular scheduled flights between Tokyo and Guam in 1986.

ANA's net profit was 24.76 billion yen in fiscal 2003, compared with a net loss of 28.26 billion yen a year earlier. Revenue remained virtually flat at 1.22 trillion yen.

Earlier in fiscal 2003, the airline industry was hit hard by the war in Iraq and the outbreak of SARS.

Despite an otherwise disappointing year, ANA achieved a profit largely thanks to 28.6 billion yen in cost-cutting measures, including 15 billion yen in personnel expenses.

The carrier changed pension, retirement and other benefit schemes, and reduced operating costs by revamping flight schedules.

The increased earnings enabled ANA to reinstate dividend payments for the first time in seven years, at 3 yen per share.

During the year, ANA saw passenger volumes on its international flights drop 13 percent to 3.3 million people.

It was forced to cancel many Asian flights when passenger numbers plunged amid the SARS outbreak.

But the fall in revenue from the division was helped by a rebound in pricier business-class fares in the second quarter. It said leisure travel recovered from the third quarter.

Passenger volumes on domestic flights fell 5 percent 44.78 million during the year amid fierce competition with rival airlines and railways. But revenue remained virtually unchanged due to a fare increase introduced in July.

For the current fiscal year, ANA forecast its international flight division to log its first-ever pretax profit, of between 1 billion yen and 2 billion yen. It attributed the expected profit to a change in its business model.

ANA Senior Vice President Tomohiro Hidema told a news conference that the carrier has stopped the costly practice of flying large aircraft regardless of passenger volumes and is now using a smaller fleet during off-peak seasons.