All Nippon Airways has reported a big fall in second quarter profits, and changed its full year forecast to a net loss of ¥28 billion ($306 million) instead of a profit of ¥3 billion.

The Japanese carrier's net profit fell by 11.5% to ¥3.8 billion for the three months to 30 September, with airline reporting a half-year loss of ¥25.3 billion versus a ¥22 billion profit a year before.

Revenues during the quarter fell by 65.8% to ¥341.9 billion, and that offset a 44.7% drop in costs to ¥327.7 billion, says the Star Alliance carrier. As a result, its operating profit fell by 21% to ¥14.1 billion.

"Conditions were extremely challenging during the three-month perioddue to the global recession triggered by last year's financial crisis, as well as the spread of H1N1 influenza (swine flu), which began affecting Japan from mid-May," says ANA. "While we have implemented a range of measures to boost revenues and cut costs, we were unable to offset the slump in demand and fall in unit prices."

Revenues in the key domestic market fell by 9.9% to 185.7 billion, mainly due to a slump in demand for business travel in the economic downturn and competition with rival carriers and other transport providers.

ANA carried 11.2 million domestic passengers during the three months, 5.5% less than a year before. RPKs fell by 4.3% while capacity, as measured by ASKs, was 1.9% lower. The passenger load factor was down 1.7 percentage points at 65.7%.

International revenues were 34.4% lower at 57.1 billion, even though efforts were being made to stimulate demand especially in the Chinese market. RPKs increased by 0.9%, while the number of passengers carried was up 2.5% at 1.2 billion. ASKs declined by 4.7% and the load factor was 4.3 percentage points higher at 77.9%.

Domestic cargo revenues declined by 2.4% to 8.2 billion yen, while international revenues were down 42.2% at 12.5 billion. Freight tonne kilometres were down 0.3% in the domestic market and 5.4% lower in the international segment.

"Domestic cargo volumes dropped overall year-on-year, partly due to

downsizing of aircraft, although home parcel delivery services using flights

centred on Okinawa held steady," says the carrier. "International cargo volumes showed signs of demand gradually returning from February this year, thanks to domestic demand stimulus measures in China."

The outlook remained "difficult" due to slow demand and a growing tendency among customers to look for low-cost alternatives, says ANA. It is on track with previously announced plans cut costs by ¥73 billion and increase income by ¥30 billion for the full-year. However, it adds that the outlook remains uncertain and says that "it will take more time than we originally envisaged for demand and unit prices to recover".

It expects revenues for the year to 30 March to be 90 billion lower than forecast at 1.26 trillion. An operating loss of 20 billion is projected, down from a profit of 35 billion, while a net loss of 28 billion yen is anticipated instead of a profit of 3 billion.

Source: Air Transport Intelligence news