ANA Holdings Inc.
Annual Report 2020

Plain-text annual report

Annual Report 2020 Fiscal 2019 (Year ended March 2020) 2 10 18 24 The ANA Group DNA: A Legacy from Our Founders 2 Strengths Cultivated from the Spirit of Our Founders: Innovation and Comprehensive Capabilities 4 Strengths Accumulated over a 68-Year History: Scale and Quality 6 Expansion of ANA Group Businesses 8 Corporate Philosophy / ANA’s Way Management Message The ANA Group Value Creation Process 18 Cycle of Expanding Strengths— Driven by the Spirit of Our Founders 20 Value Creation Process 22 Timeline for Simultaneous Creation of Economic Value and Social Value Business Progress 26 Current Economic Conditions and ANA Group Responses 32 Overview by Business 38 ANA Group Response to COVID-19 39 Special Feature: Establishing avatarin Inc. 42 Sustainability Initiatives 44 ANA Group ESG Management 46 Further Promotion of ESG Management 50 Dialogue with Experts on ESG 54 Material Issues 66 Business Foundations Supporting Corporate Value 68 Safety 72 Human Resources 76 Unique ANA Group Initiatives 78 Corporate Governance 92 Risk Management 94 Compliance 96 Responsible Dialogue with Stakeholders 98 Financial / Data Section Contents of This Report The ANA Group (ANA HOLDINGS INC. and consolidated subsidiaries) strives to create social value and economic value, leveraging the strengths we have cultivated based on the spirit of our founders. In so doing, we expect to generate sustainable corporate value growth. This report presents the ANA Group philosophies that have been handed down through our history. We also address value creation, our actions in response to changes in the recent business environment, and the foundation that supports our corporate activities. Editorial Policy The ANA Group emphasizes proactive communication with stakeholders in all of our business activities. In Annual Report 2020, we aim to encourage a deeper comprehensive understanding of the social value and economic value created by the ANA Group through our management strategies, our business, and our economical, social, and governance (ESG) activities. We have published informa- tion on the activities we selected as being of particular importance to the ANA Group and society in general. For more details, please visit the ANA Group corporate website in conjunction with this report. Scope of This Report • This report covers business activities undertaken from April 1, 2019 to March 31, 2020 (including some activities in and after April 2020). • In this report, “the ANA Group” and “the Group” refer to ANA HOLDINGS INC., and its consolidated subsidiaries. • “The Company” in the text refers to ANA HOLDINGS INC. • Any use of “ANA” alone in the text refers to ALL NIPPON AIRWAYS CO., LTD. The Spirit of Our Founders A Business with Integrity A Resolute and Independent Business A Self-Reliant Business We must always remember that we are a company offering highly public services. We must contribute to society without bias to profit or authority. The Words of Our Founders “Trust and love are the threads that weave a beautiful world” Let us create a world of beauty by spreading mutual trust and greater harmony, woven by trust and love. “Wakyo” (Close Cooperation) We act with strength, in harmony, but not necessarily in agreement, through patient, careful discussions to reach positive outcomes, striving as one to achieve goals once the decision is made. “Hardship Now, Yet Hope for the Future” No matter the difficulty we face, if we continue to persevere to a brighter tomorrow, the time will come when we thrive and prosper. 1 Strengths Cultivated from the Spirit of Our Founders: Innovation and Comprehensive Capabilities Our business began in 1952 with only two helicopters. Our founders’ desire was for our company to serve as a highly public company that not only pursues profits but also contributes to nations and communities. We continue to make sincere and dedicated efforts, even in the most challeng- ing of environments. The ANA Group DNA is firmly rooted in the spirit of transcending accepted wisdom, customs, and organizations. Rising to challenges and pulling together to overcome issues by taking advantage of diversity are also rooted in our DNA. 1952Two Helicopters and Big Dreams At the end of World War II, the Allied Powers fully banned any private companies in Japan from operating aircraft. That ban was lifted in 1950. Two years later, in 1952, Japan Helicopter and Aerospace Transport Co., Ltd. (ANA’s predecessor) became the first privately run air transport company in Japan with only two helicopters in its “fleet.” Starting from zero was a challenge, as the world at the time was dominated by government-directed airlines manage- ment. Under the spirit of our founders that stressed integrity and independence, the company’s employees embraced a great dream. Ten years later, in 1962, we became the launch customer for the YS-11, the first domestically produced aircraft in the post- war era. This development expanded our business to lead the Japanese airline industry. In 1964, we used this aircraft to fulfill the important mission of transporting the Olympic torch for the Games of the XVIII Olympiad in Tokyo. In this manner, ANA continued to grow alongside postwar Japan. An industry policy in 1972, called the 45-47 System, regulated domestic airline companies. Under this policy, ANA was allowed only to operate domestic flights, restricted from inter- national operations. However, in 1971, we began operating an international charter flight to Hong Kong. In the following year, the efforts of our second president and CEO, Kaheita Okazaki, led to international charter services to Shanghai, in the aftermath of the normalization of national relations with China. The ANA dream of scheduled interna- tional flight operations remained alive. The 1980s saw increas- ing calls for a review of the 45-47 System, as it did not accommodate expanding and diversifying demand for air travel. The system was finally abolished in 1985. In 1986, ANA began operating scheduled international flights between Narita and Guam, fulfilling a ten-year dream. Achieving a 10-Year Dream to Operate International Flights 1986 1978 Opening of Narita International Airport Revenue Passenger-Kilometers (RPK) Peach Aviation ANA International Services ANA Domestic Services Foundation 2011 The First to Implement the State-of-the-Art Boeing 787 Dreamliner Aircraft The Boeing 787 is a next-generation aircraft that introduced many new technologies and materials to achieve longer-dis- tance flights and significantly reduced operating costs. In 2004, the ANA Group was the first in the world to order the Boeing 787. As the launch customer, we supported the devel- opment of this aircraft. Our order of this globally anticipated, state-of-the-art air- craft made headlines, boosting the ANA Group’s global pres- ence. We placed the Boeing 787 into service in 2011, and by January 2016 we became the first company in the world to fly over 100,000 flights with this aircraft. This was equivalent to one-quarter of all Boeing 787 flights worldwide. The exception- ally increased fuel efficiency of this model enables long-distance flights by medium-body aircraft. 2014 Expansion of international slots at Haneda Airport 2013 Shift to a holding company structure 2008 Global financial crisis 2011 Great East Japan Earthquake 1999 ANA Joined the Star Alliance to Expand Our Overseas Network ANA became the ninth member of the Star Alliance, the world’s first and largest global airline alliance, in 1999. Utilizing code share flights, we continued to expand our network and accelerate the growth of our International Business. At the same time, we faced a variety of risks arising from global political and economic circumstances, as well as social phenomena. Due to unforeseen events such as the September 11 terrorist attacks in the United States in 2001, the Iraq War in 2003, and the spread of the SARS virus, passenger demand decreased dramatically. However, by implementing emergency cost reductions, we achieved profitability in our International Business for the first time in fiscal 2004 (the fiscal year ended March 2005). Despite facing numerous adversities, we have strengthened our comprehensive capabilities as a group, moving forward in our growth strategies and expanding our network. 2003 Outbreak of SARS 2001 September 11 terrorist attacks in the United States 1994 Opening of Kansai International Airport 1952 1960 1970 1980 1990 2000 2010 2019 (FY) 2 3 Strengths Accumulated over a 68-Year History: Scale and Quality In 2020, we celebrated the 68th anniversary of our founding. Today, we have grown into a top-tier global airline group in terms of both scale and quality. To continue to be a company loved by our customers and society, as well as one that connects the world, we are committed to overcoming the challenges of COVID-19 and reach the highest levels of value. Scale Quality FY2019 results Total ANA Group Passengers (FY2019) 59.62 million Share of Domestic Passengers*2 (FY2019) No. 1 (46%) Number of Aircraft (as of the end of FY2019) 307 aircraft total Wide-Body: Medium-Body: Narrow-Body: Regional: 59 107 117* 24 * Includes aircraft operated by Peach Aviation ANA Domestic Passengers*1 (2019) Total ANA Domestic and International Passengers*1 (2019) Global No. 17 Global No. 22 Airports Served by ANA (as of the end of FY2019) 101 airports 48 international airports 53 domestic airports Airports and Routes Served by Peach Aviation (as of the end of FY2019) 22 airports 39 routes ANA Mileage Club Members (as of the end of FY2019) 36.65 million Cargo Volume (FY2019) 1,239 thousand tons Sources: *1 International Air Transport Association (IATA), 2020 *2 Number of passengers (industry-wide): Ministry of Land, Infrastructure, Transport and Tourism (FY2019) In-Service Rate 97.4% On-Time Departure Rate 88.7% On-Time Arrival Rate 87.5% Number of Customer Feedback Reports 16.9% 20.1% 35.8% FY2015 73,688 26.1% FY2019 16.6% 117,628 42.3% Complaint Compliment Comment / Request Other 21.2%21.2% 21.1%21.1% External Recognition Quality SKYTRAX (ANA, 2020) 5-STAR AIRLINE for an 8th consecutive year By Category: • World’s Best Airport Services (2019) • Best Business Class Onboard Catering (2019) JCSI (Japan Customer Satisfaction Index) Survey (ANA, FY2019) • International Aviation Division, Customer Satisfaction No. 2 On-Time Performance Cirium (ANA, 2019) Asia-Pacific Major Airlines Network Category: No. 1 Mainline Category: No. 1 Worldwide Major Airlines Network Category: No. 2 Mainline Category: No. 2 4 5 Expansion of ANA Group Businesses The ANA Group consists of our core Air Transportation Business and a variety of related businesses. Each company is managed autonomously, and we establish strong relationships and synergies to further refine our unique strengths and continuously increase corporate value throughout the Group. Air Transportation Composition of Operating Revenues 73.3% Full Service Carriers (FSCs) ALL NIPPON AIRWAYS CO., LTD. ANA WINGS CO., LTD. Air Japan Co., Ltd. Low Cost Carriers (LCCs) Peach Aviation Limited Airline Related Composition of Operating Revenues 12.6% ANA AIRPORT SERVICES Co., Ltd. ANA Base Maintenance Technics Co., Ltd. ANA MOTOR SERVICE CO., LTD. ANA Cargo Inc. ANA Systems Co., Ltd. ANA Catering Service Co., Ltd. ANA TELEMART CO., LTD. ANA X Inc., and more Consolidated Group Data Operating Revenues ¥1,974.2 billion Number of Employees 45,849 Composition of Operating Revenues by Segment (Fiscal 2019) * Calculated before eliminations (¥ Billions) Operating Revenues Operating Income (Loss) Air Transportation 1,737.7 Airline Related Travel Services Trade and Retail Others Adjustments Total (Consolidated) 299.4 143.9 144.7 44.2 (395.9) 1,974.2 49.5 18.1 1.3 2.9 3.5 (14.7) 60.8 Travel Services Trade and Retail Composition of Operating Revenues Composition of Operating Revenues 6.1% ANA Sales Co., Ltd. ANA Business Jet Inc., and more 6.1% ALL NIPPON AIRWAYS TRADING Co., Ltd., and more The core of the ANA Group is our ownership and operation of the full service carrier (FSC) ANA brand and the low cost car- rier (LCC) brand Peach Aviation. We leverage the strengths of each entity to drive growth in our airline business domains. We will continue to contribute to greater corporate value for the entire Group by building an optimal business portfolio within the Air Transportation Business and pursuing a more resilient business structure. In the Airline Related Business, ANA Group companies mainly support the Air Transportation Business with services that include airport ground support, aircraft maintenance, vehicle maintenance, cargo and logistics, catering (in-flight meals), and contact center services. This business seeks to grow and deepen Group businesses through contract services for overseas airlines, new value creation through the effective use of customer data, and other means. As the sales and marketing division of the ANA Group, ANA Sales Co., Ltd. provides airline sales services, including sales of air tickets and travel services. The company also engages in the planning and sales of travel products. To meet the needs of our customers who value their time, we are expanding the scope of our travel services, which includes the launch of ANA Business Jet Inc. in 2018. ANA Business Jet arranges charter flights for business jets. ALL NIPPON AIRWAYS TRADING Co., Ltd., and Group compa- nies perform aircraft parts procurement, conduct aircraft trad- ing (import, export, leasing, sales), operate airport shops (ANA DUTY FREE SHOP and ANA FESTA) across Japan, and manage other businesses related to air transportation. The Group also trades in non-airline products (paper, pulp, food import and sales; semiconductor and electronic component import / export), provides advertising agency services, and operates the ANA online shopping site. Air transportation Aircraft maintenance Vehicle maintenance Cargo / logistics Human resources / business support Flight catering Human resource development Sales and marketing Research institute / think tank Airport ground support IT IT Contact center General trading companies Real estate / building maintenance Charter arrangements 6 6 7 The beliefs of our founders have transcended the ages, passed on with great care as the DNA of the ANA Group. Ambition in Our DNA Our Mission in Society Group Synergies Mission Statement Built on a foundation of security and trust, “the wings within ourselves” help to fulfill the hopes and dreams of an interconnected world. ANA Group Safety Principles Safety is our promise to the public and is the foundation of our business. Safety is assured by an integrated management system and mutual respect. Safety is enhanced through individual performance and dedication. Management Vision It is our goal to be the world’s leading airline group in customer satisfaction and value creation. ANA’s Way To live up to our motto of “Anshin, Attaka, Akaruku-genki!” (Trustworthy, Heartwarming, Energetic!), we work with: 1. Safety We always hold safety as our utmost priority, because it is the foundation of our business. 2. Customer Orientation We create the highest possible value for our customers by viewing our actions from their perspective. 3. Social Responsibility We are committed to contributing to a better, more sustainable society with honesty and integrity. 4. Team Spirit We respect the diversity of our colleagues and come together as one team by engaging in direct, sincere and honest dialogue. 5. Endeavor We endeavor to take on any challenge in the global market through bold initiative and innovative spirit. 8 9 Returning to the spirit of our found- ers, coming together as a group to overcome the COVID-19 pandemic and create a strong, resilient Group business structure. Shinya Katanozaka President & Chief Executive Officer 10 11 Management Message The Impact of COVID-19 on Our Businesses However, the spread of infection around the world led to stron- ger immigration restrictions in every country beginning in March. Naturally, we were forced to cancel or reduce flights on interna- tional routes. In Japan, the national government declared a state of emergency on April 7 and local governments requested voluntary restraints on unnecessary travel outside the home. These developments led to a sharp decrease of passengers First, I want to express my sincere gratitude for your continued flying on domestic routes. As a result, the ANA Group posted support. an operating loss of ¥58.8 billion for the stand-alone fourth I also want to express my deepest sympathies to the people quarter, which was the largest loss we have ever recorded on a around the world who have been affected by COVID-19. quarterly basis. Although we secured net operating income of The ANA Group has been pursuing growth strategies, mainly ¥60.8 billion for the full year, we truly regret that we canceled through the International Business, in line with our FY2018–2022 dividends for fiscal 2019 in light of the business environment ANA Group Corporate Strategy, which we formulated in February and our inability to predict when the COVID-19 pandemic 2018. During fiscal 2019, All Nippon Airways Co., Ltd. (ANA) will end. introduced new routes from Narita to Perth, Chennai, and Strict immigration regulations continue in force around the Vladivostok. The Company also put ultra-wide body aircraft into world, and international flights have been restricted heavily. service as part of a Hawaii Strategy. The Cargo Business In Japan, we saw a second rise in the number of COVID-19 adopted wide-body freighters for Shanghai and Chicago routes infections beginning in July. Some prefectures are pushing for to strengthen our ability to capture demand for not only special another call for citizens to refrain from travel. Given this envi- items including oversize cargo but also trilateral cargo. The ronment, we have seen a rise in new work styles and lifestyles, merger of Peach Aviation Limited and Vanilla Air Inc. in our LCC including online conferences, telework, and demand for non- Business has resulted in a more efficient business structure contact services. We expect consumers to shy away from air to confront tough global competition in the future. To further travel for the time being. It is extremely difficult for us to imagine enhance basic quality for greater competitiveness, we have been the type of continued demand we incorporated when we formu- persistent in addressing the engine component issues related to lated our corporate strategy. the Boeing 787, while at the same time, we made up-front invest- Looking at our past, we know that the Group’s businesses ments in safety, quality and services as well as human resources, have not always been smooth sailing. Since the start of the 21st including the active recruitment of employees who will lead us century, we have encountered numerous challenges, including into the future. As a result of these activities, we continued to the September 11 terrorist attacks, SARS, the Lehman Shock, generate record-high operating revenues on a consolidated the Great East Japan Earthquake, and U.S.–China trade fric- basis through the third quarter of fiscal 2019. tions. With every challenge, our officers and employees have However, once we entered the fourth quarter, we began put their minds together to overcome the circumstances, even seeing the impact of the spread of COVID-19 during the second when such policies have included difficult consequences. It may half of January. Passenger numbers began to decrease gradu- not be an overstatement to say that we now face the greatest ally on routes to China and Asia. As a company that plays a role challenge since our founding, which will be 70 years in just in social and transportation infrastructure, we have continued to two years from now. Even so, we are willing to overcome these operate at the highest level possible, monitoring route trends in challenges and put our businesses back on a growth vector. detail, including the needs for Japanese citizens overseas to To this end, I wish to explain my thoughts on how we plan to return home. In so doing, we remained focused on the safety deal with the challenges at hand. of our customers, our employees, and other stakeholders. Our Initiatives since the Outbreak of COVID-19 do away with internal concerns and foster a sense of security. We are a business that ensures the safety of the skies. Therefore, we absolutely had to avoid situations in which employees were forced to engage in their work while worrying about infection, unemployment, or other concerns. I shared my thoughts candidly about our commitment to ongoing training and education looking ahead to a recovery in operating scale. When COVID-19 first emerged, we set about on our financial I discussed how we would move forward in work-style diversity response immediately. We began discussions with financial while complying with laws and regulations. I also addressed institutions to secure cash on hand. Supported by the financial how we planned to engage in labor–management negotiations foundation we accumulated through the past several years of to revise compensation in a way to protect both our employees results, we were able to establish a plan during April to secure and the Company. the funds needed for ongoing business operations for the time We experienced the lowest point of passenger demand for being. By the end of June, we executed loans and expanded our Domestic Business in May. At the same time, we needed our commitment line, securing access to the level of ¥1 trillion. to introduce new procedures to prevent COVID-19 infections. In parallel with securing cash on hand, we implemented As a group, we pursued exhaustive measures to create an effective business measures that included reducing the number environment in which customers and employees could feel of flights in line with the decrease in passenger demand, safe and secure. President Hirako of ANA was proactive in his adjusting personnel operations, and optimizing services. At the response to provide peace of mind to our customers as quickly same time, I instructed the presidents of all Group companies as possible, and he unveiled the ANA Care Promise on June 1 to engage in emergency cost-reduction measures. We have as the ANA policy to prevent infections. The new standard of air asked the Scheduled Airlines Association of JAPAN to provide travel proposed by ANA is the same comfort and enjoyment as support in approaching the government and related agencies ever, now with even greater peace of mind. Peach also pursued to obtain deferments and exemptions related to taxes and necessary measures, including the publishing of a special public fees for the airlines industry. In this and other ways, we page on the company’s website to communicate aircraft proce- are working together with other airlines to respond to the crisis. dures in response to the new normal of the with-COVID-19 era. However, the COVID-19 pandemic has showed no signs of As a group, we will continue to provide clean and hygienic waning, and the outlook for our business had become even environments, striving to relieve passenger anxiety and inspire more uncertain. As this difficult situation continued, in March, confidence in boarding our aircraft as we leverage these poli- I issued a message to the 45,000 ANA Group employees, cies into new brand power. declaring my intention to protect their jobs. I believed that the Group would come together to respond to the crisis if we could P.38 ANA Group Response to COVID-19 12 13 Management Message Business Structure Reform in Anticipation of the Post-COVID-19 Era see a gradual recovery on Domestic Business that will reflect a As a short-term initiative, we plan to change our Air change in quantity with respect to passenger numbers. Over the Transportation Business structure toward balanced profitability. medium term, we believe the emergence of vaccines and other We will pursue a two-pronged portfolio strategy through ANA factors will lead to a moderate pace of recovery in demand on and Peach, bringing to bear the brand strengths of each in a International Business, while continued globalization will spur a post-COVID-19 world. At the same time, the ANA Group will return to air travel. On the other hand, even as the impact of reduce fixed costs in terms of fleet and human resources. Over COVID-19 continues, we expect leisure demand to recover first, the medium term, deepen our portfolio strategy toward building growing steadily over the medium term, reflecting a change in a strong Group business structure that creates consistent, mixture based on passenger class. We also expect to see a steady value. While doing so, we will also establish our Non-Air What Will Never Change: Our Pursuit of ESG Management Our corporate strategy to date has called for growth through recovery in inbound travelers visiting Japan. We must also Business as a second pillar of revenue to stand alongside our Travel restrictions were tightened around the world in conjunc- network expansion in the ANA and Peach brands to generate consider how changes in work styles affect business travel Air Transportation Business. The ANA Group aims to be a cor- tion with the spread of COVID-19. The Japanese government operating revenues and profits on par with the global top-tier demand, as more companies report weaker earnings, conduct porate group capable of withstanding the return of a pandemic, declared a state of emergency in April 2020. During that time, airlines. We are faced now, however, with the urgent need to business through online meetings, and make other changes. returning to stable and continuous dividends through improved I experienced for myself just how keen people were to go out- modify our business policies flexibly in response to changes Our plans for reform are measures responding to changes corporate value. side. I think that latent needs for air travel will never change in in behavior of people caused by the COVID-19 pandemic. in passenger numbers and class. Our first approach to pushing Our aim is to not only reduce the scope of our business the future. People will still want to return to their hometowns, The following topics are urgent issues for the ANA Group past COVID-19 is to reduce the scope of our operations in through restructuring but also achieve growth in the post- travel overseas, and use aircraft for other travel needs. The under the current situation: conjunction with the change in passenger numbers. At the stage COVID-19 era, becoming an airline group essential to the spread of remote work and other factors could increase the 1) Reduce costs and control investment 2) Pursue business structure reform we see a recovery in demand over the medium term, we will people of the world. Now that the external business environ- potential for weak business travel demand temporarily. On the re-expand the scope of our business toward a growth trajectory. ment has changed so significantly, we must be proactive in other hand, new location-independent work styles could give To respond to changes in passenger class, we plan to change adapting to the new normal. The ANA Group will pursue reform rise to new demand for workations and other travel. how we capture demand throughout the Group by offering products and services tailored to the needs of new markets. with a sense of urgency, securing a path to sustainable growth Others have pointed out that travel restrictions could have that we will be able to hand over to the next generation. an impact on the nature of the airline business. Now is the time With respect to 1) reducing costs and controlling investment, The following matters represent specific actions for us to we reduced capacity significantly in line with demand trends, achieve these plans. P.24– Business Progress trimmed personnel expenses based on negotiations with the union, and engaged in other cost-reduction measures in terms of both variable and fixed costs. We reduced costs by a total ¥162.5 billion during the first quarter of fiscal 2020. And we will continue to expand into other areas for reduction and delve deeper into reduction impacts. With respect to investment, we continue to negotiate with aircraft manufacturers and other parties, reflecting our intent to significantly curb capital expen- ditures by postponing the timing of aircraft delivery. We also plan to 2) pursue business structure reform in bold measures for the future. The current demand structure in the airline industry is about to change in major ways. We expect to Basic Policies on Business Structure Reform: Business Model Changes* 1) Short Term: Change business structure toward surplus in profit in Air Transportation Business a. Optimize Air Transportation Business portfolio strategy b. Engage in resource-related tactics to reduce fixed costs 2) Medium Term: Establish a resilient Group business structure that creates consistent, steady value a. Strengthen Air Transportation Business portfolio strategy b. Establish a second pillar of earnings with our Non-Air Business that we must communicate the meaning and significance of the ANA Group to society. The road to recovery will by no means be smooth. When travel by air begins to increase with the development and distribution of a vaccine, the ANA Group will play an important role in social infrastructure. We will help revi- talize economies, trade, and other social activities, as we aid the movement of people, goods, and cultural interactions. This aligns with our Group Mission Statement: The wings within ourselves help to fulfill the hopes and dreams of an intercon- nected world. The ANA Group will continue to value personal relationships and empathy, connecting the world to bring about a brighter, more abundant future. To grow sustainably with society, companies must pursue * Disclosures as of July 29, 2020 For the most up-to-date information, please visit our corporate website: Financial Results Presentation Materials: https://www.ana.co.jp/group/en/investors/irdata/supplement/ not only economic value, such as operating revenues and profits, but also social value, which includes a response to social issues facing modern society on a global scale. As a member of society, the ANA Group desires to share value for the sustainable development of our stakeholders, including our customers, shareholders and investors, employees, business partners, and local communities. We have pursued environ- mental, social, and governance (ESG) management, which has become even more important in the face of the COVID-19 pandemic. We are determined to approach medium- and long- term issues seriously and from a global perspective. P.44–45 ANA Group ESG Management 14 15 Management Message Environmental issues are issues that truly impact our stake- holders, and the environment has become an even greater topic of concern across the world. Climate change is a common global challenge. Addressing climate change has become a responsibility for companies entrusted with the future, and the airline industry has become subject to stricter regulations to reduce CO2 emissions from aircraft operations. Entrusting Our Future to New Generations Recently, airline industry CO2 emissions are down due to can- Beginning in January, Wuhan, China, experienced a dramatic cellations and flight reductions stemming from COVID-19. increase in COVID-19 infections. At that time, ANA organized a However, as our Air Transportation Business recovers in the total of five charter flights to ensure Japanese citizens in the near future, we must take appropriate measures to ensure area could travel back to Japan. While the threat of COVID-19 CO2 emissions do not return to the same level as in the past. was still not recognized fully in Japan, many of our employees Therefore, we have created new long-term targets for the year worked side-by-side with the risk of infection. Despite the chal- 2050. We intend to strengthen our efforts to address climate lenges, we helped a total of 828 Japanese citizens return change, reducing CO2 emissions from aircraft operations by home, as each employee fulfilled their role with dedicated 50% compared to 2005. P.46–49 Further Promotion of ESG Management action. Later, some employees remarked that they became even more aware than usual of our mission as a public trans- portation provider. Others stated how completely focused they The new goals we created will not be easy to achieve. We must became in helping return passengers safely to their homes in respond in tangible ways through our aircraft, jet fuel technol- Japan. We fulfilled our responsibilities as an airline with the ogy innovations, and more. We must also respond in intangible support of the Japanese government and many others. On ways through steady efforts that involve human intervention. June 23, we received a letter of appreciation from the Japanese Social issues other than those related to the environment that Minister of Foreign Affairs. require ongoing efforts include business activities and supply As part of our social contribution activities, we asked for chain management that respect human rights. Stakeholder employee volunteers in April to support medical gown sewing. engagement is an essential part of gaining an appropriate The response of Group employees was far beyond our expec- understanding of and responding to these trends. In addition tations. After hearing from employees of their desire to serve to using dialogue to understand potential opportunities and society and do whatever they could to help, I was again risks surrounding the Group, we also plan to engage in man- impressed that human resources are the true treasure of our agement that incorporates the environment, society, and Group. While we cannot see when the COVID-19 pandemic will governance. Here, we will do even more to gain an accurate end, I want to express how truly proud I am of our employees understanding of social awareness and behavioral changes, who even now work in airports, on-board aircraft, and in a reflecting this understanding in our corporate strategy. In the variety of other locations to fulfill our responsibilities as social future, the ANA Group will make the process for achieving our and transportation infrastructure. goals more visible and provide appropriate disclosures of our results through annual reports, websites, and other communi- cation channels. P.76–77 Unique ANA Group Initiatives Our true capabilities come to the fore when times are tough, requiring calm thinking, passionate action, and self-awareness in achieving responsibilities together with colleagues. One of the spirit of our founders is to be a Business with Integrity. This reflects an emphasis on the public interest rather than on prof- its. Our employees united in their sense of mission to fulfill their roles properly and without fanfare when they supported the Wuhan charter flights and the medical gown sewing project. Every employee demonstrated their sense of responsibility to take a personal role in this mission. The ANA Group possesses wings within ourselves that help us overcome difficulties together. Our DNA is rooted in values handed down to us from those who came before, and this DNA will never change at any time in the future. I am convinced that the corporate culture we have cultivated over our 68 years of history will be the driving I intend to steer firmly ahead to ensure we become an inspiring force behind overcoming the current crisis. airline group. Hardship now, yet hope for the future were the famous I ask for your continued support of the ANA Group. words of Masuichi Midoro, our founder. Using these words, successive generations of management have continued work- ing together single-mindedly with employees to serve society through a foundation of safety. ANA’s predecessor, Japan Helicopter and Aeroplane Transports Co., Ltd. began with only two helicopters, 28 employees, and big dreams. Since that time, we have continued to grow with effort and a spirit of taking on new challenges. We have faced many difficulties due to changes in our business environment. But we have always come through such crises reborn and stronger than ever. We will overcome COVID-19 through the comprehensive capabili- ties of the Group. My dream is for us to build even stronger wings that spread out to connect the people of world and take us forward. Dreams come true, if one makes the effort. With this in mind, and as the top manager of ANA HOLDINGS INC., September 2020 Shinya Katanozaka President & Chief Executive Officer 16 17 Management Message Cycle of Expanding Strengths Driven by the Spirit of Our Founders We have remained committed to our founding spirit, improving on our unique strengths over the course of our history. Each element of our philosophy amplifies others, leading to a cycle of expanded strengths. This, in turn, serves as the driving force behind the values unique to the ANA Group. Ongoing Commitment to Our Philosophies Ambition in Our DNA Group Synergies Our Mission in Society Aspirations toward Innovation • Early adoption of state-of-the-art aircraft • Leading-edge products and services Strengths Cultivated from the Spirit of Our Founders Always expanding through a focus on innovation multiplied by Group diversity Comprehensive Capabilities to Meet Our Goals • Multifaceted business portfolio and decision-making independence for Group companies • Network of nearly 45,000 Group employees Each ANA Group company relies on its own expertise to contribute to our overall strategy. These companies develop innovative businesses, products, and services, raising our organi- zation to higher levels of quality and creating more revenue opportunities. Create Both Economic Value and Social Value We seek new challenges by embodying the essence of team spirit, embracing the support of our stakeholders around the world, who have responded to our obsessive focus on quality and our extensive network. Improve Quality • History and culture of safety • Commitment to on-time operations • Respond to diverse needs based on degree of customer satisfaction Strengths Created through Our Businesses Create both quality and volume in pursuit of social infrastructure value Expand Business Scope • Expand international route network • Solid domestic network • Customer segment coverage by full service carrier and LCC 18 19 The ANA Group Value Creation Process Value Creation Process We will invest appropriate management resources based on the environment surrounding the ANA Group. In so doing, we will accelerate the cycle of our four strengths, which serve as the engine driving value cre- ation. By executing our strategy, we will create social value and economic value simultaneously. As we do so, we aim for improved corporate value while we contribute to the Sustainable Development Goals (SDGs) adopted by the United Nations. Our Environment (Medium and Long Term) ANA Group Management Resources Economic Growth in Asia-Pacific Changing Social Structures in Japan and Overseas Advancing Technology Climate Change and Resource Shortages Power of people who are willing to endeavor and challenge Fleet and network connecting the world Trust of our customers and society Limited natural resources shared with humankind Financial foundation allowing us to spread our wings e t a e r t h e v a l u e w e c E x p a n d Ongoing Commitment to Our Philosophies Ambition in Our DNA Group Synergies Our Mission in Society Aspirations toward Innovation Cultivate Strengths Comprehensive Capabilities to Meet Our Goals Improve Quality Create Strengths Expand Business Scope Execute our strategy Leverage our strengths to move forward and achieve sustainable expansion in our businesses Sustainable Corporate Value Enhancement Achieving Our Management Vision Economic Value Simultaneous Creation of Economic Value and Social Value Social Value Expanding top-line Improving cost competitiveness Creating more business opportunities Developing demand in new customer segments Improving employee productivity Improving quality and service Pursuing both improved convenience and efficiency Generating new business Strengthen our competitive ability Providing smart, comfortable travel Revitalize our regional tourism business Promoting Japan as a tourism nation, encouraging inbound tourism Foster and utilize a diverse employee base Promoting diversity Helping create a society that respects human rights Generate efficiencies and innovation through DX Providing personalized services Raising employee job satisfaction Controlling cost increases (primarily fuel expenses) Pursue energy efficiencies Reducing environmental impact Management Foundation 20 Mission Statement Safety Hygiene Corporate Governance Human Resources / ANA’s Way 21 The ANA Group Value Creation Process Timeline for Simultaneous Creation of Economic Value and Social Value To continue creating social value and economic value through our corporate activities, it is important that we set appropriate targets and timelines, having an accurate awareness of the prevailing business envi- ronment. We must respond with flexibility to the dizzying changes in our business environment, including increased competition and the emergence of geopolitical risks. We must also set our sights on medium- and long-term initiatives in response to environmental regulations and human rights issues. As we incor- porate both values into our corporate strategy, we will generate even greater improvements in the value we create moving forward. 2020 Understanding of the short-term environment • New normal • Change in airline market demand structure Economic value Simultaneous Creation of Economic Value and Social Value Social value C u r r e n t A N A G r o u p C o r p o r a t e S t r a t e g y Materiality (P.44) Environment Human Rights Diversity and Inclusion Regional Revitalization Short-Term Initiatives P.24 Business Progress Airline Industry Overview Business Measures Financial Measures Cost Reductions E x e c u t i n g t h e N e x t A N A G r o u p C o r p o r a t e S t r a t e g y Understanding the medium- and long-term environment • Economic growth in Asia-Pacific • Changing social structures in Japan and overseas • Advancing technology • Climate change and resource shortages The ANA Group ESG Commitments P.42 Sustainability Initiatives E • Reduce CO2 emissions • Reduce resource waste • Reduce food waste • Biodiversity conservation • Responsibility to respect human rights • Promote responsible procurement and supply-chain management • Human resource development to support sustainable growth • Responding to the diversity of our customers • Promote regional revitalization • Utilizing innovation to solve social issues • Employ stronger governance structure S G 2050 i i A c h e v n g M e d u m i - a n d L o n g - T e r m G o a s l 22 23 The ANA Group Value Creation Process Business Progress The impact of COVID-19 has resulted in major changes to the environment surrounding the ANA Group. We must take swift action both in our businesses and finances to overcome one of the greatest challenges in our history. At the same time, we must also transform our business structure to accommodate new-normal lifestyles, pursuing sustainable growth. What Does the ANA Group DNA Mean to You? Uncompromising commitment to quality through everyday effort, striving for change, and an unwavering commitment to safety on the front lines. Teruyuki Kominami ANA Line Maintenance Technics Co., Ltd. Maintenance Crew 24 2424 25 25 ANA Group Corporate Strategy Progress Progress in Response Measures In January 2019, we published the ANA Group Corporate Strategy Update for fiscal 2019 and 2020. As we subsequently finalized our plans to expand our international network, mainly from Haneda Airport, in January 2020 we planned to announce a rolling update to From the initial stages of the impact of COVID-19, the ANA Group has taken a proactive response in both business and financial aspects. the ANA Group Corporate Strategy by March. However, the impact of COVID-19 on our business became apparent in February. With the spread of the virus both in Japan and overseas, we assumed that the drastic decline in passenger demand would extend over a longer period of time. Accordingly, we made our response to this urgent issue a top priority. Business Measures We implemented measures for the following four major areas of our businesses. 2018 2019 2020 2021 2022 (FY) Results for the 1Q of FY2020 Please visit our corporate website for the latest information. Financial results briefing materials: https://www.ana.co.jp/group/en/investors/irdata/supplement/ Business Environment Surrounding the ANA Group Corporate and Business Strategy 1. ANA Group Corporate Strategy (published February 2018) 2. ANA Group Corporate Strategy Update (published January 2019) Staged Growth in Inbound Travel • Slot expansion at Tokyo metropolitan area airports • Tokyo 2020 Olympic and Paralympic Games FY2018 to FY2022 FY2019 to FY2020 3. Flight Schedule Plan for FY2020 (announced in January 2020) FY2020 4. Formulation of Further Strategy Action Plans for Major Areas 1) ESG Management 2) Productivity Improvement 3) Customer Data Utilization 4) Pursuit of Innovation February 2020– Rising Negative Impact on Demand by COVID-19 Priority to Measures Addressing Urgent Issues 1 Match Capacity to Demand Trends Reduced operation and sales-linked expenses significantly 2 Optimize Employee Utilization and Services 3 Emergency Response Measures 1) Adopted a temporary leave program Expanded targeting to 36 Group companies and 43,500 employees 2) Revised airport operation structure, etc. Temporary closures of some facilities along with capacity Reduced fixed costs across various categories 1) Reduced officer remuneration, personnel expenses 2) Shrank aircraft-related expenses 3) Cut down outsourcing business 4) Made significant reductions in controllable costs, etc. 4 Establish Social Credibility Launched ANA Care Promise (June 1) Match Capacity to Demand Trends In response to the decline in passenger demand, we matched Emergency Response Measures We implemented a number of measures quickly to reduce capacity to demand by suspending and reducing flights. We personnel expenses and other costs. These measures included also downsized the aircraft in operations, reducing variable reducing officer remuneration, management salaries, and costs such as fuel expenses and landing and navigation fees. summer bonuses, which improved our profit balance. Optimize Employee Utilization and Services Along with controlling capacity, we adopted a temporary leave Establish Social Credibility We are pursuing efforts to establish our social trust so custom- program and other measures to optimize employee utilization. ers use our aircraft with peace of mind. We also optimized our service systems and operation structure, In June 2020, ANA launched the ANA Care Promise. Peach including the temporary closure of certain airport facilities. also implemented a variety of measures, providing a clean and hygienic environment, striving to eliminate customer anxiety. 2626 26 27 27 Business Progress Business Progress Progress in Response Measures Cost Reduction Initiatives By taking appropriate measures in our businesses, we achieved total cost reductions of ¥162.5 billion during the first quarter of fiscal 2020, reflecting a combination of cuts in variable costs, such as fuel expenses, and fixed costs, such as personnel expenses. Cost Reduction Impact (Consolidated) Results [Apr.–Jun.] Total ¥ –162.5 Bn Key Programs throughout the 1Q of FY2020 Cost Reduction Forecast for the Current Fiscal Year Variable Costs Operation & Sales-Linked Expenses ¥ –130.0 Bn 1) Control capacity flexibly Capacity by Business Apr.–Jun. (YoY) • International Passenger –86% • Domestic Passenger –73% • International Cargo –62% • Peach Aviation –81% Continue to control capacity in response to demand trends Group Personnel Expenses ¥ –24.5 Bn Fixed Costs 2) Reduce officer remuneration and manager salaries 3) Reduce summer bonuses 4) Adopt a temporary leave program Approx. ¥ –75Bn* Others ¥ –8.0 Bn 5) Limit capital expenditures 6) Reduce controllable costs, etc. We will continue to strive to minimize variable costs by matching capacity to demand trends carefully. We plan to reduce fixed costs by ¥75.0 billion* over the full year. As we expect the recovery in passenger demand to take time, we will pursue further cost reductions by expanding areas to target and digging for deeper cuts. * Forecast as of July 29, 2020 Please visit our corporate website for the latest information. Financial results briefing materials: https://www.ana.co.jp/group/en/investors/irdata/supplement/ Financial Measures The ANA Group implemented financial measures in the following two major areas. At the same time, we issued a request to the government for support of the airline industry. Ensure Liquidity on Hand Results for the 1Q of FY2020 Secured cash amount for the time being, total ¥1 trillion or more 1) Secured bank loans Approx. ¥535 Bn 2) Established additional commitment line Expand to ¥500 Bn Limit Capital Expenditures Reduced capital expenditures significantly 1) Postponed planned aircraft delivery schedule 2) Deferred in-flight product changes, etc. 1 2 We secured liquidity on hand as early as possible in anticipation of the prolonged impact of COVID-19. Working with financial institu- tions, we secured access to approximately ¥1 trillion in total funding, consisting of bank loans of ¥535.0 billion in the first quarter and an expanded commitment line to a maximum of ¥500.0 billion. We also postponed planned aircraft deliveries for this year and deferred in-flight product changes, limiting capital expenditures. We reviewed Group investment plans, deferring some projects and significantly reducing investment amounts. Others Request for Government Assistance to the Airline Industry * Response as a Scheduled Airlines Association of JAPAN Results for the 1Q of FY2020 Obtained deferments of landing and navigation fees, etc. In the meantime, we submitted a request to the government for industry support through the Scheduled Airlines Association of JAPAN. As a result, many airports in Japan have deferred landing and navigation fees. Leasing costs and facilities usage fees have also been reduced. Going forward, our industry will continue to ask for further support, including extended deferments and exemptions of taxes and public fees. 2828 28 29 29 Business Progress Business Progress Future Management Policies Business Environment and the ANA Group Response The impact of COVID-19 has forced changes in social structures and value systems around the world. As work-styles and lifestyles change, the acceptance of a new normal is about to cause changes in demand structures, even in the airline industry. The ANA Group will respond to this situation as described below. Environment A new normal in work styles and lifestyles Airline Industry Significant changes in the demand structure of the airline market Passenger Numbers (Change in Volume) ANA Group Passenger Class (Change in Mixture) Short Term (under COVID-19) Medium Term (post-COVID-19) 1) Rise in non-air travel 2) Gradual recovery in domestic routes 3) Recovery at a moderate pace on international routes 4) Active resumption of air travel Reduce business scale to get over COVID-19 Re-expand business scope toward a growth trajectory 1) Variation in recovery speed on each 2) Different class mix compared to passenger segment pre-COVID-19 • Leisure • Business : Decrease : Decrease to gradual recovery • Leisure : Increase including inbound travelers • Business : Ongoing weakness ANA Group Provide products and services that meet the new market needs Responding to Passenger Numbers (Change in Volume) We are currently seeing strong movement toward non-air travel. Responding to Passenger Class (Change in Mixture) Even as the impact of COVID-19 continues, we expect leisure Even so, we expect to see a gradual recovery in passenger demand to recover first, growing steadily over the medium demand on domestic operations. Over the medium term, we term. We also expect to see a recovery in inbound travelers. believe the emergence of vaccines and other factors will lead However, we forecast demand for business travel to continue to a moderate pace of recovery in international operations, to experience weakness as corporate earnings deteriorate and while continued globalization will spur a return to air travel. online conferencing becomes more widespread. Therefore, The Group will reduce the scale of our businesses tempo- we expect to see significant changes in passenger class rarily to weather the declining phase of demand. When we see mixture. a recovery in demand over the medium term, we will re-expand The Group will provide products and services that meet the scale of our businesses toward a growth trajectory. new market needs, changing our approach to capturing demand across the entire Group. Please visit our corporate website for the latest information. Financial results briefing materials: https://www.ana.co.jp/group/en/investors/irdata/supplement/ Basic Policy for Reform of Business Structure The ANA Group will carry out business structure reform to respond steadily to changes in the market environment. Sustainable Growth Medium Term: Establish a resilient Group business structure that creates consistent, steady value 1) Strengthen Air Transportation Business portfolio strategy 2) Establish a second pillar of earnings on Non-Air Business Enhance corporate value (Stable & Continuous Dividends) Short Term: Change business structure toward surplus in Air Transportation Business 1) Optimize Air Transportation Business portfolio strategy ANA : Reduce the scale of our business for the time being; Concentrate management resources on high-profit routes; Reevaluate products and services to meet a new normal Peach : Capture wider demand in outlying regions of the major cities near Narita and Kansai airports 2) Implement resource-related tactics to reduce fixed costs Fleet : Reduce the number of aircraft; Leverage smaller aircraft and pursue higher capacity rates Human Resources: Revise staffing assignments by enhancing productivity through new work styles, etc. Management Foundation Mission Statement / Safety / Hygiene / ESG Management / Human Resources / DX / ANA’s Way As a short-term initiative, we will change our business structure toward balanced profitability in our Air Transportation Business. 1) Optimize Air Transportation Business portfolio strategy ANA will reduce the scope of its business for the time being, concentrating management resources on high-profit routes. At the same time, ANA will reevaluate current products and services in anticipation of market needs in the post-COVID-19 era. However, Peach, which has established an efficient business structure through merger, will strive to capture wider demand in outlying regions of the major cities near Narita and Kansai airports. 2) Implement resource-related tactics to reduce fixed costs We intend to reduce the total number of owned aircraft in our fleet, as well as leverage smaller and more efficient aircraft. We also plan to review our staffing assignments, enhancing productivity through new work styles based on digital transformation (DX), etc. Over the medium term, we will pursue a deeper portfolio strategy for the purpose of strengthening our Air Transportation Business, covering a wide range of diversifying demand. Also, we will seek to establish a resilient Group business structure that creates consistent, steady value by establishing our Non-Air Business as a second earnings pillar. This will improve corporate value, returning the ANA Group to stable and continuous dividends as we pursue sustainable growth. 3030 30 31 31 Business Progress Business Progress Air Transportation Business We will survive the trials of COVID-19, continuing to grow on into the future. Yuji Hirako Member of the Board of Directors, ANA HOLDINGS INC. President & Chief Executive Officer, ALL NIPPON AIRWAYS CO., LTD. The year 2020 was expected to be a year of great progress, among the best airlines in the world. At the same time, COVID-19 with the expansion of international flight slots at Haneda Airport has had a major impact on our lifestyles and behavior. On June and Japan hosting the Tokyo 2020 Olympic and Paralympic 1, ANA launched the ANA Care Promise as a new standard for Games. Unfortunately, the airline industry now faces major air travel. Under this promise, we have strengthened our challenges stemming from the COVID-19 pandemic. Since I hygiene initiatives even further. We will pursue the complete was named president in 2017, I have worked to build a resilient confidence of our passengers through appropriate measures organization that can deliver results in any environment. in the with-COVID-19 era and based on the service quality we Currently, we have been forced to cut flights on both interna- have built over our history. tional and domestic routes on an unprecedented scale. It is at To overcome this unprecedented crisis, we must reform our times like these that we must demonstrate resilience to survive. Air Transportation Business cost structure, particularly in fixed During fiscal 2019, we conducted a comprehensive review of safety, quality and services that form the solid foundation of our business. At the same time, we executed up-front investments in human resources and our fleet to take advantage of the international slot expansion at Haneda Airport. While results were firm through the third quarter, the impact of COVID-19 in the fourth quarter resulted in Air Transportation Business operating revenues amounting to ¥1,737.7 billion, a decrease of 4.2% year on year. Operating income amounted to ¥49.5 billion, a decrease of 69.1%. In fiscal 2020, we will maintain flexibility in controlling capacity during periods of weak demand. We will also work to maximize revenues during periods of recovery. International Passenger Business Phased recovery of ASK while assessing the status of global travel and immigration restrictions Fiscal 2019 in Review In May, we began introducing the Airbus A380 FLYING HONU on our Narita–Honolulu route as part of our Hawaii Strategy. We also introduced Narita–Perth service in September, Narita– Chennai service in October, and Narita–Vladivostok service in March 2020. For the first time in 10 years, ANA unveiled new seats for First Class and Business Class on Boeing 777-300ER aircraft. We introduced the upgraded aircraft on the Haneda–London route in August, the Haneda–New York and Narita–New York routes in November, and the Haneda–Frankfurt route in February 2020. We introduced our first private wide-seat with a closable door, called THE Room, in Business Class. These new seats offer the world’s first personal 4K-compatible monitor and other amenities, achieving the highest levels of passenger comfort. Meanwhile, the decline in demand due to COVID-19 on Chinese routes became apparent at the end of January. Slowing demand spread subsequently to routes in Asia, North America, Europe, and Hawaii. In response, we began adjusting supply and demand in February, and by the end of March, we canceled or reduced a total of 2,814 flights across 71 routes. As a result, international route passengers amounted to 9.41 million, a decrease of 6.7% year on year. Operating rev- enues were 5.8% lower at ¥613.9 billion. Fiscal 2020 Business Policies As long as travel and immigration restrictions continue in place around the world, we will continue to reduce the scale of our operations to the greatest extent possible. In the meantime, we will restore capacity in phases if Japan and other countries we Performance of the International Passenger Business Revenues ASK RPK (Index) Fiscal 2015 = 100 130 120 110 100 0 126 119 124 2015 2016 2017 2018 2019 (FY) New Business Class Seat, THE Room Our air transportation services have enjoyed an outstanding costs. In addition, we are reviewing employee work styles and service begin to ease restrictions. reputation in the world. In 2019, ANA was ranked first in the plan to increase employee productivity significantly. By engaging Asia-Pacific region for on-time arrivals by Cirium of the U.S. In diligently and quickly in these areas, we will introduce bold addition, we received the prestigious 5-Star designation from reforms that place ANA back on a growth trajectory in the SKYTRAX of the U.K. for an eighth consecutive year, rating post-COVID-19 era. 3232 32 33 33 Business Progress Business Progress Air Transportation Business Domestic Passenger Business Cargo and Mail Business Increasing capacity as economic activity and movement of people resume, helping to revitalize the local economy while restoring profitability Maximize transport capacity to grow earnings in a tight cargo market Performance of the International Cargo Business Revenues ATK RTK (Index) Fiscal 2015 = 100 150 100 50 0 122 120 91 2015 2016 2017 2018 2019 (FY) Fiscal 2019 in Review Our International Cargo Business experienced weak demand for cargo originating both in Japan and overseas due to the global economic slowdown stemming from U.S.–China trade friction and other factors. In addition, we were forced to cancel a large number of flights beginning in February due to the impact of COVID-19. As a result, both transport volume and revenues underperformed year on year. In our route network, we introduced the Boeing 777F wide- body cargo freighter for the Narita–Shanghai (Pudong) route (July) and Narita–Chicago route (October). In addition to new products such as oversize cargo and special cargo (e.g., semi- conductor manufacturing equipment), we also captured trans- portation demand for emergency supplies and hygiene-related supplies, which surged in demand due to the spread of COVID-19. As a result, international cargo volume for fiscal 2019 amounted to 866 thousand tons (down 5.2% year on year) and operating revenue amounted to ¥102.6 billion (down 17.9%). Fiscal 2020 Business Policies Global passenger flight cancellations and reductions have resulted in a shortage of capacity for international cargo trans- portation. To respond flexibly to the tight supply and demand in Boeing 777F Aircraft the market, we plan to operate extra flights and charters, mainly using freighters. In April, we became the first Japanese airline to begin transporting cargo in the passenger cabin on passen- ger aircraft. We will continue to pursue revenue growth, while maximizing our transport capacity. Performance of the Domestic Passenger Business Revenues ASK RPK (Index) Fiscal 2015 = 100 110 100 0 103 99 99 2015 2016 2017 2018 2019 (FY) Fiscal 2019 in Review Passenger numbers through the third quarter were solid, mainly due to strong business demand and travel within Japan. We also captured the strong demand over the 10-day Golden Week holidays. We introduced discounted tickets available for purchase up to 355 days prior to boarding as one means to capture demand as early as possible. These and other mea- sures, as well as our new fare structure adopted in the previous year, succeeded in generating sales. In our route network, we increased the number of flights for Narita–Nagoya (Chubu) in May and Nagoya (Chubu)– Kumamoto in October. We also adjusted aircraft type flexibly and optimized the number of flight, optimized supply to demand through aircraft type and scheduling. In November, we introduced new seats on Boeing 777-200 aircraft, offering improved comfort and functionality with power reclining in Premium Class. We also introduced seats equipped with touch panel personal monitors in Economy Class. At the Naha Airport, we altered the layout of the departure counter and implemented the ANA Baggage Drop automated baggage drop machine, making Naha the fourth airport in Japan to be so equipped. We also renovated the ANA LOUNGE. These and other efforts were made to further improve service quality. However, the spread of COVID-19 in Japan prompted the central and local governments to ask citizens to refrain from New Premium Class Seats for the Boeing 777-200 unessential go-out or attendance at events. These policies resulted in a significant decline in passenger demand begin- ning at the end of February. While we endeavored to maintain our network as a public transportation provider, we began adjusting the number of flights in March. In total, 2,674 flights across 42 routes were suspended or reduced. As a result, domestic passengers amounted to 42.91 mil- lion, a decrease of 3.2% year on year. Operating revenues were 2.4% lower, at ¥679.9 billion. Fiscal 2020 Business Policies We will continue to reduce operation-linked expenses by con- trolling the number of flights in operation as long as demand remains weak due to COVID-19. At the same time, we will resume capacity flexibly when we confirm increased demand as a result of increased economic activity and the resumption of travel. We plan to strengthen our ability to capture leisure travel demand by taking advantage of the Japanese govern- ment’s Go To campaign and other measures to encourage tourism. We will leverage these measures to restore profitability and contribute to the revitalization of local economies. Refurbished Naha Airport Departure Counter ANA Signed a Strategic Partnership Agreement with Singapore Airlines Transporting Cargo in the Passenger Cabin On January 31, 2020, ANA signed a joint venture framework agreement with Singapore Airlines to strengthen our network and increase our presence in the Asia / Oceania region. While expanding existing code share flights, ANA is preparing to apply for Antitrust Immunity (ATI) under the Civil Aeronautics Act. Our goal is to start joint operations beginning with our 2021 winter schedule. After approval, this agreement will mark the third such arrangement after United Airlines (Asia–North, Central, and South America) and Lufthansa (Japan– Europe). These stronger alliances help us offer greater passenger convenience and strengthen our competitiveness in the Asia / Oceania region. 3434 34 35 35 Business Progress Business Progress Air Transportation Business Non-Air Business Strengthening efforts to establish a new revenue pillar to stand next to our Air Transportation Business LCC Business Airline Related LCC merger strengthens our business foundation and allows us to allocate management resources on domestic routes for the time being Fiscal 2019 in Review We moved forward with the transfer of aircraft and human resources in stages as we prepared for the Peach Aviation Limited and Vanilla Air Inc. merger. By the end of October, we completed the integration of operations. While we curtailed the use of resources temporarily due to aircraft conversions and flight crew transition training, we transferred 10 routes previ- ously operated by Vanilla Air to Peach. At the same time, geopolitical risks in Hong Kong and South Korea had a negative impact on performance, as did the spread of COVID-19 beginning in February. In response, we canceled or reduced 2,088 flights across 23 international and domestic routes. As a result, passengers numbers amounted to 7.28 million, a decrease of 10.6% year on year. Operating revenues were 12.5% lower, at ¥81.9 billion. Fiscal 2020 Business Policies We introduced Narita–Kagoshima and Narita–Nagasaki service on our domestic routes at the end of March. In mid-June we resumed service for all routes, and in late July, we resumed service for all flights, strengthening our efforts to capture leisure travel demand. On August 1, we launched the Narita–Miyazaki and Narita–Kushiro routes, building on the strengths estab- lished by the Peach brand over the years and expanding routes offered from our LCC base in Narita, taking over from Vanilla Air. LCC Business: Operating Revenues (¥ Billions) 87.5 93.6 81.9 69.8 75.6 2015 2016 2017 2018 2019 (FY) * The above graph represents the combined total of Peach and Vanilla Air results (fiscal 2015–2016 includes Peach results before consolidation). Takeaki Mori Representative Director & CEO Peach Aviation Limited After serving many passengers in Japan and overseas, Vanilla Air ceased operations at the end of October 2019 and completed a merger with Peach Aviation. Many who transferred from Vanilla Air, including pilots, cabin atten- dants, maintenance crew, and other employees, are now serving as the mainstay of Peach operations. This merger has combined the strengths of each company, including Peach’s innovative initiatives out of the Kansai International Airport and Vanilla Air’s creation of new Tokyo metropolitan area demand at the Narita Airport. The shared management resources provide economies of scale that have strengthened our business foundation. In addition to the routes taken over from Vanilla Air, Peach introduced service between Narita and Kagoshima, Nagasaki, Miyazaki, and Kushiro, establish- ing a firm presence in the Tokyo metropolitan area. At present, travel remains restricted significantly due to the impact of COVID-19. At the same time, accelera- tion of telework and other work-style reforms have led to more leisure time and even the potential for working from resorts or family homes in rural areas. Seeing these trends, we believe the importance of travel to meet others and enjoying the novelty of visiting new places will only continue to increase. The concept of travel has changed and will continue to expand in the future. By communicating the good qualities and new charms of Japan to the rest of the world, we believe we can develop even more demand in inbound tourist travel. And Peach was one of the first to increase domestic route flights, with the theme of Bridging Your Sky. We will expand our domestic network to function fully in our role as a bridge, contributing to the revitalization of econo- mies in Japan’s outlying regions and of Japan as a whole. In addition, we expect the tabinoco website (user- generated travel content platform) to generate new demand, serving as a bridge connecting passengers with other passengers and Japan’s rural areas. Governments will begin lifting travel restrictions in phases in the near future. Over the medium to long term, we plan to once again expand our international business, taking advantage of our substantial domestic network to encourage inbound travelers to see even more of what Japan has to offer. Peach will secure a position as the leading LCC in Asia, both in customer satisfaction and in market share. Fiscal 2019 operating revenues amounted to ¥299.4 billion Airline Related Business: Operating Revenues (2.9% increase year on year) and operating income amounted to ¥18.1 billion (37.7% increase). This result was mainly due to increased ground handling services at Kansai and Chubu airports and the new consolidation of subsidiary MRO Japan (¥ Billions) Co., Ltd., an aircraft maintenance company launching full 231.9 264.4 284.3 291.0 299.4 operations in Okinawa. Fiscal 2020 contracts for ground handling services are likely to decrease due to fewer flights by overseas airlines owing to the impact of COVID-19. When global operations resume in the future, we will pursue initiatives to restore and strengthen profitability. Travel Services 2015 2016 2017 2018 2019 (FY) During fiscal 2019, sales of online products attracted strong Travel Services: Operating Revenues demand for both domestic and international travel. In addition, we took an aggressive stance to capture demand for travel during the 10-day Golden Week holiday in Japan. The spread of COVID-19 beginning in late January impacted operating revenues and operating income, which amounted to ¥143.9 billion (4.5% decrease year on year) and ¥1.3 billion (129.9% increase), respectively. In fiscal 2020, we plan to capture domestic travel demand, which is expected to recover early. We will also pursue efforts to strengthen our competitive posture, taking advantage of the Go To campaign, while expanding direct sales and leveraging our dynamic Tabisaku packaged product. Trade and Retail (¥ Billions) 167.3 160.6 159.2 150.7 143.9 2015 2016 2017 2018 2019 (FY) In fiscal 2019, while transaction volume for aircraft parts Trade and Retail: Operating Revenues increased in our aerospace and electronics business, volume decreased for nuts and other food business products. Further, volume in our Retail business declined at our airport ANA DUTY FREE SHOP retail locations and ANA FESTA airport shops due to the impact of COVID-19. As a result, operating revenues amounted to ¥144.7 billion (3.9% decrease year on year) and operating income amounted to ¥2.9 billion (21.5% decrease). During fiscal 2020, we will exercise selection and concen- tration to strengthen existing businesses, while also creating new businesses that contribute to greater revenue growth. (¥ Billions) 140.2 136.7 143.0 150.6 144.7 2015 2016 2017 2018 2019 (FY) 3636 36 37 37 Business Progress Business Progress Business Progress ANA Group Response to COVID-19 Creating a New Standard for Air Travel The global spread of COVID-19 has led to the start of a new lifestyle standard in many aspects of our daily lives. In June 2020, ANA launched the ANA Care Promise as a shared commitment to our customers to pro- tect the health of our passengers and staff, creating a carefully detailed environment emphasizing measures to prevent disease infection. Peach Aviation has also committed to creating a new standard in the skies through similar measures and the concerted efforts of all employees. We will continue to place the highest priority on safety, providing clean, hygienic environments and ser- vices to offer even greater peace of mind to our customers in every travel situation. Overview of Disease-Prevention Measures 1 Create a hygienic and clean environment at all times • Disinfect and sterilize equipment, etc. • Package food and drinks in the lounge, etc. 2 Implement preventive measures for staff who interact with customers • Wear masks, face shields, etc. (airport and lounge staff) • Wear masks, gloves, and goggles, etc. (cabin attendants) 3 Disinfect all aircraft on a regular basis • International route aircraft (every flight) • Domestic route aircraft (every night) 4 Thorough ventilation inside the aircraft • Ventilate all air in the cabin in three minutes by drawing in clean outside air • Equip all aircraft with high-performance filters* to filter and circulate air inside the cabin Ceiling air conditioning ducts Lower cargo compartment Vent air out of the aircraft * Type used in hospital operating room air conditioners Draw in air from the engine We are asking passengers to cooperate with initiatives to prevent the spread of disease; thereby reducing anxiety among all passen- gers. These measures include mandatory wearing of masks or facial coverings in the airport and inside the aircraft, modified proce- dures within the airport, at security checkpoints, at the boarding gate, social distancing, and other measures. * Passengers who do not wear masks or who are not feeling well (fever, etc.) may be denied boarding. For more detailed information: About the ANA Care Promise About Peach Disease-Prevention Measures https://www.ana.co.jp/en/jp/topics/coronavirus-travel-information/ https://www.flypeach.com/information/en/infection_control/ Special Feature Establishing avatar-in is a futuristic platform that allows anyone to connect beyond geographical distances or physical restrictions. By launching a new venture for this platform, we will accelerate business speed and contribute to the society of the future in next-generation social infrastructure. In April 2020, ANA Holdings established avatarin Inc. as our first-ever start-up. An avatar is a remote-controlled alter ego robot that enables interactive telepresence. ANA Holdings launched the ANA AVATAR project in 2018, developing robots and researching mobility that does not require physical movement. We see great potential yet to be unlocked in use cases for these avatars. For instance, avatars can contribute to resolving a myriad of social issues in areas like education and healthcare, as well as generate new travel demand. To achieve the wings within ourselves to fulfill the hopes and dreams of an interconnected world as defined in our Mission Statement, avatarin Inc. will address business domains beyond the airline framework, creating new value unique to the ANA Group. 3838 38 39 39 MISSION To expand humanity’s potential by offering new abilities through avatars. Major Businesses • Develop and offer services using avatar remote-controlled alter ego robots and the avatar-in platform • Offer proposals to resolve social issues through avatars newme newme, , a wider general-use a wider general-use avatar model avatar model avatar platform avatar-in, avatar platform avatar-in, Creating a future society in which anyone can participate, freely connecting via the internet to avatars placed in many different locations Conferences Remote work Office / Meetings Education / Seminars Museums / Entertainment Information centers / Multilingual support Avatar Use Cases Participate in office meetings from home Shop while receiving store staff advice View popular new releases at the bookstore Participate in online graduation Students living on a remote island visit Well-known basketball coach provides ceremonies the Tokyo National Museum remotely direct instruction remotely Healthcare / Nursing care (Remote visits / Remote care) Remote medical care Shopping / Sightseeing Playing with children living far away Remote hospital visits Akira Fukabori Founder & CEO, avatarin Inc. create an environment in which anyone can freely and instantly serendipity (chance events and experiences), more difficulty in gain acceptance for the avatar platform as social infrastructure, project their presence to any location. Our aim is to make a team building, and greater challenges in developing new ideas. we will proceed in the joint development of robots and services world in which all people can easily participate in society. newme With avatars, users can move around the office, conference via collaboration and equity partnerships with a wide range of is a wider general-use avatar designed for maximum market halls, and other locations freely from their own home. This companies. penetration, installed in locations that include medical facilities, system creates a realistic environment in which users can visit Air travel passengers make up only 6% of the world’s popu- tourism sites, and schools. By transferring consciousness and and talk to someone without constraints, take a casual stroll, lation. We are transitioning from the era of physical travel to an presence to newme, users can travel beyond geographical and have chance encounters, glean hints of potential ideas from era of teleported consciousness. The ANA Group, which began Our mission is to expand humanity’s potential by offering new physical limitations. For example, hospital patients can enjoy accidental meetings or discoveries, and so on. with only two helicopters, will supplement the movement of abilities through avatars. We believe that it is our mission to shopping and sightseeing, teachers can conduct classes at By advancing the greater fusion of real and virtual, avatars aircraft and offer instant mobility in the form of avatars. As we harness technology that eliminates distance, time, and physical schools on remote islands, etc. offer new abilities for all people. We are firm in our belief leverage ideas unique to us as an airline group, we will continue constraints on movement, providing a new method of travel Today, the impact of COVID-19 has caused rapid growth that we can contribute to resolving various social issues by to evolve avatarin Inc. and contribute to the creation of the that transcends aircraft or other existing methods. in social needs for contactless and remote technologies. The connecting people without concern to distance, time, and society of the future. Currently, avatarin Inc. uses the remote-controlled alter ego spread of online work and teleconferencing has resulted in robot avatar and the world’s first avatar platform avatar-in to issues including fewer opportunities for small talk and physical restrictions, as well as by proposing new, mutually supportive lifestyles. To promote the spread of avatars and 4040 40 41 41 Business Progress Business Progress Sustainability Initiatives The ANA Group strives to resolve social issues through our business activities to keep growing together with society. We establish a long-term vision for ourselves, executing our strategies steadily to improve corporate value sustainably. What Does the ANA Group DNA Mean to You? 42 Always remembering to be thankful to our customers and colleagues, and engaging in strong teamwork to deliver safety and security. Yoko Kobayashi ANA Cabin Attendant 43 ANA GROUP ESG MANAGEMENT The Social Environment Surrounding the ANA Group Various social issues exist around the world, including global warming and climate change, energy resource short- ages, increasing ocean plastic waste and microplastics, poverty, and child labor. More voices are calling for a response from not only national and local governments but also from private-sector companies. Examples include the CO2 emissions reduction goals set under the Paris Agreement and the SDGs, which are global common goals to be achieved by 2030. Especially over the past several years, the issue of climate change has attracted global attention, and CO2 is considered to be one of the causes of global warming. The central business of the ANA Group is air transportation. Therefore, we must address the impact of our business activities on the environment and society, including reduc- tion of CO2 emissions from flight operations. In addition, the Air Transportation Business is susceptible to external factors, such as natural disasters, terrorism, and the spread of infectious disease. Creating stability in our global environ- ment and social circumstances is critical for our business operations. The ESG Management Promotion Cycle for Sustainable Growth Having gained an understanding of the surrounding envi- ronment, the ANA Group pursues ESG management to become an indispensable part of society in the future, to grow continually as a company, and to create value. We identify social demands through dialogue with stakeholders, and then align our corporate strategy with these requirements, evaluating the impact on business and society. Finally, we incorporate these requirements into corporate initiatives. We disclose the status of our initiatives on our corporate website and through other channels as necessary. At the same time, we engage in regular dialogue with stakeholders based on information we disclose. We also report our progress and confirm the appropriateness of our initiatives in those dialogues. We pursue ESG management through a cycle of dialogue, initiatives, and information disclosure. Here, our aim is to develop a sustainable society and to increase corporate value. 44 ANA Group ESG Management Promotion Cycle Dialogue Dialogue External Dialogue Stakeholder Dialogue Stakeholder Dialogue Internal Dialogue Alignment With Alignment with Corporate Strategy Corporate Strategy Mission Statement Mission Statement Built on a foundation of Built on a foundation security and trust, “the of security and trust, wings within ourselves” help to fulfill the hopes “the wings within and dreams of an inter- ourselves” help to connected world. fulfill the hopes and dreams of an inter- Dialogue Based on Dialogue Based on Dialogue Based on Dialogue Based on Information Disclosed Information Disclosed Information Disclosed Information Disclosed connected world. Information Disclosure • Integrated Report • Integrated Report • Human Rights Report • Human Rights Report • Websites • Websites … and other channels … and other channels. ANA Group Material Issues in ESG Management We aligned the social demands identified through dia- logue with stakeholders with our corporate strategy. After evaluating the impact on business and society, we identi- fied four material issues, and we have been engaged in addressing these issues through our business activities. In fiscal 2015, we identified three material issues: the environment, diversity and inclusion (D&I), and regional revitalization. In fiscal 2016, we added human rights as a fourth material issue. In fiscal 2019, we established the ANA Group ESG Commitments. At that time, we held dialogues with experts and conducted management-level discussions to confirm that these four material issues would continue to be material issues for the ANA Group. Evaluate the mpacts on Evaluate the IImpacts on Evaluate the impacts on busi- Evaluate the impacts on busi- Business and Society Business and Society ness and society ness and society Initiatives Environment • Reduce CO2 emissions • Reduce resource waste • Reduce food waste • Biodiversity conservation M a t e r i a l I s s u e s Human Rights • Responsibility to respect human rights • Promote responsible procurement and supply-chain management Diversity and Inclusion • Human resource development to support sustainable growth • Responding to the diversity of our customers Regional Revitalization • Promote regional revitalization through tourism and social contribution activities • Utilizing innovation to solve social issues • Maintain commitment of top management Governance • Pursue board of director diversity • Ensure transparency E S G Create Both Social Value and Economic Value, aiming to develop a sustainable society and increase corporate value Disclose Status of Initiatives Disclose Status of Initiatives Disclose Status of Initiatives Disclose Status of Initiatives Materiality Matrix Extremely important Human Rights • Human rights violations across the supply chain Diversity and Inclusion • Diversity of customers and employees Society Axis Consideration for stakeholders / Impact on society and the environment Environment • Climate change • Environmental pollution Rationale for Identification as Material Issues Environment P54 For the ANA Group For Society • Controlling fuel costs • Controlling the costs of future emission trading schemes • Maintaining / improving evaluations by avoiding environmental risk • Reducing environmental footprint Human Rights P58 • Maintaining / improving evaluations through avoiding human rights risk Regional Revitalization • Decline of Japanese regions • Income / education disparity in emerging countries Diversity and Inclusion • Improving profitability by generating new demand P60 • Providing an issue resolution system to strengthen capacity to respond to customers • Improving profitability by generat- ing new inbound tourism demand Management Axis Extremely important Regional Revitalization P64 • Maintaining / improving profitability of domestic airline business Impact on the operations of the ANA Group (Mission Statement, Management Vision, direction of corporate strategy, business opportunities and risks) • Improving profits of international airline business • Realizing a world that respects human rights • Realizing an inclusive society • Revitalize regional economies • Promoting international exchange 45 Sustainability Initiatives FURTHER PROMOTION OF ESG MANAGEMENT Please visit our corporate website for more details on ANA Group ESG Commitments https://www.ana.co.jp/group/en/csr/commitment/ Developing ANA Group ESG Commitments To become an indispensable part of society in the future and to grow continually, the ANA Group must address environmental and social issues through our business activities from a long-term perspective. We strive to solve material issues related to the environment, human rights, D&I, and regional revitalization. To further promote ESG management from a long-term perspective, we developed ANA Group ESG Commitments based on the following three viewpoints. We will continue to address these issues in achieving our commitments. 1 Commitments to Be Achieved by 2050 2 Commitments to Pursue on an Ongoing Basis through 2030, the Final Target Year for the SDGs Matters for Which We 3 Provide Disclosure and Report Results on a Continued Basis 1 Commitments to Be Achieved by 2050 Reduce CO2 emissions from aircraft flight operations by 50% (compared to 2005) Environment (Million ton) 12 Domestic International 10 8 6 4 2 0 Address the environment from the following four viewpoints. (1) Adopt new technologies Move forward in introducing fuel-efficient aircraft and improved engines, including the Boeing 787 and Airbus A320neo / A321neo models, developed through new technology. (2) Improve flight operations Reduce fuel consumption by improvements in aircraft flight operation, regularly cleaning the inside of the engine, and reducing the weight of equipment installed. (3) Introduction of sustainable aviation fuel (SAF) Continue to introduce SAF produced from sustainable sources, such as vegetable oil, animal fat, and waste biomass. (4) Utilize emission trading schemes (purchase CO2 emissions credit) Reduce CO2 emissions globally by purchasing CO2 emission credit generated by lower CO2 emissions in businesses other than aviation. To prevent a further increase of CO2 emissions 50% reduction compared to 2005 Eliminate CO2 emissions from all non-aircraft flight operations by 2050 Environment Reduced through energy conservation Eliminate CO2 Emissions Shift to renewable energy 2019 2050 Delve deeper into energy conservation mea- sures and pursue a shift to renewable energy sources. At the same time, plan to introduce hybrid vehicles (HVs), electric vehicles (EVs), and fuel cell vehicles (FCVs) for use in air- ports, while upgrading existing equipment in our facilities and buildings to more energy- efficient models over time. Reduce our resource waste ratio to zero and reduce food waste, including in-flight meals, by 50% Environment Promote the 3Rs (reduce, reuse, and recycle resources, such as plastic and paper). Reduce food waste throughout the product life cycle (food material procurement, preparation, delivery, and disposal). 2 Commitments to Pursue on an Ongoing Basis through 2030, the Final Target Year for the SDGs Responsibility to respect human rights Human Rights Promote responsible procurement and supply- chain management Environment / Human Rights Utilizing innovation to solve social issues Regional Revitalization Based on the United Nations Guiding Manage and promote environment-con- Provide new value through avatars, Principles on Business and Human scious procurement with respect to human drones, MaaS*, etc., and cooperate Rights, make every effort to promote rights and build a fair and transparent with different industries. the respect of human rights. supply chain. * Mobility as a Service (MaaS): Integration of various forms of transport services into a single mobility service on demand. 3 Matters for Which We Provide Disclosure and Report Results on a Continued Basis Human resources development to support sustainable growth Diversity and Inclusion Responding to the diversity of our customers Diversity and Inclusion Develop human resources and a sustainable work environ- Respect the needs and diversity of each customer, and pro- ment in which employees raise their productivity and contrib- mote universal services in both products and services. ute to sustainable corporate growth. 2005 2019 2050 in and after 2021, plan to use market mechanisms in addition to initiatives described in (1) to (3) above. Biodiversity conservation Environment Regional revitalization Regional Revitalization Contribute to biodiversity conservation by promoting and Contribute to regional revitalization through social contribution enhancing measures to prevent illegal wildlife trade. activities and by solving social issues. 46 47 Sustainability Initiatives FURTHER PROMOTION OF ESG MANAGEMENT Process to Establish ANA Group ESG Commitments We developed the ANA Group ESG Commitments in three steps: (1) Identify social demands; (2) Categorize and prioritize social demands to develop commitments; and (3) Verify appropriateness and finalize commitments. The first step is to identify social demands through regular dialogue with stakeholders (Step 1). The second step is to identify ESG issues related to our businesses and develop ANA Group ESG Commitments (Step 2). The third step is to verify the appropriateness of the commitments through dialogue with ESG investors and to finalize commitments in the Group Management Committee (Step 3). Identify Social Demands Categorize and Prioritize Social Demands to Develop Commitments Step 3 Verify Appropriateness and Finalize Commitments Identify Social Demands through Dialogue with Stakeholders Management Level Discussions Verifying Targets with Our Stakeholders When developing the ANA Group ESG Commitments, we engage in dialogue with ESG experts to understand the social expectations and requirements of the ANA Group. More details are available on our corporate website. https://www.ana.co.jp/group/en/csr/communications/discussion/ https://www.ana.co.jp/group/en/csr/communications/dialogue/ Dialogue Regarding the SDGs Dialogue with ESG Investors Participating Organizations • Hermes Equity Ownership Services (Hermes EOS) • Corporate Human Rights Benchmark (CHRB) Shinya Katanozaka Norichika Kanie ANA HOLDINGS INC. Keio University Graduate School of President & Chief Executive Officer Media and Governance Professor © Caux Round Table Japan Dialogue Regarding the Environment Dialogue Regarding Business and Human Rights Participating Organizations • WWF Japan • Conservation International Japan • IATA JAPAN For more, see P.59 Participating Organizations • The Danish Center for Human Rights • Institute for Human Rights and Business • World Benchmarking Alliance (WBA) We discussed and developed the ANA Group ESG To objectively verify the appropriateness of the ANA Group Commitments in our Group Management Committee. This ESG Commitments developed within the Group Management committee operates under the chairmanship of the president Committee, we held more dialogues with the ESG investors and consists of full-time directors and full-time Audit & who helped us first identify social demands. We received Supervisory Board members. opinions on the appropriateness of commitments and future The Group Management Committee discussed the social information disclosure. demands identified through dialogue and the ESG issues related to our businesses as identified by our corporate sus- ESG Investors Participating in Dialogues tainability and other relevant operation departments in accor- • Hermes EOS (Hermes Equity Ownership Services) dance with our Mission Statement and in consideration of the • CHRB (Corporate Human Rights Benchmark) impact on our business and society. ANA Group Management Committee Deliberations July • Identifying the latest social trends and investor trends August • Understanding social demands and requirements of the ANA Group • Suggesting ESG issues related to our businesses 2019 Finalizing the ANA Group ESG Commitments The Group Management Committee again discussed and then finalized the ANA Group ESG Commitments after con- firming the appropriateness of commitments with ESG inves- tors. The final ANA Group ESG Commitments were reported to the board of directors. Opinions at the Board of Directors’ Meeting • The board recommended that per-unit reduction should also be addressed in tandem with social trends for total November • Suggesting ANA Group ESG CO2 reduction. Commitments for the ANA Group based on social demands 2020 February • Revisiting commitments and suggesting implementation structure • The board noted that ESG management is being driven by Europe. The Group should not simply adopt European-style ESG, but rather strike a balance on a case-by-case basis and in reflection of Japanese values. © Caux Round Table Japan © Caux Round Table Japan 48 49 StepStep12Sustainability Initiatives DIALOGUE WITH EXPERTS ON ESG The COVID-19 pandemic has changed social values and behavior. We conducted an interview with ESG experts to better understand social trends and respond appropriately. These interviews consisted of questionnaire responses, rather than face-to-face meetings, considering safety. We will continue to engage in dialogue with stakeholders to understand and identify social demands. Topics Expectations and concerns required of the ANA Group due to changes in consciousness after the spread of COVID-19 Implementation Period June to July 2020 Summary Hiroshi Ishida Executive Director, Caux Round Table Japan In order to achieve the medium and long-term goals set by the ANA Group, ANA Group will continue to focus on medium to long-term trends and follow the ESG-related efforts which include the respect for human rights, environmental considerations, etc. In addition, we expect that it will be possible to build a resilience business model by absorbing the change in social value due to the impact of COVID-19 in the long-term trend. Under the COVID-19, it is important for the ANA Group to pursue transparency in the process of identifying new ESG issues and to develop a “Quality Relationship” with the aim of improving reliability with ESG-related investors. In the context of the COVID-19 crisis, companies are expected to put adequate measures in place to make sure that they manage human rights risks connected to the pandemic. This should include at a minimum a commitment from the company to respect human rights in this crisis and a clear allocation of responsibility inside the company to ensure that this is achieved in practice. It is crucial for companies to take necessary steps to identify, assess and manage the human rights risks connected to the COVID-19 crisis through a robust human rights due diligence process. For a company with a large supply chain like ANA Group, adopting responsible purchasing practices to protect suppliers should be a priority. Companies are also expected to provide effective remedy, including the availability of griev- ance mechanisms through which complaints related to COVID-19 concerns can be made without the fear of retaliation. More than ever, the COVID-19 crisis shows the need for sustainable, inclusive develop- ment and provides the opportunity to ‘build back better’: making society and the economy more resilient by protecting fundamental human rights, aligning short-term economic inter- ests with long-term needs, and ensuring continued momentum on the SDGs. Camille Le Pors Lead, Corporate Human Rights Benchmark, World Benchmarking Alliance It is appreciated that ANA Group is committed to the UN Guiding Principles (UNGPs) through its Human Rights policy, training and Human Rights Due Diligence (HRDD). With social dis- tancing here to stay for coming month HRDD process will be tested, due to tough business environment and limited in-person engagement (with employees, suppliers and rights hold- ers) in the value chain. Particularly, impacts on travellers will be due to with travel restrictions, increased sanitisation, social distancing at airports as well as inside the aircrafts. Some rights holders* will be more impacted than the others, thus it will be important to keep re- evaluating needs and Human Rights risks in ANA’s value chain. * Rights-holders: People impacted directly by corporate activities, etc. The world today is a different place: are we still a global society? I believe our ‘new normal’ will be different because—perhaps for the first time in our lives—we will try not to lose what we have found. How ANA Group copes with the shift to a smaller global travel and hospitality sector will be a case study for how to keep sight of what matters. Those parts of the business that were in the shadows will now fall into the light. The decisions on what to cut and what to keep will require close examination of what was waste- ful and what was valuable. © Caux Round Table Japan Rishi Sher Singh Specialist in Global Value Chains Puvan Selvanathan Chair, Bluenumber Foundation and Former Member of the UN Working Group on Business and Human Rights The COVID-19 pandemic provided an unexpected temporary reduction in CO2 emissions and other environmental impacts. Companies that return to their old ways of doing business and cannot transform may be disqualified by society in the post-COVID-19 world. As such, 37 companies and 28 industry groups in Europe have joined the Green Recovery Alliance*. The ANA Group post-COVID-19 recovery shall pursue the concept of Do No Harm to avoid returning to the pre-COVID-19 CO2 emission level, and to further efforts towards Net Zero of all negative environmental and social impacts, not just carbon emissions. ANA Group shall take advantage of this window of opportunity to become a leader in green recovery and sustainability, and to commit as early as possible to the stakeholders, especially the future generations. Yasushi Hibi Vice President, Conservation International * Green Recovery Alliance: An informal alliance of political leaders, civil society groups and NGOs, CEO and business associations, and the European trade union confederation. This alliance promotes the EU post-pandemic recovery plan, accelerating the transition toward climate neutrality and healthy ecosystems. 50 51 Sustainability Initiatives DIALOGUE WITH EXPERTS ON ESG More and more governments around the world are adopting the Green Recovery policies, looking ahead to the post-COVID-19 world. More than ever, businesses are being asked to improve sustainability. WWF has raised Green and Just Recovery, Wildlife Exploitation, and Land Use and Food Systems as important social issues, suggesting the need to review approaches in these areas. The ANA Group is expected to show a long-term post-COVID-19 airline business plan that is consistent with the requirements by the Science Based Targets Initiative* so as to reframe its efforts to reduce greenhouse gases and realize a zero-carbon society. Also, the ANA group is expected to expand measures against illegal trade as a means to prevent infections from animals. Further, it should use resources wisely by reducing and reusing TOBAI Sadayosi Chief Executive Officer WWF Japan ©WWF Japan plastics, as well as by sourcing palm oil, timber, paper, and other resources through sustain- able means. * Science Based Targets Initiative: Science Based Targets is a collaborative initiative among the WWF, CDP, World Resources Institute (WRI) and the UN Global Compact. The initiative encourages companies to adopt emissions reduction targets in line with what the latest climate science says is necessary to limit global warming to well below 2˚C above pre-industrial levels. One of the issues investors are currently focusing on is how companies support, diversify and maintain a sustainable supply chain. It highlights the importance of employment, health, safety, work styles, and satisfaction of employees of the group and supply chain companies are also crucial issues. Besides, investors are paying attention not only to data security but also to data governance, because AI-based analysis and utilization of customer and employee data requires a partnership with the external parties. As the global aviation industry is expected to remain in a tough situation for a while, I hope the ANA Group will re-question what it can do and find new growth opportunities as a resilient company in the Post-COVID-19 era. Masaru Arai Chair, Japan Sustainable Investment Forum (JSIF) Being a Company Indispensable to Society in the Post-COVID-19 World The ANA Group is being affected by the COVID-19 pandemic in significant ways. However, the direction in which we promote ESG management from a long-term per- spective will remain unchanged after we overcome this crisis. We aim to become a resilient company by listening to and accurately understanding the social demands of the post-COVID-19 world. We will reflect the input of experts in our strategic initiatives. We also continue to aim to create a sustainable society (contribute to the SDGs) and increase corporate value by identifying social demands through ongoing dialogue with stakeholders and by implementing measures appropriately. Chikako Miyata Senior Vice President, Director of Corporate Sustainability ANA HOLDINGS INC. 52 Using External Evaluations Related to ESG Results of the four following external evaluations have provided us with an objective and multifaceted understanding of ANA Group ESG management. We intend to reflect these results in officer remuneration. DJSI FTSE MSCI CDP FY2019 Evaluation FY2022 Targets Remarks World Index Asia Pacific Index Selected as a component member Maintained status as noted (left) Stock index developed jointly by U.S.-based S&P and Switzerland-based RobecoSAM. Evaluates corporate sustainability from the perspectives of economy, environment, and society. Selected as a component member of FTSE4Good Index Maintained status as noted (left) Stock index managed by U.K.-based FTSE. Evaluates the initiatives and results of ESG management based on benchmarks. * Selected as a component member of the Japan Empowering Women Index (WIN) Selected as a compo- nent member of the Japan ESG Select Leaders Index Stock index managed by U.S.-based MSCI. An index based on the performance of stocks around the world from various perspectives. Examines and evaluates corporate commitment to ESG. B A– External evaluation for institutional investors managed by a U.K.-based NPO. Analyzes the corporate impact of CO2 on the environment and climate change, evaluating the company’s responses. * THE INCLUSION OF ANA HOLDINGS INC. IN ANY MSCI INDEX, AND THE USE OF MSCI LOGOS, TRADEMARKS, SERVICE MARKS OR INDEX NAMES HEREIN, DO NOT CONSTITUTE A SPONSORSHIP, ENDORSEMENT OR PROMOTION OF ANA HOLDINGS INC. BY MSCI OR ANY OF ITS AFFILIATES. THE MSCI INDEXES ARE THE EXCLUSIVE PROPERTY OF MSCI. MSCI AND THE MSCI INDEX NAMES AND LOGOS ARE TRADEMARKS OR SERVICE MARKS OF MSCI OR ITS AFFILIATES. ESG Implementation Structure We established the Group ESG Management Promotion Committee ESG Implementation Structure (which was renamed from the Group CSR / Risk Management / Compliance Committee in April. 2020) in accordance with Group ESG Board of Directors, Other Management Committees, etc. Management Promotion Committee Regulations. This committee, which Group ESG Management Promotion Committee operates under the guidance of the president and under the chairmanship of the director in charge of corporate sustainability, consists of ANA HOLDINGS and Group company directors, executive officers, and the full-time Audit & Supervisory Board members of ANA HOLDINGS. The committee establishes core policies, formulates proposals, and deliber- ates matters related to ESG management. After deliberations, important issues are elevated to the board of directors, the Audit & Supervisory Board, and the Group Management Committee. Each Group company has an appointed ESG promotion officer (EPO) to oversee ESG and ESG promotion leader (EPL) to lead the ESG activi- ties of their respective organization. ANA HOLDINGS President & Chief Executive Officer Chief ESG Promotion Officer (CEPO) * Director in charge of ANA HOLDINGS Corporate Sustainability G r o u p c o m p a n e s i ESG Promotion Officer (EPO) * Selected by Group company directors Management Committee Related to ESG Promotion ESG Promotion Leader (EPL) 53 Sustainability Initiatives MATERIAL ISSUES Environment ANA Group ESG Commitments Reduce CO2 emissions from aircraft flight operations by 50% (compared to 2005) Eliminate CO2 emissions from all non-aircraft flight operations by 2050 Reduce our resource waste ratio to zero and reduce food waste, including in-flight meals, by 50% Continue initiatives toward conservation of biodiversity Basic Approach The ANA Group has introduced the ANA Group Environmental Principles and the ANA Group Environmental Policies. These principles and policies build on the ANA FLY ECO 2020 medium- to long-term environmental plan from fiscal 2012 to fiscal 2020 and include initiatives for reducing environmental impact. We recognize that global environmental issues, including climate change and biodiversity conservation, are quintessential management tasks, and we will continue striving to reduce our environmental impact. In fiscal 2020, the final year of ANA FLY ECO 2020, we have formulated long-term targets looking ahead to the year 2050. We are proceeding with the formulation of a medium-term environmental plan leading to the year 2030 to help us achieve these long-term targets. Global Trends The aviation industry is heavily dependent on fossil fuels, with 2016 ICAO Assembly of the Carbon Offsetting and Reduction approximately 2% of all CO2 emitted around the world said to Scheme, which is a scheme for achieving the CNG2020 goal. be generated from the aviation field. In recent years, there has been a growing sense of crisis CO2 Emissions Forecast and Reduction Targets about climate change issues, and the aviation industry is accel- erating its efforts to reduce CO2. The Paris Agreement was adopted at the 2015 United Nations Climate Change Conference (COP21). Prior to this, Carbon Neutral Growth 2020 (CNG2020) had been adopted in the aviation sector following a resolution of the 2010 ICAO (International Civil Aviation Organization) Assembly. The target of CNG2020 is to keep the global net carbon emis- sions from international aviation from 2021 at the same level. Additionally, the International Air Transport Association (IATA) has set the ambitious goal of reducing CO2 net carbon emissions by 50% by the year 2050 compared to 2005. Other initiatives have advanced across the industry to curb CO2 emissions. These initiatives include the adoption in the CO2 Emissions Emissions based on current, unchanged trajectory Carbon Neutral Growth 2020 Change in total emissions 100 50 Utilize emission trading schemes (purchase CO2 emissions credits) Improve flight operations Adopt new technologies Introduction of SAF CNG2020 (Left axis) Index: 2005 results = 100 2005 2010 2020 2030 2040 2050 Drafted based on the IATA Vision Information Disclosure on Response to Climate Change CDP TCFD Disclosure of information on corporate strategies for CO2 emissions and climate change. Disclosure of information analyzing the risks and opportunities posed by climate change to our business. 54 Science Based Targets (SBT) Greenhouse gas reduction targets based on scientific evidence consistent with the Paris Agreement. The ANA Group declared our commitment to the SBTs in May 2020. We are participating in a technical subcom- mittee creating reduction targets and rules for the aviation sector. Please visit our corporate website for more: https://www.ana.co.jp/group/en/csr/environment/ Progress Report: ANA FLY ECO 2020 Medium- to Long-Term Environmental Plan for FY2012–2020 Reduction of 20% (vs. Fiscal 2005 levels) in CO2 emissions per revenue ton-kilometers on international and domestic routes Limit total domestic route CO2 emissions to under 4.4 million tons / year on average Fiscal 2005 Fiscal 2019 Fiscal 2019 1.25 kgCO2/RTK 1.01kgCO2/RTK Limited to 4.0 million tons Reduce ground operations energy consumption by 1% annually on an intensity basis (compliance with the Act on the Rational Use of Energy) Fiscal 2019 9.1% reduction vs. previous fiscal year Complete implementation of noise control measures for international and domestic flight aircraft Complete implementation of air pollution control measures for international and domestic flight aircraft Fiscal 2019 100% Compliance with ICAO Chapter 4 Noise Standard for all aircraft (including leased aircraft) Fiscal 2019 100% Compliance with ICAO Emission Standards for all aircraft (including leased aircraft) Initiatives to Curb CO2 Emissions Adopt New Technologies Introduction of Fuel-Efficient Aircraft The ANA Group is actively introducing state-of-the-art aircraft to Introduction of Lightweight Cabin Seats We adopted aircraft seats devel- reduce CO2 emissions from aircraft. These aircraft include the oped jointly with Toyota Boshoku Boeing 787 and Airbus A320neo / A321neo, which feature Corporation on domestic routes. excellent fuel efficiency. As of the end of March 2020, fuel- These seats allow us to reduce efficient aircraft accounted for 70.3% of the Group fleet. The weight in-cabin by 195kg across ANA Group is also a launch customer for the Boeing 787. all aircraft versus traditional Consisting of 73 aircraft, our Boeing 787 fleet is the largest specifications. In turn, this among the world’s airlines. weight reduction has led to a reduction of approximately 15kl in annual fuel consumption per aircraft. 1 Save fuel through flight crew initiatives reversers Use single-engine taxiing and reduce usage of thrust • Reduce climbing resistance by raising flaps earlier after takeoff • Maintain engine RPMs at only the necessary levels during thrust reverser use after landing • Shut down one engine during post-landing taxi • Adopt / implement continuous descent approach and expand the number of eligible airports Save fuel by optimizing flight routes Save fuel in airport, equipment operations 2 3 While still ensuring safety, we can reduce the use of thrust reversers during landing, limiting engine output, and taxiing on the ground with a single engine after landing. These measures will lead to reduced CO2 emissions. Engine cleaning We can restore engine performance through regular cleaning of inside components using water. This main- tenance has been proved to lower the combustion temperature of the engine, improve fuel efficiency, and reduce CO2 emissions by approximately 1%. 55 50% reduction by 2050 Improve Flight Operations Sustainability Initiatives ENVIRONMENT Introduction of Sustainable Aviation Fuel (SAF) To prevent increasing CO2 emissions for 2021 and beyond, the ICAO Assembly adopted the use of renewable aviation fuels other than the conventional fossil fuels. This development requires the use of SAF, jet fuel made from sustainable sources such as veg- etable oil, animal fat, and waste biomass. Considering the SAF life cycle, it is preferable that SAF be locally produced for local con- sumption. Therefore, we are pursuing efforts toward the adoption of SAF together with relevant institutions and businesses inside and outside Japan for stable production both domestically and overseas. In October 2019, ANA received delivery at Haneda Airport of a new Boeing 777-300ER from the manufacturer’s Everett plant (Washington State, U.S.A.). This aircraft uses exhaust gas-derived SAF manufactured by U.S.-based LanzaTech. For this flight, ANA not only purchased and used SAF but also took the lead in trans- porting SAF from the factory, mixing the fuel, inspecting quality, and refueling. In this way, we acted as the main player throughout the supply chain. IATA-Hosted SAF Symposium Lecture (New Orleans, U.S.A.) The IATA hosted the SAF Symposium in New Orleans in November 2019. As a panelist, ANA stated that we would work with governments, related institu- tions, and businesses to ensure the stable production of SAF in Japan as well. Initiatives to Reduce Environmental Impact Carbon Offset Program In response to customer feedback, the ANA Group now offers Reduce Food Waste We have expanded in-flight meal reservations in First Class and the ANA Carbon Offset Program by class on domestic and Business Class sections of our international flights. This service international routes. This program is a mechanism to offset the helps us meet passenger requests for in-flight meals and elimi- amount of CO2 emitted by aircraft. We have chosen projects to nate the need to load extra meals. This service improves cus- support via this program that meet certain certification stan- tomer satisfaction, while reducing food waste. dards (J-VER, VCS, Gold Standard CER). ALL NIPPON AIRWAYS TRADING Co., Ltd. contributes to the reduction of food waste by donating surplus food and Initiatives as an Eco-First Certified Company beverage inventories resulting from the replacement of in-flight In 2008, ANA became the first in the transportation industry and the first airline to become a certified Eco-First Company. We received this honor in recognition of our environmental initia- tives and corporate stance that emphasizes social responsibility. One specific initiative recognized was our work to reduce environmental impact by recycling resources. Our efforts here include waste separation (glass bottles, PET bottles, and cans) generated on all international flights arriving in Japan. products for sale on domestic routes. Donations are made to Second Harvest Japan*, a certified NPO. * Japan’s first food bank, collecting foods that would otherwise become food loss and delivering it to people in need Exchanging Disposable Plastics for Eco-Friendly Materials By the end of fiscal 2020, approximately 70% of the total weight of all disposable plastic products used in-flight and in airport lounges will be eco-friendly materials, such as paper and bio- plastics. In addition, ANA supports the Plastics Smart campaign sponsored by the Ministry of the Environment, and we are engaged in further initiatives in this area. Utilize Emission Trading Schemes (Purchase CO2 Emissions Credits) Taking Action for Biodiversity We are exploring the potential for using ICAO-approved programs to trade emission credits (purchase CO2 credits), since it will become mandatory to offset increased CO2 emissions on and after 2021. We recognize that these credits are also an effective method for offset reduction. Initiatives in Non-Aircraft Operations Based on energy management standards established uniquely for and by the ANA Group, we reduced CO2 generated outside of aircraft operations by 4.4% compared with the previous fiscal year. We achieved this result by upgrading Group-owned and leased facilities with energy-saving equipment and by using renewable energy, including solar power generated in-house. In fiscal 2020, we began purchasing and expanding our use of electricity from renewable sources. ANA, ANA Catering Service Co., Ltd., and ANA Foods Co., Ltd. received the Excellence in Energy Efficiency Award (S Class) certifi- cation under the Act on the Rational Use of Energy of the Ministry of Trade, Economy and Industry for a fifth consecutive year. Initiatives for Environmental and Ecosystem Conservation The ANA Group continues to be engaged in environmental year, in collaboration with TRAFFIC*1, ANA created an educa- tional program in partnership with ROUTES*2, and we offer education programs both inside and outside the Company. In conservation activities. Group employees participate in activi- December 2019, we held a workshop for airport staff in collabo- ties that include the ANA Forest of the Heart project in Minami ration with NARITA INTERNATIONAL AIRPORT CORPORATION. Sanriku, Miyagi Prefecture, as well as invasive plant control activities at Yambaru National Park in Okinawa Prefecture, the Team Chura Sango coral reef conservation project in Onnason Village, and more. Support for the Keidanren Declaration of Biodiversity In June 2020, we announced our support for the Revision to Declaration of Biodiversity by Keidanren and Action Guidelines In 2018, ANA signed the Buckingham Palace Declaration, a toward the realization of a sustainable society through the statement aimed at eradicating illegal wildlife trade. That same construction of a world that coexists with nature (a society in harmony with nature). *1 TRAFFIC: An NGO that surveys and monitors wildlife trade. A joint venture between the World Wildlife Fund (WWF) and the International Union for Conservation of Nature (IUCN). TRAFFIC sponsors activities through a global network, mainly through bases in ten countries. https://www.traffic.org/ *2 ROUTES: Abbreviation of Reducing Opportunities for Unlawful Transport of Endangered Species. ROUTES is an international collaborative platform for dealing with criminal activities involving the illegal trade of wild animals. The organization implements a variety of programs, mainly in countries / regions where illegal transac- tions occur frequently. 56 Education program booklet Workshop on eradication of illegal wildlife trade 57 Sustainability Initiatives Sustainability Initiatives MATERIAL ISSUES Human Rights ANA Group ESG Commitments Responsibility to respect human rights: Based on the United Nations Guiding Principles on Business and Human Rights, make every effort to promote the respect of human rights. Promote responsible procurement and supply-chain management: Manage and promote environment-conscious procurement with respect to human rights and build a fair and transparent supply chain. Basic Approach The ANA Group has been working to ensure human rights in accordance with the global standards provided in the United Nations Guiding Principles on Business and Human Rights. In April 2016, we established the ANA Group Policy on Human Rights. We based this policy on the International Bill of Human Rights (the Universal Declaration of Human Rights and the two International Covenants), the International Labour Organization Declaration on Fundamental Principles and Rights at Work, the Ten Principles of the United Nations Global Compact, and the United Nations Guiding Principles on Business and Human Rights. We also encourage our contrac- tors and suppliers to adopt similar policies. Please visit our corporate website for more: https://www.ana.co.jp/group/en/csr/human_rights/ Prevent the Use of Airplanes in Human Trafficking After conducting training for all ANA cabin attendants, we Eradicate Corruption We emphasize preventive measures in regions considered began a program in April 2019 to report potential cases of relatively high-risk among the countries served by the ANA human trafficking found in-flight to ground facilities. Group. In 2020, we conducted another human trafficking prevention Following Southeast Asia in 2018, we held seminars on program to raise awareness among all ANA cabin attendants. competition and anti-bribery laws in China in 2019 for ANA The program covered international protocols, notification pro- Group employees and employees on overseas assignments. cedures from within the aircraft, and other response measures. Stakeholder Engagement Communication with Our Employees To deepen an understanding of respect for human rights, we Local Dialogue Overseas (Thailand) We recognize that the fisheries industry in Thailand presents conduct education and awareness activities through in-house potential human rights risks in the ANA Group supply chain. training for new employees and newly appointed managers. In June 2019, we visited Thailand for the purpose of under- In addition, we have been conducting annual e-learning standing the state of migrant workers and learning about the courses for all Group employees as of fiscal 2015. The topic of response to issues in the fishing industry. We performed local the fiscal 2019 e-learning course was to leave no one behind. on-site visits and exchanged views with international institu- The course was available to approximately 44,000 employees, tions, local NGOs, and others. We will continue human rights initiatives, recognizing that respect for human rights lies at the very foundations of the philosophy of of which 92% participated. the SDGs. Issuing the Human Rights Report The ANA Group issued our first Human Rights Report in Japan in 2018, aiming to promote communication with stakeholders through active dissemination of our initiatives to respect human rights. The Group has continued 人権報告書 2019 to issue these reports annually since then. Involving Business Partners We inform all contractors and suppliers of the ANA Group Purchasing Guidelines. We work together to ensure their work- place environments uphold respect for human rights. Note that we are preparing to revise the ANA Group Purchasing Guidelines with the cooperation of third-party insti- tutions to ensure even more responsible procurement. In October, we visited a company involved in the production of in-flight meals for ANA flights departing from Thailand. There, we conducted interviews about initiatives related to traceability and exchanged views with local NGOs and others. Major Initiatives In 2016, we conducted a review to identify potential risks to human rights related to business activities across the ANA Group and at all locations where we serve. Our evaluation identified the following four key issues for risk prevention. Note that though we conducted a re-assessment to identify risks in 2019 based on advice from outside experts, we confirmed that there are no changes at present to the four existing key issues, as follows. Survey on Employment Conditions of Foreign Workers in Japan In 2019, we summarized precautions to take when hiring non- Strengthen Supply Chain Management of In-Flight Meals We used our participation in the Bluenumber Initiative*2 (in Japanese nationals and shared these with the entire Group. 2017, ANA HOLDINGS was the first Japanese company to join) Further, we secured the cooperation of an independent third- to register more than 200 partners and producers connected to party institution (Caux Round Table Japan*1) to conduct inter- the ingredients in our in-flight meals. We also conducted a test views with contractor-employed foreign workers involved in registration of more than 2,000 articles. ground handling services at airports. We seek to build a highly transparent food supply chain that In 2020, we will begin to identify employment conditions for includes respect for human rights and environmental conserva- foreign workers in the supply chain, leveraging technology tion in the production process. systems in the process. 58 Exchange of views with local NGOs in October @Caux Round Table Japan Regular Reviews from Human Rights Experts The ANA Group holds advisory meetings with human rights experts on a regular basis. In October 2019, we invited four human rights experts from the Danish Center for Human Rights*3, the Institute for Human Rights and Business*4, and the World Benchmarking Alliance*5 to evaluate the progress of the ANA Group’s initiatives given the advice received the previous year. The experts provided advice for stronger information disclosure, new human rights issues requiring caution, places to improve our management systems, and more. *1 Caux Round Table Japan: The Caux Round Table is a global network of business leaders working to realize a fair, free, and transparent society through business. *2 Bluenumber Initiative: The Bluenumber Initiative is a global program to establish food supply chain platforms by Bluenumber Foundation. *3 Danish Center for Human Rights: The Danish Center for Human Rights was established by the Danish Parliament to gather information and develop tools related to human rights and business. *4 Institute for Human Rights and Business: Founded in 2009, the Institute for Human Rights and Business is an international think tank active in the field of business and human rights. This Institute is a leading driver of initiatives in this field. *5 World Benchmarking Alliance (WBA): A benchmarking organization established primarily by the United Nations Foundation, Index Initiative, and British insurance company Aviva. This organization develops benchmark indicators to evaluate company contribution levels to a sustainable society. @Caux Round Table Japan 59 MATERIAL ISSUES Diversity and Inclusion ANA Group ESG Commitments Human resources development to support sustainable growth: Develop human resources and a sustainable work environment in which employees raise their productivity. Responding to the Diversity of Our Customers: Respect the needs and diversity of each customer, and promote universal services in both products and services Basic Approach Creating an Environment for Customer Comfort (Facility Legacy of Diversity) We will continue to create services, facilities, and equipment offering even greater comfort and convenience in any scenes, from pre-departure through arrival. Websites Airports (Information) Population demographics are changing in Japan and our customers continue to diversify globally. In this environment, continuing to be chosen and trusted by customers will be crucial for the future of ANA Group growth. We will accelerate initiatives aimed at providing world-class inclusive and universal services in an effort to fulfill our responsibility as a public transportation entity and build an inclusive society in which everyone can live together. Create accessible website environments for all to use, regardless of disabilities Remote sign-language services at counters / Morph resin wheelchairs Airports (Facilities) Aircraft Implementation Structure One pillar of our corporate strategy is the FY2018–2022 Universal Service Strategy, which calls for us to respect the diversity of each customer and provide ANA Group services that every customer can enjoy comfortably and with peace of mind. We carry out initiatives to improve our facilities and services, while at the same time, we identify issues in any scenes, from pre-departure through arrival, and implement action plans to improve convenience in every scenario. Facility strategy Comply with laws and regulations, as well as implement accessible websites, airports, and aircraft on-board facilities and equipment Service strategy Encourage the barrier-free mindsets through stronger education, training, and systems and benefits for all employees Pre-departure Airport In-flight Arrival Major Initiatives For Customers to Experience Air Travel Comfortably and with Peace of Mind In July 2019, we launched the “Assistance Information Registration Service” to receive and store information for cus- tomers in our ANA Mileage Club member database who need special assistance. The system saves customers the time and effort of providing the details of the assistance required every time they make a reservation. In turn, this facilitates smooth reservation procedures. Information Stored • Walking ability • Information on wheelchair to be checked in (manual, electric, foldable or non-foldable, size, spare battery) • Whether or not you have a visual / hearing impairment • Medical equipment to be used on board the aircraft • Assistive equipment to be loaned requiring special arrangement • Assistance required at the airport or on board, etc. Installation of low counters at 50 airports in Japan / Wider boarding gates ANA-original in-flight wheelchairs (available in all aircraft) / Wheelchair-accessible restrooms on selected narrow-body aircraft Creating a Society with Accessibility for All Beyond air transportation, ANA plans to leverage MaaS* as a necessary assistance information with and among relevant mechanism to improve accessibility and convenience for all organizations. customers. Universal MaaS is a service that enables customers In June 2019, ANA started an industry–academic– who are hesitant to travel, due to disability, age, or other reason government joint project with Keikyu Corporation, Yokosuka to enjoy travel without stress. The service facilitates seamless City, and Yokohama National University. Here, we began proof- transportation by providing information on public transportation of-concept tests for customers traveling in wheelchairs. We will fares, barrier-free connection routes, and so on. The system continue to work together with our stakeholders, aiming to also shares and links customer location information and launch social implementation by the end of fiscal 2020. Joint Press Conference Proof-of-Concept Test * Mobility as a Service (MaaS): Integration of various forms of transport services into a single mobility service on demand. 60 61 Sustainability Initiatives DIVERSITY AND INCLUSION Human Resource Development to Drive Barrier-Free Mindset Practices (Service Legacy of Diversity) We have implemented a range of initiatives to ensure that every employee embraces a barrier-free mindset in society and that allows us to offer world-class inclusive and universal services. We are creating skies that value and welcome all people through programs that eliminate fear of air travel for special needs school students, as well as through ongoing education for employees. Hands-On Open Seminar for Universal Services Participants interact with the elderly and persons with disabili- Universal Service Refresher Training We provide e-learning education four times every year to raise ties to learn about issues from the perspectives of those the level of the universal services pursed by the Group. concerned. ANA’s Sora-Pass Classes We provide a Sora-Pass* class for children who are not used to traveling on aircraft. Here, children learn the boarding process from the airport to the cabin of the aircraft. In 2019, we launched an ANA Sora-Pass class (boarding support class) for students using wheel- chairs and students with developmental disabilities. ANA Group employees visit schools and teach classes to students who use ANA flights for school travel to alleviate the anxieties about air travel. * Sora-Pass: Air Travel Passport 11 Point 22 Point ANA instructors teach classes appropriate to the characteristics of the children’s disabilities Experience-based curriculum allowing students to easily understand boarding an aircraft 33 Point Instructors are current ANA employees One class is a 60- or 70-minute session. ANA instructors visit schools and teach classes in which students learn the pro- cess from boarding to disembarking in the classroom, after which they experience the process for themselves. Students experience sitting in on-board wheelchairs, security checkpoint proce- dures, and more. ANA Group employees who have experi- ence as cabin attendants or ground staff serve as instructors (instructor job experi- ence depends on program content). ANA Wing Fellows Vie Oji: Diverse Human Resources Shine and Excel ANA Wing Fellows Vie Oji was established in June 1993 and was accredited as a special subsidiary under the Act on Employment Promotion, etc. of Persons with Disabilities in December 1993. Since then, the company has operated busi- nesses in diverse locations, business types, and with diverse human resources. At the same time, we have pursued diverse work styles in the ANA Group, serving as a leader of diversity and inclusion. Guided by the vision that all employees are valuable, this company contributes to increasing the corporate value of the ANA Group. Manufacturing and External Sales Business Airline-Related Business The company provides hospitality and The ANA Aoshima Factory produces This business supports the Group high-quality customer service through and sells hand made paper and through various services, including a bakery division, convenience store woodwork products under its own management of ANA uniforms, operations center, and the ANA brand name, using raw materials mileage-related services, and digital Wonderful Day Café. from the Miyazaki area to introduce management of aircraft maintenance Aoshima to the world. records. Universal Standard Consulting: Leveraging Strengths for New Value We established the Universal Standard Consulting business unit in August 2016. The unit provides consulting services to spread the adoption of universal environments inside and outside the ANA Group. The unit suggests high-quality universal standards based on the perspectives and sensibilities of people with disabilities and our own ANA’s heartfelt service. Specifically, the unit verifies equipment at airports and on aircraft, as well as organizes workplace environment seminars for ANA Group employees. The unit also inspects hotels and accommodation facilities, in addition to promoting the employ- ment of visually impaired persons. 62 63 Promoting Universal Services through Group BusinessesSustainability Initiatives MATERIAL ISSUES Regional Revitalization ANA Group ESG Commitments Utilizing innovation to solve social issues: Provide new value through avatars, drones, MaaS, etc., and cooperate with different industries Regional revitalization: Contribute to regional revitalization Basic Approach Japan is famous for its traditional culture and tourism attractions. On the other hand, Japan faces concerns about falling populations in rural areas and the gradual decline of traditional industries. The ANA Group works together with corporations, NGOs, NPOs, local governments, and others in order to develop long-term demand for the Air Transportation Business, as well as to expand the ANA economic sphere (including Non-Air Business). In addition, we will contribute to regional revitalization through tourism promotion in this era of the new normal by providing informa- tion about tourist area safety and security. Implementation Structure The ANA Group Regional Revitalization Meeting, under the Tourism Development section of ANA Marketing and Sales, organically integrates initiatives across Group companies to maximize impact. This meeting is responsible for advancing strategies that promote tourism for regional revitalization. L o c a l G o v e r n m e n t , D M O s , e t c . ANA Sales Domestic Offices Government Agencies ANA Tourism Development Tourism Promotion Tourism Strategies ANA HOLDINGS INC. ANA Strategic Research Institute Secondments, consulting, surveys, etc. Actions ALL NIPPON AIRWAYS TRADING ANA Group advertising media, hometown tax, merchandising, etc. ANA Group Regional Revitalization Meeting ANA Sales Travel package planning, promotion, and sales ANA Business Solutions Provide ANA Group expertise ANA Cargo Expansion of export regional / local products ANA department overseas HQs, Offices Marketing and promotions for inbound tourism Group companies Cross-organizational initiatives Major Initiatives Regional Revitalization through Tourism Promotion Social Contribution • Offer consulting services leveraging ANA Group human resources • Participation in reconstruction activities • Discover and market tourism resources throughout Japan (Supporting regional recovery after large-scale disasters) • Develop, distribute, and sell local products • Support environmental and biodiversity conservation programs • Establish systems to host foreign visitors to Japan (Project to conserve coral reefs in Okinawa, etc.) • Stage promotional campaigns involving air transportation services • Develop next-generation education programs • Promote domestic / international tourism via ANA flights (Aviation Class, career training, etc.) • Develop training programs incorporating ANA Group expertise • Social contribution programs in overseas areas we serve • Expand directly related populations through cross-industry collaboration (Educational support, tourism resource conservation, etc.) • Leverage innovation to resolve social issues Please visit our corporate website for more: https://www.ana.co.jp/group/en/csr/regional_creation/ Expand Directly Related Populations through Cross-Industry Collaboration Proof-of-Concept Test for Air Ticket Subscription Service Utilizing Vacant Seats We are implementing initiatives to expand reach to directly an air ticket subscription service utilizing vacant seats in and between regional routes. Our concept here is to support the expanding work styles and lifestyles for people who have related populations, including promoting lifestyles rooted in established multiple bases while traveling between the Tokyo multiple bases, promoting workcations, and creating second metropolitan area and rural areas, or from one rural area to hometowns. Our intent here is to solve population declines in another. We are working with ADDress Co., Ltd., a company outlying regions, population density in the Tokyo metropolitan that offers unlimited flat-rate residence services across Japan area, and other social issues. We hope to support lifestyles that using vacant homes in rural areas. take advantage of ever-expanding work styles and lifestyles due to the shift to remote work caused by COVID-19. In January 2020, we launched a proof-of-concept test for Creating New Travel Value through Journey+ We have established and operate the Journey+ plat- form to connect users and local communities. Journey+ builds communities based on the keywords of business succession issues, resolution Group Photo: Journey+ in Southern Kyushu of regional social issues, regional revitalization, and taking on new challenges. Under this platform, we visit innovators and leaders active in a given region to consider the real social Materials about the ANA collaboration with ADDress Co., Ltd. issues facing that area. Promoting Domestic and International Tourism via ANA Group-Operated Flights In April 2018, we launched Japan Travel Planner, a travel infor- To encourage inbound tourist (mainly longer-term travelers mation website for visitors to Japan. This website is a part of from Europe and the U.S.) to visit other areas within Japan, we our efforts to attract travelers to visit Japan and revitalize local are collaborating with online travel agents* to offer activities economies. As of fiscal 2019, Japan Travel Planner has grown and sharing economy services passengers can enjoy during into an important communication platform for passengers their stay. arriving from overseas, offering information on more than 800 We are also pursuing cooperation with various areas over- tourist spots in 11 languages. The website hosts more than seas, and we will continue to contribute to the revitalization of 600,000 site visitors on average monthly. We encourage tour- local economies by stimulating inbound tourist demand. ists to visit many different parts of Japan through a seamless connection with the ANA flight booking website. * Travel agencies doing business solely online Utilizing Innovation to Solve Social Issues Using Avatars to Build New Regional Communication Infrastructure avatarin Inc., the first-ever start-up launched by ANA HOLDINGS, is engaged in the avatar business. This business contributes to regional revitalization by offering communications that bridges physical distances and new infrastructure. During the 2020 Golden Week holidays and in cooperation with Oita Prefecture, avatarin Inc. installed a newme remote-controlled robot at three locations in the Oita Funai Gobangai Shopping Street. This robot offers the opportunity to experience remote shopping. Even in situations where cross-prefecture travel is made difficult due to COVID-19, these avatars enable shopping from anywhere in the country, contributing to greater local sales. Shopping with the newme avatar 64 65 Sustainability Initiatives Business Foundations Supporting Corporate Value To share our values with all stakeholders, the ANA Group has established a foundation for appropriate management resource allocation and rapid management decision-making. What Does the ANA Group DNA Mean to You? 66 The DNA of experience to overcome difficulties and take on challenges, moving forward into the future and growing as a strong Group through relentless effort. Yuichi Nishiyama B777 Pilot 67 Safety Strengthening Safety as a Business Foundation, Passing Down Safety as a Culture Safety is the unequivocal mission of every business in the ANA Group. Solid Approach to Safety Safety is the absolute value underlying every ANA Group cor- The corporate culture based on mutual understanding and porate activity. Safety is the foundation of everything we do. Our trust form relationships among employees across various job dedication to safety extends to every part of our group busi- descriptions to support all aspects of the ANA Group business. nesses, including food services, cargo, and information. Our In every workplace, we post the ANA Group Safety Principles everyday efforts to improve safety and conscientious response and Course of ANA Group Safety Action, which are pledges to customer expectations build confidence and trust with soci- shared by all ANA Group employees. ety. Faced with the new threat of COVID-19, we are implement- ing all possible measures, providing a sanitary environment and ensuring safety against the risk of infection. ANA Group Safety Principles Safety is our promise to the public and is the foundation of our business. Course of ANA Group Safety Action Strictly observe rules & regulations, and all actions will be grounded on safety. As a professional, place safety as the #1 priority while keeping your health in mind. Safety is assured by an integrated management Address any questions and sincerely accept the opinions of others. system and mutual respect. Safety is enhanced through individual performance and dedication. Information will be accurately reported and shared in a timely manner. Continuous self-improvement for prevention and avoiding reoccurrence. Lessons learned from experiences and increased skills for risk awareness. ANA Group Medium-Term Safety Promotion Plan Based on the FY2018–2022 ANA Group Medium-Term Safety Promotion Plan, we have improved the safety risk management process, focusing on prevention as a key component. In fiscal 2020, we began the following measures in pursuit of our vision to become a lead- ing airline with a world-class “Safety system and Culture” and create a sense of safety for customers. 1. Offering a Sense of Safety for Our Customers Customer questionnaires and interview results help us identify the points at which customers feel a sense of safety when using ANA Group services. We offer peace of mind for customers through individual Group employee performance and dedication to safety. C o m m u n c a t i i o n Sense of Safety 2. Strengthening Safety Structures We improve our safety risk management process (see the following section) through safety structures that conform to global standards Customer Customer and other measures. We strengthen our safety systems by visualizing risks and mea- sures, analyzing flight data, and using indicators to identify the signs of unsafe events. At the same time, we work together with other airline companies to improve safety across the airline industry. 3. Putting Safety Actions into Practice We analyze the safety actions and reflect the results in our training and practice to strengthen our safety structures. Safety Implementation of Implementation of Safety Measures Safety Measures Safety Structures Education / Education / Awareness Awareness Safety Culture ANA Group ANA Group 68 Four Axes of Safety Risk Management The ANA Group has adopted a PDCA cycle for safety management for (1) aircraft operations, (2) passengers, (3) employees (front line), and (4) security. We have set numerical targets for unsafe events with respect to these four axes. At monthly Group Safety Promotion Committee meetings, which holds the final decision-making authority within our safety implementation structure, attendees report on high-risk events and issues, discuss countermeasures and risk reduction, and review safety targets and achievement rates. Four Axes of Safety Risk Management Operations Passengers Employees (front line) Preventing accidents / major incidents Preventing harm to the bodies and lives of passengers from departure to arrival Preventing dangers to ANA Group employees and others Security Advance risk identification and prevention for illegal acts, such as terrorism and hijacking incidents The Changing Environment and the Unchanging Mindset toward Safety Awareness The ANA Group also faces significant changes in the business environment due to COVID-19. In an environment where the number of flights are significantly reduced or suspended, employees face three different task categories that can result in human error. Three Task Categories (First Time, Procedure Changes, and Task after Extended Time Gap) First Time Task Uncommon tasks Procedure Changes New or different procedures and environments Task after Extended Time Gap Performing a task an extended time away / away from the process Every ANA Group employee uses foresight to anticipate risks, sharing information and using the assertion* method with coworkers to respond appropriately to these three task categories, leveraging organization management to prevent unsafe situations. * Assertion: Employees respect each other and express their opinions in a constructive and cooperative manner, which is important behavior for a team to ensure safety. Every employee strives to create an atmosphere in which everyone feels free to express themselves and voice their concerns to prevent unsafe events. Passing on Lessons Learned from Air Accidents—Forest Dew Park On July 30, 1971, an ANA aircraft and a Japan Self-Defense Force aircraft on a training flight collided and crashed over the city of Shizukuishi, Iwate Prefecture, resulting in 162 causalities. The Irei no Mori monument has been well kept and maintained by the local community in Fuji City, Shizuoka Prefecture. Every year, more than 500 ANA Group employees visit to clean the forest and for safety enlightenment. In 2020, which coincides with the 50th anniversary of the accident, the monu- ment was rebuilt and the location renamed to Forest Dew Park. The name was changed to meet the wishes of those concerned to make the monument more familiar and more casually accessible to those who are unfamiliar with the acci- dent. We will continue to maintain the new Forest Dew Park together with the foundation for the Irei no Mori and stakeholders in the local community, etc., as Monument for Aviation Safety we strive to preserve the memories of ANA’s last casualty involved aircraft accident and maintain the location as a place reflect- ing an oath for safe aviation operations. 69 Business Foundations Supporting Corporate Value Safety ANA Group Safety Education Center (ASEC) We established ASEC in 2007 in Shimomaruko, Ota-ku, Tokyo. This activity was our response to a proposal from an employee who said that ANA should create a location to preserve the memories of past accidents. In October 2019, we relocated the ASEC to the newly Toward Ensuring Safety built ANA Group Training Center (ANA Blue Base). Configuration of ASEC The facility is located on the second and third floors of the ANA Blue Base (ABB) and consists of three spaces. 1 The Way Theater 2 The Sky of the Pledges 3 Active Lounge The theater is a space where visitors come face-to-face with the accidents through the use of videos and the exhibition of parts of the crashed aircraft. This is a space where ANA Group employ- ees engage with the memories of their senior employees who experienced an accident and converse with them in spirit. The lounge is a space to learn how to notice human errors through experience and discussion with colleagues. Overview of the Education Programs Firsthand Experience of the Tragedy of Accidents This program allows participants to come face-to-face with the acci- dents through the use of videos and records from the past. Firsthand Experience of Real Situations that Cause Human Errors This program allows participants to learn the mechanism where human errors occur through discussions. Putting Safety Actions into Practice The purpose of this program is to allow participants to conduct safety activities in their workplaces follow- ing their declaration of safety activities. The new ASEC offers programs that allow participants We raise awareness of safety through three concepts that to engage actively and create safety together with other reflect the ideas under which we created the center: Look participants through education, as well as to experience the truthfully at accidents, look truthfully inside, and look truthfully creation of peace of mind for customers. The ASEC also uses at our colleagues. Under these concepts, the ASEC strives expertise from inside and outside the Group, introducing the to raise safety awareness through safety education and latest information equipment to transform the center into a strengthen the culture of pursuing safety without compromise, learning facility that allows employees to conduct safety which forms the foundation for our management. activities in their workplaces. Strengthening the Safety Management System to Address Alcohol Issues On May 1, 2020, ANA received a business improvement order height of efforts by the entire airline industry to prevent the from the Minister of Land, Infrastructure, Transport, and Tourism recurrence of alcohol issues. We apologize once again for to ensure the safety of air transportation in relation to a drinking the concern and trouble we caused our customers and incident by our flight crew that occurred at Fukuoka Airport in stakeholders. November of the previous year. The incident recurred at the Future Measures The ANA Group will solve alcohol issues through the following key measures. 1. Ensure Alcohol Testing (Set Up a Strict Testing Procedures) 2. A Personal Transformation in Each Employee (Develop Responsible Drinking Behavior) • In addition to the legally mandated alcohol testing, conduct a pre-test and report from home or hotel before work • We implemented an initiative to develop responsible drinking habits among our employees, called the TEKKIN INITIATIVE. • Strengthen management systems by creating an alcohol test management system in conjunction with a facial recognition system, etc. • We are improving the educational system and developing work- place leaders to ensure that all employees are aware of the alco- hol issue and they must exercise self-control. Pre-test Legal test OK OK Plan approval Alcohol Test Management System ZERO! ONE! TWO! Do not drink before work and if you are in poor health. Do not encourage drinking for non-drinkers. The right amount of drinking for those who are intolerant to alcohol is one drink. The right amount of drinking per day is two drinks. Do not drink on at least two days a week. * One drink = 0.5 units (10 grams of alcohol) 3. Organizational Support • Strengthen mutual support by developing and placing workplace support leaders and collaborating with, for example, medical institutions • Collaborate with relevant institutions and consider building a support program compliant with the airline industry standard Mutual Support Workplace peer consultant / supporter Referral and consultation from internal and external expert organizations as necessary 4. Strengthening the Safety Management System for Alcohol Consumption (Constant Optimization by Management, on a Workplace Level, and by Experts) • Internal auditing, consultation, and monitoring implemented to identify and improve underlying issues • Strengthen corporate-level management by introducing commit- tees formed by outside experts; form a cooperative council together with the labor union Outside Experts (Committee) Corporate Management Actual Situation Cooperative Council with the Labor Union Constant optimization using the PDCA cycle 70 71 Business Foundations Supporting Corporate Value Human Resources Sustainable Growth Focused on and Inspired by Our People Employee diversity is what enables us to bring the Group’s power to bear. Promoting Diversity and Inclusion Under our Diversity and Inclusion Declaration (“D&I Declaration”), the ANA Group seeks to become a corporate group that allows every employee to exercise their strengths fully and to expand those strengths to their maximum potential. Basic Approach to Human Resources Human resources are the greatest asset of the ANA Group. Our people are the source of our ability to respond flexibly, to overcome Diversity & Inclusion Declaration Diversity Inclusion challenges, and to grow sustainably, even in an environment that changes significantly. We are building stronger mechanisms to create We will: new value, leveraging our people as the source of our capabilities to achieve our vision of becoming the world’s leading airline group in customer satisfaction and corporate value improvement. Establishing a Mechanism for Sustainable Growth Focused on and Inspired by Our People Human Resources Diversity and Inclusion (D&I) Ease of Work Fulfillment of Work ANA’s Way Digital Improved Engagement Promoting ANA’s Way Enhanced Basic Quality Enhanced Productivity Generating Innovation Improved Customer Satisfaction Improved Corporate Value Sustainable Growth We strive to instill an understanding of our Mission Statement In 2019, we reorganized the ANA’s Day Training for all group and Management Vision, developing and evolving ANA’s Way employees, returning to our founding philosophy of hardship as an ingrained part of our corporate culture. We also encour- now, yet hope for the future and wakyo (close cooperation). age organizational and human development on an ongoing We also hold discussions for the sustainable growth of the basis to manifest the ANA Group identity. ANA Group. Major Measures ANA’s Day Training: Passing Down the ANA Group Identity This training program for all Group employees aims to make employees familiar with our founding philosophy and the words of our founders. Here, we pass on our shared, important values, and help put ANA’s Way into practice. ANA TIMES: A Group Newsletter Fostering Unity This monthly newsletter is published online for all employees. The newsletter promotes action through important management topics, the current state of the ANA Group, and employee- focused articles. あ ん し ん 、 あ っ た か 、 あ か る く 元 気 ！ A N A G R O U P M A G A Z I N E 特 集 中期経営戦略を知る！ A N A グル ープ の 未 来 に 向 けて 2019 4 VOL.8 持ち帰りOK! 表紙の ひとたちは誰！？ 詳しくは裏表紙へ！ MONTHLY TOPICS NEWS PICK UP! My ANA Bookをつくろう！ HELLO 2020 PROJECT通信 アスリート対決 表紙のひとたち Good Job Program: Fostering a Culture of Gratitude and Respect We promote the Good Job Program in which we share good practices from each workplace companywide. The program also communicates mutual gratitude over the Group intranet and via Good Job Cards, an initiative that goes beyond company and department borders. A total of 600,000 cards were issued in fiscal 2019. ANA’s Way Survey: A Regular Diagnosis of Employee Satisfaction This survey is conducted yearly to increase employee satisfaction and, in turn, customer satisfaction and corporate value. A total of 39,286 people across the 46 ANA Group companies responded to the fiscal 2019 survey, representing a response rate of 96.1%. • Consider Diversity & Inclusion as the source of innovation and value the diversity of our employees. • Endeavor to create a workplace where each person can fully demonstrate his or her strengths. • Create an ANA Group where each person can work with spirit and purpose, to generate unwavering trust and constant innovation. Innovation Establishing a Group D&I Promotion Department In conjunction with our D&I Declaration in April 2015, we estab- lished a dedicated organization within the Human Resources Department to promote the active participation of diverse human resources. This organization promotes environmental improvement, fosters culture, and encourages changes in paradigms. In April 2020, we established the new Group D&I Promotion Department, aiming to strengthen our D&I promo- tion function. In addition to the diversity of attributes such as age, nation- ality, gender, and disability, we respect diversity of viewpoints and beliefs arising from values and experiences not physically observable. We continue to strengthen our mechanism for promoting D&I throughout the Group and in our culture to leverage diversity as a strength that drives greater reform. We will accelerate new value creation by helping employees Group D&I Promotion Department Members work with greater enthusiasm and fulfillment, generating inno- vation and improving productivity. Major Measures Building a Foundation for D&I Promotion: The 5th D&I Forum This annual one-day event brings together around 200 key players in D&I promotion across all group companies to further promote understanding and encourage action. Ikuboss Initiative: Internal Communication from Top Management Top management provides examples through messages to Ikubosses and by issuing their own internal Ikuboss Declarations. Work–Life Balance: Supporting a Balance Between Work and Childcare / Nursing Care We hold seminars, provide e-learning courses, distribute handbooks, and take other actions to support balance between work and childcare / nursing care. 72 73 Business Foundations Supporting Corporate Value Human Resources Health Management Encouraging Work-Style Reforms and Kaizen The ANA Group announced the ANA Group Health Management We encourage Quality of Life (QOL) and improved corporate To promote D&I and health management, as well as to build an environment in which people can work with enthusiasm, it is essential Declaration in April 2016. We believe that our employees are value through employees who engage in their work in physical that we transform the awareness and work styles of all employees. the engine that drives sustainable growth together with society, health, mental health, and passion. The ANA Group strives to improve productivity, driven by the commitment of management. We use the time saved to transform and that our employees are who embody the motto, Trustworthy, In fiscal 2020, ANA HOLDINGS INC. was selected as a operations with new ideas and promote the work–life balance of every employee. Heartwarming, Energetic!. Certified Health & Productivity Management Organization The ANA Group has appointed a Chief Wellness Officer who Recognition Program (White 500) Company for the fourth con- is a director responsible for Group health management. We secutive year. ANA AIRPORT SERVICES Co., Ltd. was selected Encouraging Telework We are creating a culture in which every employee can play an also appoint Wellness Leaders at each Group company. for the second consecutive year, and ANA Osaka Airport Co., Ltd. active role, and in which organizations and individuals maxi- Through this leadership, the ANA Group ensures that Group was selected for the first time. Seven other Group companies mize results. We are working to evolve toward flexible, diverse employees, companies, and health insurance associations were selected as Certified Health & Productivity Management ways of working that are not limited to specific times or places. work in unison for health management. Organization Recognition Program companies, reflecting how We implemented a telework system for office work in 2010, the Group presses forward together in pursuit of initiatives. Four Perspectives on ANA Group Health Management: Developing an Environment Encouraging a Long Career in the ANA Group The ANA Group is focused on the following four priority measures. We maintain and improve the physical and mental health of our employees through regular situational monitoring and by analyzing / responding to positive impact and challenges. Health Management Initiatives 1 • Create an environment for health management throughout Disease Prevention Initiatives 2 • Enhance measures for each target employee the group Standardize health checkup list and determination criteria Establish health management offices at each branch and construct a health management system Strengthen cancer prevention measures for all Group employees Adopt policies regarding women-specific diseases introducing virtual desktop environments. In January 2017, we expanded the scope of places, eligible employees, and number of work days related to telework. We continue to intro- duce a variety of measures encouraging telework, including a special hometown telework program we adopted in fiscal 2019. As a result, we were able to transition smoothly to telework, even during the COVID-19 pandemic. The situation has led to a review of work styles and details from new perspectives. Encouraging Kaizen We are working to establish kaizen as a style of work within the ANA Group. This process of continuous improvement is designed to find and resolve problems in daily work, creating room to breathe mentally and increase time for customers and • Create a post-checkup follow-up cycle conducted by industrial • Establish and monitor health management indicators across all employees. physicians Group companies Mental Health Initiatives 3 • Deploy mental health-related measures to all Group companies Safety and Health Initiatives 4 • Develop safe, secure workplace environments Educate employees at the workplace and management level Deploy measures to prevent occupational accidents Establish a strong safety and health management system • Conduct follow-ups by occupational health staff and activate • Deploy cross-organizational educational activities driven by the workplace communication to encourage prevention activities of health and safety committees Mental Health Initiatives As the social environment changes and causes rapid changes in the working environment, healthy minds become an even more important factor in the quality of life and work. The ANA Group has introduced measures in line with the four types of mental health care described in the Ministry of Health, Labour and Welfare’s Guidelines for Maintaining and Improving Workers’ Mental Health. Care through External Consultation Desks Care through Occupational Health Staff Care by Line Supervisors Self-Care Consultations through external specialists Health consultations though industrial physicians / nurses Managers address mental health problems, including workplace environment and active communication improvements Self-awareness through stress checks, voluntary consultations Remote conferencing using the latest newme communication avatar Implementation Structure Promoter (Office / Promoter (Office / Department Manager) Department Manager) Bottom-Up Kaizen Chief Dedicated Support Workplace Members We have implemented kaizen in ANA operations depart- ments, our head office, and the Marketing & Sales Department. We have also expanded these activities to overseas branches. Nearly 3,000 initiatives were conducted to eliminate waste, inconsistency, and overburden (muri, mura, muda) in our oper- ations. Our employees are taking bold, voluntary steps to We established an implementation structure for each group create a comfortable office environment and an efficient work company and department to eliminate waste, inconsistency, structure. and overburden (muri, mura, muda) hidden in work and work- We will continue to integrate kaizen and innovation strategi- places, as well as to promote kaizen activities. In addition to cally to create new customer value and evolve toward smart continuing an action-based approach of trying new methods ways of working. and improving old methods, we will continue to pursue human resources education. The Kaizen Award: A Forum for Lateral Deployment of Good Practices The Kaizen Award aims to provide a summary of kaizen activities for the year, commend good practices, and deploy these practices laterally to the entire Group. In fiscal 2019, overseas branch activities received commendations for superior practices, which have been expanded as global activities. Superior practices were shared from not only the front lines but also from administrative departments. These ideas have also resulted in work-style reform. 74 75 Implement stress checksProvide care through occupational health staffProvide care through external consultation desksBusiness Foundations Supporting Corporate Value Unique ANA Group Initiatives Built on a foundation of security and trust, “the wings within ourselves” help to fulfill the hopes and dreams of an interconnected world. The phrase, the wings within ourselves, from our Mission Statement represents the strong desire of each employee to become wings, connecting people, goods, and emotions. Even during the COVID-19 pandemic, we carry on, uplifted by the wings within ourselves and fulfilling our mission as a public transportation provider. We move forward, creating unique and new actions based on our Group code of conduct, ANA’s Way. Wuhan to Haneda Charter Flight On January 29, 2020, ANA operated a charter flight between Wuhan and Haneda for persons wishing to return to Japan from Wuhan, China, which had been on lockdown due to the outbreak of COVID-19. In a short period of time, we prepared for the flight and operated a total of five charter flights to help people without a means to return to Japan. Every Japanese person resid- ing in China’s Hubei Province and wishing to return to Japan were able to return. In total, 828 Japanese citizens and their family members were brought home safely on ANA flights. On June 23, 2020, we became the first airline to receive a letter of appreciation from Foreign Minister Motegi for this initiative to safeguard the lives and health of many people, including Japanese persons living abroad. Support for Sewing Medical Gowns The spread of COVID-19 has led to an increasing need for medical gowns and resulting inventory shortages in Japan. In April 2020, in response to a request from the government and the ANA Group’s desire to play a role in the safety of healthcare workers, we recruited employee volunteers to help sew portions of medical gowns, cut sleeve fabrics, and inspect end products. Under the direction of Valley LLC, volunteers worked in a hygiene-conscious environment at ANA Blue Base, the ANA Group’s general training center. A total of 380 employees from the Group contributed to producing gowns over 32 days. In April 2020, we launched our gown project with participation by craftspersons across Japan. From the moment we held our first online meeting, I could feel the passion of each participant, and I was convinced this would be a successful project. The cohesion among our members grew day by day, and on July 16, we delivered our initial target of 100,000 gowns on time. I always thought that working behind the scenes, no one on the front lines of medical care would think about our efforts. However, I remember feeling an inde- scribable happiness from the support we received from so many people. I was also greatly pleased when we received a note of appreciation for our gown pro- duction efforts from a medical professional onboard an ANA flight. Though there are many tough days still ahead, I will remember the lessons I learned from the ANA Group about what it means to be a professional. Please visit the page linked to the right for more information about this initiative. https://www.anahd.co.jp/ana_news/en/2020/05/28/20200528-1.html Hideki Tani Valley LLC President 76 A Boeing 767-300ER that transported returnees from Wuhan Letter of appreciation presentation ceremony at the Ministry of Foreign Affairs #ANAGroupWingsWithinOurselves Project Beginning in May 2020, the ANA Group reduced or suspended numerous flights. At the same time, we implemented telework and adopted a temporary leave program. Amid these circum- stances, we launched the #ANAGroupWingsWithinOurselves project in response to a question posed by an employee. The At-Home Aviation Class video question was what we could do for children and customers content, the At-Home Aviation Class, featured ANA pilots unable to travel by air and how could we help make time at who presented interesting facts about our aircraft. This well- home more meaningful? received class offered fun, educational content in a quiz The ANA Group uploaded videos and other content to our format, other information about the work done by ANA pilots, website and social media to offer greater familiarity with our and answers to questions asked to our pilots. aircraft and the ANA Group employees. Our first published In addition, we have uploaded musical telework perfor- mance videos performed by energetic volunteer employees, videos expressing appreciation and encouragement for healthcare workers, and more. Even in the post-COVID-19 world, we will continue to offer a variety of content to foster trust and emotional connections with our airlines and the ANA Group in the daily lives of our customers. #ANAGroupWingsWithinOurselves Special Website (In Japanese Only) https://www.ana.co.jp/group/kokoro-no-tsubasa/ 77 Production of a video supporting medical professionals and other heroes Business Foundations Supporting Corporate Value Corporate Governance System Mission Statement Built on a foundation of security and trust, “the wings within ourselves” help to fulfill the hopes and dreams of an interconnected world. The ANA Group aims to practice management that contributes to value creation for our various stakeholders in accordance with our Mission Statement and to promote sustainable growth and enhance corporate value over the long term. To accomplish this goal, ANA HOLDINGS INC. plays the lead role in Group management for overall policies and goal-setting, pursuing transparent, fair, prompt, and effective decision- making. For this purpose, we have built a corporate governance system and work continuously to enhance governance within the ANA Group. Corporate Governance System Appointment / Dismissal Appointment / Dismissal General Meeting of Shareholders Accounting Auditors Account auditing Reporting Personnel Advisory Committee Remuneration Advisory Committee Appointment / Dismissal Board of Directors Advice Appointment / Dismissal Supervision Proposal / Report Proposal / Report President & Chief Executive Officer Group Management Committee Reporting Overall management ANA HOLDINGS Corporate Governance System Holding Company Structure The ANA Group has adopted a holding company structure to remain competitive in any challenging business environment. Each Group company is guided by experienced and specialized personnel who are delegated authority to operate their respective businesses. Company with Audit & Supervisory Board Members The board of directors and members of the Audit & Supervisory Board oversee and audit the execution of duties by directors. The Group strengthens the supervisory function of the board of directors by appointing outside directors. We also strengthen the audit function of members of the Audit & Supervisory Board by appointing full-time outside members. Corporate Executive Officer System The Group has adopted a corporate executive officer system under which management and executive functions are separated to promote efficient decision- making and to clarify responsibilities and authority in the execution of duties. Under this system, directors supervise manage- ment decision-making and the execution of duties, while corporate executive officers conduct day-to-day business. Board of Directors Group Management Committee Term of Office Number of Meetings* Number of Meetings* 1 Year (also applies to outside directors) 13 54 Number of Board Members Directors 10 (including 3 independent outside directors and 1 female director) Audit & Supervisory Board members 5 The board of directors of ANA HOLDINGS INC. sets groupwide man- agement policies and goals, while also overseeing the management and business execution of each Group company. The board of directors is chaired by the chairman of the board. All directors, including outside directors, and all members of the Audit & Supervisory Board, including outside members, participate in board meetings. Chaired by the president and CEO, the Group Management Committee consists of full-time directors, full-time Audit & Supervisory Board mem- bers, and others, and functions as an organization that complements the board of directors. The role of the committee is to provide more timely and detailed discussions of management matters. Audit & Supervisory Board Auditing Reporting Audit & Supervisory Board Members Office Group ESG Management Promotion Committee Advisory Committees Internal Audit Division Instruction / Supervision Personnel Advisory Committee Remuneration Advisory Committee Chief ESG Promotion Officer Director in charge of Corporate Sustainability Internal auditing Instruction / Supervision Secretariat Corporate Sustainability General Administration Legal & Insurance Group Companies and Divisions ESG Promotion Officers / Leaders Responsible for ESG promotion in each company / department Chairman Number of Members Number of Meetings* Chairman Number of Members Number of Meetings* Ado Yamamoto 4 5 Ado Yamamoto 6 3 The Personnel Advisory Committee discusses the selection of director candidates and the dismissal of directors, and reports to the board of directors. The Personnel Advisory Committee, chaired by an outside director, consists of three outside directors and one inside director to ensure transparency and fairness in the selection process of directors. The Remuneration Advisory Committee consists of a majority of outside directors, outside Audit & Supervisory Board members, and outside experts to ensure fair and transparent process of decision-making related to director remuneration. The committee develops the director remuneration system and director remuneration standards based on surveys of director remuneration at other companies provided by out- side experts and reports to the board of directors. Audit & Supervisory Board Number of Members Term of Office Number of Meetings* Audit & Supervisory Board members 5 (including 3 independent outside Audit & Supervisory Board members) 4 Years (also applies to outside Audit & Supervisory board members) 13 * The number of meetings held in fiscal 2019. To ensure healthy development and to earn greater levels of trust from society through audits, we appoint five individuals to serve as Audit & Supervisory Board members who possess extensive experience and the advanced expertise required to conduct audits. The Audit & Supervisory Board strengthens the collaboration with the accounting auditors and the Internal Audit Division. The board also exchanges opinions with outside directors on a regular basis. 78 79 Business Foundations Supporting Corporate Value Management Members: Directors As of July 31, 2020 1 Shinichiro Ito Chairman of the Board Chairman of the Board of Directors Major concurrent position Outside Director, Mitsui Fudosan Co., Ltd. 2004: Executive Vice President 2006: Senior Executive Vice President 2007: Senior Executive Vice President, Representative Director 2009: President & Chief Executive Officer, Representative Director 2015: Chairman of the Board of Directors, Representative Director 2017: Chairman of the Board (present) 2 Shinya Katanozaka President & Chief Executive Officer, Representative Director Chairman of the ANA Group Management Committee Head of Group ESG Management Promotion Committee In charge of the Internal Audit Division Chairman of ALL NIPPON AIRWAYS CO., LTD. Major concurrent positions Vice Chair, Keidanren (Japan Business Federation) Director (Outside Director) of Tokio Marine Holdings, inc. 2011: Executive Vice President 2012: Senior Executive Vice President 2013: Senior Executive Vice President, Representative Director 2015: President & Chief Executive Officer, Representative Director (present) 3 Yutaka Ito Senior Executive Vice President, Representative Director Chairman of Group ESG Management Promotion Committee In charge of Legal & Insurance, General Administration, Group Procurement and Corporate Sustainability 2019: Member of the Board of Directors 2020: Senior Executive Vice President, Representative Director (present) 7 6 5 8 9 10 3 1 2 4 80 4 Yuji Hirako Member of the Board of Directors President & Chief Executive Officer, ALL NIPPON AIRWAYS CO., LTD. Major concurrent position Chairman of All Japan Air Transport and Service Association Co., Ltd. 5 Naoto Takada 8 Ado Yamamoto* 2015: Member of the Board of Directors (present) Outside Director 2013: Outside Director (present) Major concurrent positions Chairman and Representative Director, Nagoya Railroad Co., Ltd. Outside Director, Yahagi Construction Co., Ltd. Chairman, Nagoya Chamber of Commerce & Industry Executive Vice President In charge of Corporate Communications and Branding, Executive Secretariat, Human Resources Strategy 2017: Member of the Board of Directors (present) 9 Izumi Kobayashi* Outside Director 2013: Outside Director (present) 6 Ichiro Fukuzawa Executive Vice President, Chief Financial Officer 2019: Member of the Board of Directors (present) Major concurrent positions Outside Director, Mitsui & Co., Ltd. Outside Director, Mizuho Financial Group, Inc. Outside Director, OMRON Corporation 7 Koji Shibata Executive Vice President In charge of Corporate Strategy, Group IT Management, Facilities Planning, Digital Design Lab, Group D&I Promotion, Okinawa Region 10 Eijiro Katsu* Outside Director 2020: Outside Director (present) 2020: Member of the Board of Directors (present) Major concurrent position President and Representative Director and COO of Internet Initiative Japan Inc. * Independent directors 81 Business Foundations Supporting Corporate Value Appointment of Directors Approach to Selection of Director Candidates Internal Directors Outside Directors The Company selects directors from among candidates who have impeccable character, extensive experience, broad insight, and advanced expertise. Ideal candidates have the potential to contribute to improved policy-making, decision-making, and oversight befitting a global airline group with widespread businesses centered on the Air Transportation Business. Our selection is made without regard to gender, nationality, or other such factors, and falls within the scope of the Civil Aeronautics Act and other relevant laws. The Group selects a multiple number of outside directors who possess practical viewpoints based on extensive experience in corporate management, or who possess unique global or regional viewpoints. These individuals must be independent from the Company, and able to offer objective and expert opinions based on a sophisticated knowledge of social and economic trends. Reasons for Appointment of Directors • • The following director candidates were selected based on the judgment that their abundant experience, performance, and insight would be crucial to overcoming the management crisis caused by the current COVID-19 pandemic and for achieving sustainable increases in Group corporate value. • • These director candidates assumed their positions after being appointed at the 75th Ordinary General Meeting of Shareholders. Reasons for Appointment Shinichiro Ito Chairman of the Board, Chairman of the Board of Directors Shinichiro Ito has extensive experience in sales, human resources, and other disciplines. Mr. Ito was appointed director of ALL NIPPON AIRWAYS CO., LTD. in June 2003 and was instrumental in overcoming the management crisis caused by the SARS outbreak and the Iraq war. After being appointed president & CEO in April 2009, he guided the ANA Group through the challenging business environment left in the wake of the Lehman Shock, introducing management reforms and expanding the Group’s revenue base to support a successful perfor- mance recovery. Since April 2015, he has served as chairman of the board of directors, working to strengthen the functions of the board by promoting proceedings that encourage free, open-minded, and constructive discus- sions and exchange of opinions. Shinya Katanozaka President & Chief Executive Officer, Representative Director Shinya Katanozaka has extensive experience in sales, human resources, corporate planning, and other disciplines. He was appointed representative director and president & CEO of ANA HOLDINGS INC. in April 2015. Under his uncompromising stance on safety, he has established a stronger foundation for Group busi- ness management. At the same time, the Group has implemented a growth strategy, achieving a profit growth for four consecutive years. At board meetings, he strives to bolster decision-making and supervisory functions. He was also instrumental in overcoming a series of large-scale management crises caused by the SARS outbreak, the Lehman Shock, and other factors. Mr. Katanozaka is spearheading efforts to implement emergency measures against the COVID-19 pandemic. I n t e r n a l D i r e c t o r s Yutaka Ito Senior Executive Vice President, Representative Director Yutaka Ito has extensive experience in legal, finance, and other disciplines. Mr. Ito studied and has been stationed in Europe and the United States for many years throughout his career. Since April 2013, he has served as representative of the European operations of ALL NIPPON AIRWAYS CO., LTD. In April 2016, he was appointed director and has endeavored to improve ANA competitiveness by raising customer satisfaction. After being appointed director of ANA HOLDINGS INC. in June 2019, he has been engaged in CSR activities and risk management, striving to promote a greater understanding of our businesses and promote ESG management by actively communicating with investors. After being appointed senior executive vice president in April 2020, he has contributed to bolstering decision-making and supervisory functions of the board. Professional Overseas Experience: Europe and the United States Yuji Hirako Member of the Board of Directors (President & Chief Executive Officer of ALL NIPPON AIRWAYS CO., LTD.) Yuji Hirako has extensive experience in sales, finance, and other disciplines. In April 2012, he was appointed representative for businesses across the United States. In June 2015, he was appointed director, overseeing financial strategies to enhance corporate value. In April 2017, he was appointed president & CEO of ALL NIPPON AIRWAYS CO., LTD., a core subsidiary of the ANA Group. Since that time, he has guided the company with an uncompromising stance on safety and a focus on global business by leveraging his extensive knowledge of the International Business, leading the company toward becoming the world’s leading airline. Professional Overseas Experience: the United States Naoto Takada Executive Vice President, Member of the Board Naoto Takada has extensive experience in labor relations, industrial policy, public relations, and other disciplines. Since being appointed director in June 2017, he has focused on Group public relations, CSR activities, risk management, and active communications with individual investors. Through these duties, he has endeavored to create a wider brand awareness of the ANA Group. Since April 2019, he has been in charge of ANA Group human resources development. Ichiro Fukuzawa Executive Vice President, Member of the Board Ichiro Fukuzawa has extensive experience in finance and investor relations. Since April 2017, he has served as an executive officer, and since June 2019, as director and chief financial officer for ANA HOLDINGS INC. He has implemented financial strategies, including efficient capital restructuring and securing a stable financial base for the Group. In addition to active engagement with institutional investors in Japan and overseas, he assists the president appropriately and is actively engaged in ESG. This includes playing a central role in the Group being the first airline in the world to issue Green and Social Bonds. Koji Shibata Executive Vice President, Member of the Board Koji Shibata has extensive experience in sales, international alliances, and other disciplines. Since April 2012, he has served as an executive officer and representative for ANA European operations. Since April 2013, he has been engaged in forming equity alliances with foreign carriers in Asia. Since April 2017, he has been in charge of planning and implementation of Group management strategies to promote Group management. Professional Overseas Experience: Europe Ado Yamamoto Independent Outside Director Ado Yamamoto has a wealth of experience and expertise in transportation industry management. At meetings of the board of directors, he offers the benefit of his background to provide opinions and advice about Group management strategy, risk management, organizational management, investment management, and the promotion of safety measures. He was appointed member of the Remuneration Advisory Committee and the Personnel Advisory Committee in June 2016. He was subsequently named chairman of the Remuneration Advisory Committee and the Personnel Advisory Committee in July 2020. Izumi Kobayashi Independent Outside Director Izumi Kobayashi has a wealth of experience and expertise as a representative for private financial institutions and international development and finance institutions, as well as an outside director for other operating com- panies. At meetings of the board of directors, she offers the benefit of her background to provide opinions and advice from a global perspective on Group management strategy, risk management, investment management, corporate governance, and organizational management. She was appointed member of the Remuneration Advisory Committee in July 2013 and member of the Personnel Advisory Committee in June 2016. Eijiro Katsu Independent Outside Director Eijiro Katsu served as administrative vice minister and in other major positions in the Ministry of Finance. He has a wealth of experience and expertise as an administrative officer. In June 2013, he was appointed president and representative director of Internet Initiative Japan Inc. He has a wealth of experience in corporate management and extensive knowledge of innovation, including digital transformation. Since April 2014, he has served as a member of our Management Advisory Council and has a wealth of knowledge regarding business conditions in the airline industry and the ANA Group businesses. I n t e r n a l D i r e c t o r s O u t s d e D i i r e c t o r s 82 83 Business Foundations Supporting Corporate Value Management Members: Audit & Supervisory Board Members As of July 31, 2020 Fiscal 2019 Initiatives Major Agenda Items for the Board of Directors (Fiscal 2019) 1. Items Related to General Meetings of Shareholders 8. Items Related to Disposal and Receipt of Important • Proposals to be submitted to General Meetings of Assets Shareholders for approval • Aircraft procurement, sales, and leases 2. Items Related to Directors, Corporate Executive Officers, 9. Investment-Related Matters the Board of Directors, etc. 10. Items Related to Major Debts • Selection of director candidates and corporate executive officers • Financing plans • Bond issuances • Results of the evaluation of the effectiveness of the 11. Items Related to Corporate Governance Board of Directors • Policies for officer remuneration 3. Items Related to Financial Results • Internal audit plans and results reports • Overview of the proceedings of the Group CSR / Risk management / Compliance Committee* • Financial results and earnings forecasts • Valuation of cross-shareholdings • Reports from operating companies • Evaluations in the capital markets 12. Other Items • Avatar business 4. Items Related to General Meetings of Shareholders • Customer satisfaction survey results • Capital stock, etc. • ANA’s Way Survey (Employee awareness survey) 5. Items Related to Organizational Restructuring results 6. Items Related to Personnel and Organizations • Personnel Advisory Committee report 7. Items Related to the Company and Important • Remuneration Advisory Committee report Subsidiaries • Impact of the COVID-19 pandemic • ANA Group Corporate Strategy update • ANA Group ESG Commitments • ANA brand business plan • ANA digital transformation initiatives * The Group CSR / Risk Management / Compliance Committee was renamed the Group ESG Management Promotion Committee in fiscal 2020. Changes in Board Meeting Length (Annual Transition) Since we began encouraging more substantial discussions in Discussion by Agenda Topic (Fiscal 2019) We encourage active discussions of corporate strategy at board meetings, selecting major related topics about which to Toyoyuki Nagamine Audit & Supervisory Board Member Kiyoshi Tonomoto Audit & Supervisory Board Member Nozomu Kano* Outside Audit & Supervisory Board Member Shingo Matsuo* Outside Audit & Supervisory Board Member Eiji Ogawa* Outside Audit & Supervisory Board Member * Independent Audit & Supervisory Board members Approach to Selection of Candidates for Audit & Supervisory Board Member Audit & Supervisory Board Members To ensure healthy development and to earn greater levels of trust from society through audits, the Company appoints individuals to Audit & Supervisory Board members from both inside and outside the Company who pos- sess extensive experience and the advanced expertise required to conduct audits. Our selections do not consider gender, nationality, or other factors. The Company appoints at least one individual who possesses appropriate levels of knowledge related to finance and accounting. Outside Audit & Supervisory Board members are selected from among candidates who have advanced levels of knowledge in a variety of areas and who are independent of the ANA Group. These individuals include candidates who are well-versed in corporate management, candidates who have sophisticated knowledge of social and eco- nomic trends, and candidates who have advanced knowledge in finance, accounting, or legal matters. board meetings, the annual total time devoted to board meet- exchange opinions from medium- to long-term perspectives. ings has increased over the last several years. Reasons for Appointment of Audit & Supervisory Board Members Mr. Toyoyuki Nagamine and Mr. Shingo Matuo ware elected at the 75th General Meeting of Shareholders. Reasons for Appointment Toyoyuki Nagamine Audit & Supervisory Board Member Shingo Matsuo Outside Audit & Supervisory Board Member A u d i t i & S u p e r v s o r y B o a r d M e m b e r s Toyoyuki Nagamine has extensive experience in flight operations, labor relations, corporate planning, and other disciplines. He has a wealth of knowledge and experience of Group management, including growth in the Group’s revenue domains and in implementing Group management strategies. Aiming for sustainable growth in the group corporate value, we have nominated Mr. Nagamine as an Audit & Supervisory Board member. This nomination is based on his wealth of experience and expertise in the airline industry, as well as our confidence in his ability to strengthen the audit function within the Group. Shingo Matsuo has abundant experience and deep insight developed as a corporate manager in highly public businesses, which is why he has been appointed outside Audit & Supervisory Board member. At meetings of the Audit & Supervisory Board and the board of directors, he provides the benefit of his background to offer advice and opinions concerning Group operation focused on safety as a top priority. He also provides insight into management strategies to encourage discussion of management issues. Aiming for sustainable growth in Group corporate value, we have again nominated Mr. Matsuo as outside Audit & Supervisory Board member to reinforce the supervisory function of the board of directors. Mr. Kiyoshi Tonomoto was elected at the 72nd General Meeting of Shareholders. Mr. Eiji Ogawa was elected at the 73rd General Meeting of Shareholders. Mr. Nozomu Kano was elected at the 74th General Meeting of Shareholders. 84 27.7 Hours 26.4 Matters Related to General Meetings of Shareholders, Board of Directors, etc. 6.2% Other 2.3% 21.4 22.8 2016 2017 2018 2019 (FY) Matters Related to Financial Results Matters Related to Fleet Plan, Investments, Asset Sales, etc. 15.5% 22.3% 53.8% Important Matters, Including Corporate Strategy and Business Plans 85 Business Foundations Supporting Corporate Value Effectiveness of the Board of Directors The ANA Group continues initiatives to improve the functions of the board of directors. We conduct a questionnaire survey for all direc- tors and Audit & Supervisory Board members, and we individually interview the chairman of the board, president & CEO, senior execu- tive vice presidents, outside directors, and outside Audit & Supervisory Board members. We provide a detailed analysis of the survey and interview results and present a report to the board of directors. We strive to enhance further effectiveness of the board of directors by improving the PDCA cycle through operational changes toward new solutions. Fiscal 2018 Fiscal 2019 Act / Plan Define Issues Do Improvement Initiatives Check Evaluate Act / Plan Identify Issues Fiscal 2020 Do Improvement Initiatives i T m e Make operational changes to provide sufficient time for discussion Extended board meeting time from two hours to three Board meeting length is appropriate in general. Written reports, etc., resulted in more effective use of time Continue three-hour board meetings as a rule S h a r i n g I f n o r m a t i o n Insufficient understanding at times due to lack of information sharing related to deliberations of internal meetings Included a summary of internal meeting discussions (pro and con opinions) in board meeting documents Meetings continue to improve with greater numbers of reports regarding internal meeting discussions More information has been provided regarding internal discussions; still room for improvement Provide more detailed notes summarizing internal discussions in board meeting materials; strengthen coordination with internal committees More time is required to discuss important management issues, including the ANA Group Corporate Strategy, separately from board meetings Held separate meetings to discuss ANA Group Corporate Strategy Improvement Example (1) Held meetings for outside directors to explain other management issues Improvement Example (2) Although deeper explanations of the ANA Group Corporate Strategy were provided, more time to discuss medium- to long-term issues, industry trends, and overseas airlines would be better More opportunities to discuss correlations with the Air Transportation Business separate from board meetings would help to gain a deeper understanding Deeper discussions are required for explanations of medium- and long-term management issues and Group companies Provide more time to discuss the medium- to long-term management issues at board meetings, and hold a special meeting for reports and Q&A separately from board meetings Provide an additional meeting where the respective officers in charge explain the management issues of ANA and a regular meeting where major Group companies present the management issues of their companies Hold meetings solely for outside director discussions Establish a new format of meeting where the financial statement auditor and outside directors hold discussions Investment project reviews should be stronger to ensure more appropriate management resource allocation for greater effectiveness Conducted reviews of investment projects since the ANA Group transitioned to a holding company structure Reviews of investment projects should continue to allow more visibility of investment cost effectiveness Continue conducting reviews More efforts are required in town meet- ing* operation for greater effectiveness Made changes to management of town meetings with Flight Operation Center (FOC) members to enhance the effectiveness P88–89 Town Meetings with Frontline Employees Town meetings with FOC members were very informative. Continue town meetings with frontline employees in various businesses Visits to frontline office and town meetings with employees have been well-received; continue to improve meeting quality Continue to conduct hearings with outside directors about their interests and aspirations and conduct visits to frontline offices i D s c u s s o n D e t a i i l s A c t i v i t i e s A d d i t i o n a l * Dialogue between officers and employees Improvement Example (1) Held meetings for outside directors to discuss the ANA Group Corporate Strategy Outside directors are not provided with sufficient time to discuss the ANA Group Corporate Strategy at board meetings alone. We held meetings separately from board meetings in which the ANA HOLDINGS represen- tative director, the ANA president & CEO, officers in charge of corporate planning, and outside directors discussed the ANA Group Corporate Strategy. Opinions Discussed • Time spent on business in Europe provides a real sense that climate change is a very hot topic there. We must also take environmental issues more seriously. • What is the ideal business model for ANA, which operates in a small country such as Japan, compared to airlines in the United States and China operating over a vast land area? What measures should ANA take toward this ideal? • The cargo business is greatly impacted by economic trends. Can we grow it into a core business of our portfolio with our current understanding that cargo is an accessory to the passenger service? • Global risks are likely to increase in the future. We must prepare for the continued rise of populism and nationalism, leading to gradual restrictions on the movement of people and goods. Improvement Example (2) Held meetings for outside directors to discuss the avatar business We established avatarin Inc. in April 2020 to create new businesses and resolve social issues. We held a meeting separately from board meetings for outside directors to provide deeper explanations of our avatar business and solicit opinions from various perspectives. At the meeting, outside directors learned the details of the avatar business and received a demonstration of the remote-controlled robot newme. Outside directors discussed the avatar business after the presentation and demonstration. Major Topics Covered by the Board Effectiveness Survey (1) The performance of board functions (decision-making, supervision of business execution) (2) Response to issues identified in the prior year’s survey (3) Management of board meetings i. Discuss board deliberations, including dissenting opinions, at other internal meetings ii. Provide balance among agenda item explanations, questions and answers, and time for discussions iii. Content (time, quality) for explanations to outside directors prior to meetings iv. Materials (quantity, quality) handed out during board meetings 86 87 Business Foundations Supporting Corporate Value Effectiveness of the Board of Directors Town Meetings with Frontline Employees Background Following the principles of Japan’s Corporate Governance Code, we conduct a twice-yearly survey (ANA’s Way Survey) to determine whether ANA Group employees understand and comply with ANA’s Way, our Group code of conduct. The survey results revealed the need to encourage further communications between management and employees. Also, outside directors have requested to meet and talk with frontline employees to deepen an understanding of the Group’s business and corporate culture as a whole. Based on these requests, we have held town meetings between outside directors and frontline employees since fiscal 2018. Town meetings were held with section managers at the ANA Engineering & Maintenance Center and maintenance departments within Group companies during fiscal 2018. In 2019, we conducted similar interactions with members of the Flight Operation Center (FOC). 2019 Town meetings with members of the Flight Operation Center (FOC) Process Outside directors selected from several topics to discuss with the FOC Documents related to the selected topics were pro- vided to the outside direc- tors beforehand Six outside directors and six FOC employees were divided into two groups for active discussions. 1. Consistent Training Programs for Flight Crew Members QWhat are the issues in providing consistent training for skilled flight crew members? A strong mentality to express their own opinions is a must. Young people tend to try to judge other people’s feelings and worry about what other people think. Worrying too much about what other people think becomes a hindrance in making decisions when decisiveness is required. A captain must always exercise appropriate judgment. Advanced technological innovation of aircraft allows the cap- tain to concentrate more on management and communication in the cockpit, rather than solely on aircraft operations. The issue is how to improve judgment through everyday operations. How do we conduct our business to develop pilots over the long term? Approximately 100 pilots were hired when our generation joined the Company (class of 1992–1993). However, every time the economy stalled, we reduced recruitment and post- poned captain promotion training. Fluctuations in recruitment may be unavoidable over the short term. However, this vari- ance certainly impacts the consistency of flight crew training over the medium and long term. Flight crew members over 65 years should be allowed to continue to work if they are willing and able. The ANA retirement age is 60 years (which can be extended to 65 years). However, flight crew members are allowed to con- tinue to work until 68 years based on Japanese government regulations. The qualification of flight crew members can be confirmed by a health check and skills assessment. We have seen flight crew members over 65 years who have left to work at other airlines. 2. Measures to Address Alcohol Use by Flight Crew ANA has experienced a series of problems involving alcohol use by flight crew. Why couldn’t the Company prevent these issues? What do you think about measures to eliminate alcohol-related issues? Q We must improve communications between captains and first officers. We must strive to improve human relations and a sense of belonging to ANA. The captain concentrates on safety during a flight. The captain does not have much time to provide detailed instructions or discuss their experiences with the first offi- cer. The response to alcohol issues is becoming stricter. Senior members have passed on their experience and skills to junior members in their spare time after flight ser- vice. However, such a culture is on the decline recently. The younger generation does not seem to like close human relations. However, we are proud that we have grown together, exchanging frank opinions with each other, regardless of the relationship between senior and junior ranks. A lack of dialogue with others will result in less rejec- tion and possibly greater personal comfort. However, it is also true that receiving honest feedback can lead to personal growth. We expect management to take the lead in systematically reducing the sense of isolation and communication gaps. Do you think irregular work patterns and different crew composition for every flight might hamper organizational functionality? Could it be that an organizational structure that leaves each person their own decisions has something to do with alcohol issues? Q The FOC maintains an atmo- sphere in which everyone can express their opinions freely. Given the nature of the work, not everyone receives instructions from their superiors every day. Each person is responsible for their own duties on each flight. An organi- zation that supports this culture should not be afraid to encourage frank discussions with superiors or senior officers. We must strengthen personal communications. We send information regarding alcohol issues via email quite frequently. We also conducted at least one interview with every pilot, performed by a superior. However, this approach has not been completely sufficient, and we believe we must engage in deeper communications. Given the nature of our work, providing certain discretion to each individual serves to benefit organizational operations. We admit that we had issues in managing such an extremely limited number of individuals effectively. We must consider an organizational approach that addresses the issue fully. Outside Director Comments We were glad to hear the opinions of captains and other flight crew members with whom we do not have direct contact. Hopefully, these kinds of opportunities will be provided again in the future. Organization A captain is independent and has the ultimate authority on a flight. He or she is not so much a member of an organization per se. Communications A captain works in a lonely environment. From an organizational operations perspective, it is important that captains create opportunities to talk with junior officers and establish an environment to provide sufficient guidance. Skills We must create a system to enhance communication. This includes an environment that encourages the improvement of skills among flight crew members. Retirement Age Flight crew members are allowed to work until 68 years of age, as long as they have the and ability. ANA should take a close look at extending retirement age. Board Meeting Comments Captains serving as managers have opportunities to communicate with ANA management. However, other captains do not have sufficient opportunities. We recognize that we have various issues to over- come in the consistent training of flight crew members. Future Direction We have received opinions from our outside directors based on their broad perspectives. Meanwhile, town meetings have provided outside directors with a detailed understanding of Group businesses, which has further reenergized our board meetings. We will continue to provide opportunities for town meetings with frontline employees across a broader range of our businesses. 88 Town Meeting (November 2019) 89 Business Foundations Supporting Corporate Value Director and Audit & Supervisory Board Member Remuneration 1. Basic Policies for Director Remuneration The basic policies for director remuneration are as follows. remuneration ranges from 0.0 to 1.0 times according to the degree of achievement for annual performance targets. • Ensure the transparency, fairness, and objectivity of remu- a. Bonuses neration and establish a remuneration level worthy of his / her We use net income, safety, and customer satisfaction as roles and responsibilities indicators that reflect the performance and substance for a • Create a system that can reflect the contributions of individual single fiscal year. The Remuneration Advisory Committee and directors by introducing performance-linked remuneration combining a diverse range of indicators to clarify roles and responsibilities for company results. the board of directors have previously determined the target values for each indicator and a table for corresponding pay- ment levels. This table determines payment amounts based • Establish a remuneration system that achieves our social on the performance on each indicator. responsibilities as a company, while allowing the Company to b. Stock options share profits with shareholders through raising medium- to We use return on equity (ROE), return on assets (ROA), and long-term corporate value. 2. Procedures for Determining Remuneration The board of directors decides director remuneration, taking into operating income margin, etc., as indicators for improved corporate value over the medium to long term and sustainable growth. The amount of payment is determined through a combination of payment levels, determined by the Remuneration account reports by the Remuneration Advisory Committee. The Advisory Committee and the board of directors, and the total amount of director remuneration shall be within the scope of the amount approved at the Ordinary General Meeting of respective indicators. (2) Outside directors Shareholders. Remuneration for outside directors consists of fixed compensation (monthly compensation) without a performance-linked portion. 3. Remuneration Advisory Committee See P.79 This compensation encourages outside directors to exercise 4. Remuneration System (1) Internal directors their supervisory functions from an independent standpoint. (3) Audit & Supervisory Board members Remuneration for both inside and outside Audit & Supervisory In addition to a fixed basic remuneration, remuneration for directors Board members consists of fixed compensation (monthly com- includes an annual variable performance-linked bonus and long- pensation) without a performance-linked portion. This compen- term incentive stock option plan as a means of providing healthy sation encourages those members to exercise their supervisory incentives for pursuing sustainable growth for the Company. functions from an independent standpoint. The ratio of fixed basic remuneration and bonus / stock options Remuneration levels for members of the Audit & Supervisory for total remuneration is 1:0.67 fixed to variable if annual perfor- Board are determined in line with remuneration at other compa- mance targets have been accomplished. The ratio of variable nies and in consultation with outside experts. Conceptual Diagram for the Officer Remuneration System Ratio Fixed 1 Variable 0.67*1 Remuneration (1) Basic remuneration (2) Bonus (short-term performance-linked) (3) Stock options (long-term incentive) P a y m e n t c r i t e r i a Internal directors Payment according to title, etc. Measure for fiscal year results according to various criteria Net Income Safety Evaluate contributions to corporate value over the medium to long term Return on Equity (ROE) Return on Assets (ROA) Customer Satisfaction Operating Income Margin Outside directors Uniform payment for all members Audit & Supervisory Board members Payment according to status as full-time or part-time — — — — Remuneration limits Annual total for (1) and (2) is limited to a maximum ¥960 million*2 Per resolution at the 66th Ordinary General Meeting of Shareholders, held June 20, 2011 Annual maximum of ¥180 million Per resolution at the 74th Ordinary General Meeting of Shareholders, held June 21, 2019 Payment method Monthly (cash) Annually (cash) Annually *1 Range from 0.0 to 1.0 times according to the degree of achievement for annual performance targets. *2 Stock options referenced in (3) is paid according to the stock option plan adopted per resolution of the 70th Ordinary General Meeting of Shareholders, held June 29, 2015. This amount is separate from the remuneration limit amount. Major Indicator Targets and Results in FY2019 (Reference) Original Fiscal Year Targets (Consolidated) Results Net Income ¥108.0 billion ¥27.6 billion Return on Equity (ROE) Return on Assets (ROA) Operating Income Margin 9.5% 6.2% 7.7% 2.6% 2.4% 3.1% We set internal targets for Safety and Customer Satisfaction , in addition to those indicated at the left. The results based on these targets are reflected in the evaluation. FY2019 Director and Audit & Supervisory Board Member Remuneration Segment Directors (Outside directors) Audit & Supervisory Board members (Outside Audit & Supervisory Board members) Total Number of persons eligible Total amount of remuneration, etc. (¥ millions) Total amount by type (remuneration, etc.) (¥ millions) Basic remuneration Bonuses Stock options 10 (3) 6 (4) 16 323 (44) 137 (65) 460 313 (44) 137 (65) 450 — (—) — — — 10 (—) — (—) 10 Notes: 1. The table above includes one outside director who resigned as of the end of the 74th Ordinary General Meeting of Shareholders, held June 21, 2019. 2. The amounts listed above are rounded down to the nearest million yen. Cross-Shareholdings We believe that it is essential to maintain and strengthen between the effectiveness of an investment in a stock versus collaborative relationships with our business partners for the capital costs of the Group. If, as a result of these evalua- further growth and development of Group businesses. The tions, we determine that the price of a stock will continue to ANA Group, consisting mainly of our Air Transportation be low for a certain period of time and further will not contribute Business, engages in cross-shareholdings when we deem to sustainable growth over the medium to long term, we will such holdings to contribute to improved corporate value over reduce our holdings in said stock. the medium to long term from the viewpoint of continuing As a result of a comprehensive review of the cross-share- smooth business, maintaining business alliances, and grow- holdings owned by the Group, we have determined that we ing profits through strengthening business relationships. do not own cross-shareholdings that should be subject to Every year, the board of directors conducts a comprehen- reduction. sive review of individual cross-shareholdings. The board In addition, the exercise of voting rights associated with evaluates the significance of holdings and the benefits and cross-shareholdings will be judged based on the results of risks associated. To verify the economic rationality of cross- dialogue with the company in question after examining the shareholdings, we conduct a quantitative and multifaceted medium- to long-term improvement of the corporate value evaluation, which includes checking the TSR (total share- and the impact on the Group’s business. holder return) for each stock or conducting a comparison 90 91 Business Foundations Supporting Corporate Value Risk Management Preserve Corporate Value through Safe and Reliable Business Operations The ANA Group takes steps to identify, analyze, and appropriately address risks with the potential to severely impact management. In addition, we have developed groupwide frameworks to minimize the impact of risks and prevent reoccurrence in case risks materialize. Risk Management Promotion System The ANA Group Total Risk Management Regulations provides the basic terms of the Group’s risk management system. Under these regulations, the Group ESG Management Promotion Committee develops and implements basic policies. These policies are executed in line with the basic policies determined by the board of directors. Each Group company / department has established a risk manage- ment system. Here, the ESG Promotion Officer and the ESG Promotion Leader are responsible for promoting and leading risk manage- ment operations, respectively. The ESG Promotion Leader assumes a role to conduct risk management operations according to plans and take swift action while working with the secretariat in the event of a crisis. Risk Management Principles Risk Prevention Each Group company implements independent risk manage- Crisis Management in Response to a Risk We collect accurate information and implement measures to ment activities (identifying risks, analyzing and evaluating minimize damage and prevent reoccurrence by investigating these risks, planning and implementing countermeasures, and identifying the causes of crises. and monitoring the results). The Crisis Management Manual provides responses to crises The Group companies monitor and evaluate progress, in general, and the Emergency Response Manual provides effectiveness, and level of achievement of the measures taken responses to incidents with a direct impact on the operation with respect to significant risks identified in each organization. of ANA Group aircraft, including accidents or hijack. The Company implements measures to address issues faced by the Group, and the Group ESG Management Promotion Committee monitors progress. Major Initiatives Business Continuity Plan (BCP) Our BCP details policies and procedures for responding to Union in 2018, and the China Cybersecurity Law (CCSL) and the California Consumer Privacy Act (CCPA), established in 2020. large-scale disasters to ensure the safety of customers and all We require every employee to receive e-learning training on ANA Group directors and employees, minimize the impact on the importance of information assets and proper handling, etc. management and on society as a whole, and resume normal In so doing we ensure compliance with these laws, regulations, business operations as quickly as possible. Information Security The ANA Group updates the Group’s information security regulations and implements the information security manage- ment system. Through this system, we strive every day to and rules for using our information systems. In this way and others, we strive to raise employee awareness of the signifi- cance of information security in the workplace. Security Export Control* The ANA Group exports the parts, chemicals, apparatuses, and improve information systems functions and implement security other articles necessary for aircraft maintenance to overseas measures in line with the policies. airports and aircraft maintenance centers. Certain articles have Personal information is essential for us to provide services the potential to be adapted to create weapons. Accordingly, we in ANA Group businesses. We view personal information as practice rigorous security export control of exported articles. important assets we receive from our customers. In recent A stringent security export control structure is maintained years, various laws and regulations related to personal informa- through once-annual audits and trainings. These activities target tion and privacy have been established in Japan and overseas. divisions that are considered exporters for being directly involved We have therefore revised our privacy policy and relevant inter- in exporting as well as divisions that are involved due to handling nal regulations to ensure compliance with the General Data Protection Regulation (GDPR), established in the European customs clearance and other transportation-related processes. * Security export control is a term that refers to all regulations placed on exports from Japan by the Foreign Exchange and Foreign Trade Act. 92 Cybersecurity Measures The ANA Group is designated as a critical infrastructure provider in Japan by the National Center of Incident Readiness and Strategy for Cybersecurity (NISC). We implement security measures at entrance and exit control, and we have adopted antivirus measures in accordance with the guidelines formulated by the Ministry of Economy, Trade and Industry (METI). We monitor our security system 24 hours a day, 365 days a year. The ANA Group trains security personnel, and we have established the Computer Security Incident Response Team (CSIRT) to ensure swift action in response to any incidents. Cybersecurity intelligence is most effective when providing early alerts to counter cyberattacks. Therefore, we participate in information sharing organizations, such as the Aviation Information Sharing and Analysis Center (A-ISAC), which consists of airline, aircraft manufacturer, and other members. We also participate in the Surface Transportation Information Sharing and Analysis Center (ST-ISAC). In these ways, we acquire information from internal and external industry sources as early as possible for use in taking preventive measures. The Keidanren (Japan Business Federation) published the Cyber Risk Handbook for Directors in autumn 2019. We develop measures assuming that incidents are inevitable. Since the utilization of digital technology is an important means for corporate growth, we understand that we must take a balanced approach. The ANA Group sees cybersecurity as a risk management issue to be addressed by the entire group, including our board of directors. Responses to Typhoons and Their Aftermath Natural disasters such as large typhoons and torrential rains have occurred frequently over the past few years. As a public transporta- tion provider, we see a growing importance to make preparations and conduct drills related to these disasters on a regular basis. Typhoon No. 21(Jebi) touched down in September 2018 and caused flights to be suspended for an extended period of time at the Kansai International Airport. We conducted a review in fiscal 2019 of our disaster responses at the time, including a second look at practice drills. As a result, we enhanced the disaster response capacity of the front lines of our business. We also reviewed our facilities at airports across Japan, developing facility enhancement plans to prepare for flooding and power outages. ANA actively participates in the development of guidelines for Advanced Airport-Business Continuity Plan (A2-BCP) led by the Ministry of Land, Infrastructure, Transport and Tourism (MLIT). These guidelines address building airports resistant to natural disasters and participation is part of our efforts to strengthen cooperation with airport administrators and other stakeholders. The ANA Group strives to update our BCP measures in the event of a crisis, and we continue to improve our capacity to respond on the front lines of our business and to train our people. Drill at the Kansai International Airport Responses to COVID-19 (Employee Infection Prevention Measures) The ANA Group created a response system based on the Crisis Management Manual and Emergency Response Manual in late January 2020, when the COVID-19 infection spread in Wuhan, China, and the authorities suspended public transportation services. We have endeavored to prevent the spread of infection. For example, when a physician identifies an employee who is suspected of infection, we notify the relevant employee and employees who are likely to have been in contact, directing them to stay home and wait for instructions from the public health center. In addition, we implemented the following measures to prevent infection among our employees. • Implement consistent infection prevention measures, such as hand washing • Instruct employees to wear masks and gloves according to the degree of infection spread • Check employee health on a consistent basis • Communicate information and distribute materials based on the latest knowledge • Ensure employees are aware of government declaration of emergency policies (we imposed some policies that are stricter than those of the government) Based on the experience acquired through measures to prevent the spread of the infection since January, we will implement the following measures. • Strive to acquire the latest information and share with employees • Implement new business and work styles based on the new normal published by the Ministry of Health, Labour and Welfare and the guidelines of the Keidanren and the Scheduled Airlines Association of JAPAN, understanding that infections spread in waves 93 Business Foundations Supporting Corporate Value Compliance Preserve Corporate Value by Enhancing Internal Systems and Further Entrench Mission Statement The ANA Group is taking steps to minimize exposure to legal risks and prevent incidents that could diminish corporate value. Compliance Implementation System The ANA Group has developed a compliance system based on the ANA Group Compliance Regulations to promote compliance with laws, regulations, and other standards related to business activities. Under the direction of the Group ESG Management Promotion Committee, which is an advisory body to the board of directors, each company and department appoints an ESG Promotion Officer that is responsible for promotion and an ESG Promotion Leader as a key driver of ESG initiatives. These officers and leaders strive to raise awareness of compliance across the ANA Group. Internal Reporting System Based on the ANA Group Rules for Handling Internal Reporting, we have set up a point of contact (ANA Alert) both inside and outside the Company (via a law firm) to collect and resolve any issues. These reporting systems are available to all Group executives, employees, and temporary personnel involved in operations. ANA Group retirees and officers and employees of our business partners may also use these reporting systems. We protect the privacy of the whistleblower and other relevant parties, and assures that no punitive measures will be taken against those that seek consultation or cooperate in confirming facts. This helps us obtain internal risk-related information promptly and aids in self-resolution. We are also engaged in initiatives overseas to improve awareness of our internal reporting system and focus on minimizing legal risks on a global level. Major Initiatives Legal Compliance Education We conduct a variety of educational programs for every Group executive and employee to acquire correct knowledge of and exercise appropriate judgment related to various laws and regulations. We hold regular seminars on contract practices, labor practices, and laws and regulations related to air trans- portation, improving our familiarity with business-essential knowledge. The Company also seeks to foster a mindset focused on legal compliance among Group executives and employees working overseas. To this end, we hold seminars on competition and anti-bribery laws at overseas branches. We also sponsor seminars tailored to topics and content that reflect the needs of each Group company and / or department. Information Dissemination To spread awareness of compliance throughout the ANA Group, we distribute e-mail and other newsletters on topics related to revisions to laws and regulations, as well as points of caution regarding labor and contract practices. We have also posted manuals and guidelines for various laws, regulations, and rules on the compliance website on our intranet. In this way and others, we create an environment in which Group executives and employees have access to this information at any time. Initiatives to Prevent Harassment We are working now, more than ever, to strengthen initiatives for workplaces free from harassment. Specifically, we estab- lished the new Rules on Harassment Prevention and conduct e-learning harassment education for all Group executives and employees. In this way, we are striving to create workplace environments across the entire ANA Group in which people can work without hindrance and that never tolerate harassment. Seminar conducted during fiscal 2019 Newsletter Harassment Education Materials Information Poster for the Internal Reporting System Group Companies Compliance Survey Surveys on compliance at Group companies are conducted once each year. These surveys consist of self-checks on the Strengthening Cooperation with Group Companies and Overseas Branches To strengthen the compliance system across the entire Group, degree to which compliance was practiced with regard to rel- we have clarified the points of contact between our Legal & evant laws and regulations as well as examinations of issues Insurance Department, Group companies, and ANA overseas pertaining to each Group company and to the entire Group. We branches, building and operating a system facilitating two-way conduct follow-ups with each company based on survey communication. results as necessary in the interest of resolving issues. ANA Group Tax Policy In February 2020, we formulated the ANA Group Tax Policy to strengthen corporate tax governance and respond to growing global interest in taxes. The core principles of this policy state that the ANA Group considers the proper reporting and fulfillment of tax obligations related to our business activities is a social responsibility. Reporting and paying tax obligations enables the Group to preserve our corporate value and contribute to the development of communities in each relevant country. By implementing tax governance that is groupwide and cross-functional, we comply with the relevant laws, regulations, and other rules, clearly indicating the ideal state whereby we report and fulfill tax obligations in an appropriate manner. We present courses of action for employees related to (1) compliance with laws and regulations, (2) fair business practices, (3) talent develop- ment, (4) tax management, (5) utilization of external knowledge, and (6) relationship with relevant tax authorities. We strive to raise awareness among Group employees on an ongoing basis through internal training and other methods. By sharing this policy with each of our stakeholders and ensuring that Group employees are in compliance, we aim to reduce tax risk and report and fulfill tax obligations in an appropriate manner. Six Courses of Action for Our Tax Policy 1 2 3 4 5 6 Compliance with Laws and Regulations Fair Business Practices Talent Development Tax Management Utilization of External Knowledge Relationship with Relevant Tax Authorities Details are available on our corporate website. https://www.ana.co.jp/group/en/csr/basic_ approach/tax-policy/ 94 95 Business Foundations Supporting Corporate Value Responsible Dialogue with Stakeholders The ANA Group conducts business activities through our relationships with stakeholders. We engage in ongoing dialogue with stakeholders to build trust and offer peace of mind. As we do so, we increase the effectiveness of our strategies by incorporating the opinions and requests of stakeholders into our businesses. Dialogue with Shareholders and Investors The 75th Ordinary General Meeting of Shareholders IR large meetings / small meetings (for institutional investors / analysts) Number of attendees 585 people Voting rights exercise ratio 62.8% 6 times Dialogue with institutional investors / analysts Presentations for private investors* Aircraft maintenance center tours for private shareholders* 225 times (in Japan : 127 times; overseas : 98 times) 10 times / Total: 575 people (including IR fairs) 10 times / Total: 614 people * Suspended January–March 2020 due to COVID-19. Communication with Our Employees ANA Officer Town Meetings Number of meetings 949 times Participants Total: 12,612 people Topic examples • Commitment to safety • SDGs • Work-style reform, etc. Dialogue with International Society Participation in an international conference on the environment Dialogue with overseas ESG investors Dialogue with human rights organizations overseas Participation in international conferences on human rights 7 times (United States, Canada, Switzerland, Malaysia) 6 times (UK) 2 times (Thailand) 5 times (United States, Switzerland, Thailand, Japan) Dialogue with Business Partners Exchange of opinions with companies involved in the manufacture of in-flight meals 1 time (Thailand) External Recognition Inclusion in ESG Indexes • Dow Jones Sustainability World Index • Dow Jones Sustainability Asia Pacific Index • Sustainability Award Gold Class 2019 • FTSE4Good Index • FTSE Blossom Japan Index • MSCI Japan Empowering Women Index (WIN)* Quality On-Time Performance • SKYTRAX (ANA) - Awarded 5-STAR status for an eighth consecutive year • Cirium (ANA) Asia-Pacific Major Airlines - Network Category : No. 1 - Mainline Category : No. 1 Worldwide Major Airlines - Network Category : No. 2 - Mainline Category : No. 2 Management Strategy • Japan Health Conference, Ministry of Economy, • Cabinet Office Trade and Industry Certified Health and Productivity Management Organization Recognition Program –White 500– (ANA HOLDINGS INC., ANA AIRPORT SERVICES Co., Ltd., ANA OSAKA AIRPORT CO., LTD.) • Ministry of Health, Labour and Welfare IKUMEN AWARD 2019 Balance Support Category Special Encouragement Award (ANA) • Ministry of Health, Labour and Welfare Next-generation support certification Company Platinum Kurumin Certified (ANA, ANA AIRPORT SERVICES CO., LTD.) • DBJ Health Management Ranking Highest Rank (ANA HOLDINGS INC., ANA) • J-Win Diversity Award 2020 Advanced Achievement Award (ANA) Cool Japan Matching Award 2019 Kabuki-themed in-flight safety video Grand Prix Award (ANA) • Good Design Award 2019 (New domestic route economy-class seats developed between ANA and Toyota Boshoku Corporation; P.55) • IAUD International Design Award 2019 Gold Award, UX Design Category (ANA) • 2019 ORICON Customer Satisfaction Survey No. 1 in category of Instructor, Corporate Training, Extension Seminar for Young, Mid-Level Employees (ANA Business Solutions) Participation in reconstruction activities, volunteer activities (sponsored by ANA Holdings Corporate Sustainability) Participation in conferences for the revitalization of communities surrounding Narita Airport Number of meetings 17 times Group employee participants Total: 423 people Number of meetings 62 times Dialogue with Communities 96 * THE INCLUSION OF ANA HOLDINGS INC. IN ANY MSCI INDEX, AND THE USE OF MSCI LOGOS, TRADEMARKS, SERVICE MARKS OR INDEX NAMES HEREIN, DO NOT CONSTITUTE A SPONSORSHIP, ENDORSEMENT OR PROMOTION OF ANA HOLDINGS INC. BY MSCI OR ANY OF ITS AFFILIATES. THE MSCI INDEXES ARE THE EXCLUSIVE PROPERTY OF MSCI. MSCI AND THE MSCI INDEX NAMES AND LOGOS ARE TRADEMARKS OR SERVICE MARKS OF MSCI OR ITS AFFILIATES. 97 Business Foundations Supporting Corporate Value Consolidated 11-Year Summary ANA HOLDINGS INC. and its consolidated subsidiaries (Note 1) (FY) (Note 2) 2019 2018 2017 2016 Yen (Millions) 2015 2014 2013 2012 2011 2010 2009 For the Year Operating revenues (Note 4) Operating expenses Operating income (loss) Income (loss) before income taxes Net income (loss) attributable to owners of the parent Cash flows from operating activities Cash flows from investing activities Cash flows from financing activities Free cash flow Substantial free cash flow (Note 5) Depreciation and amortization EBITDA (Note 6) Capital expenditures At Year-End Total assets Interest-bearing debt Shareholders’ equity (Note 7) Per Share Data (Yen, U.S. dollars) (Note 8) Earnings per share Book value per share Cash dividends Average number of shares during the year (Thousand shares) Management Indexes Operating income margin (%) Net income margin (%) ROA (%) (Note 9) ROE (%) (Note 10) Shareholders’ equity ratio (%) Debt/equity ratio (Times) (Note 11) Asset turnover (Times) (Note 12) Payout ratio (%) Number of employees Operating Data International Passenger Operations Passenger revenues Available seat-km (Millions) Revenue passenger-km (Millions) Number of passengers (Thousands) Load factor (%) Unit revenues (¥) Yield (¥) Domestic Passenger Operations Passenger revenues Available seat-km (Millions) Revenue passenger-km (Millions) Number of passengers (Thousands) Load factor (%) Unit revenues (¥) Yield (¥) LCC Passenger Operations (Note 13) Revenues Available seat-km (Millions) Revenue passenger-km (Millions) Number of passengers (Thousands) Load factor (%) Unit revenues (¥) Yield (¥) International Cargo Operations Cargo revenues Cargo volume (Tons) Domestic Cargo Operations Cargo revenues Cargo volume (Tons) 1,974,216 1,913,410 60,806 51,501 27,655 130,169 (230,218) 23,869 (100,049) (79,149) 175,739 236,545 351,361 2,560,153 842,862 1,061,028 82.66 3,171.80 — 334,559 3.1 1.4 2.4 2.6 41.4 0.8 0.8 — 45,849 613,908 68,885 50,219 9,416 72.9 8.9 12.2 679,962 58,552 39,502 42,916 67.5 11.6 17.2 81,953 11,076 9,202 7,288 83.1 7.4 8.9 102,697 866,821 25,533 373,176 2,058,312 1,893,293 165,019 154,023 110,777 296,148 (308,671) (46,480) (12,523) (18,028) 159,541 324,560 375,864 2,687,122 788,649 1,099,413 331.04 3,285.46 75.00 334,632 8.0 5.4 6.4 10.6 40.9 0.7 0.8 22.7 43,466 651,587 65,976 50,776 10,093 77.0 9.9 12.8 696,617 58,475 40,704 44,325 69.6 11.9 17.1 93,611 12,052 10,394 8,153 86.2 7.8 9.0 125,015 913,915 27,454 393,773 1,971,799 1,807,283 164,516 196,641 143,887 316,014 (324,494) (29,989) (8,480) 61,410 150,408 314,924 304,707 2,562,462 798,393 988,661 417.82 2,954.47 60.00 344,372 8.3 7.3 6.8 15.1 38.6 0.8 0.8 14.4 41,930 597,446 64,376 49,132 9,740 76.3 9.3 12.2 689,760 58,426 40,271 44,150 68.9 11.8 17.1 87,555 11,832 10,212 7,797 86.3 7.4 8.6 118,002 994,593 30,710 436,790 1,765,259 1,619,720 145,539 139,462 98,827 237,084 (194,651) 3,349 42,433 39,655 140,354 285,893 254,425 2,314,410 729,877 919,157 28.23 262.44 6.00 3,500,205 8.2 5.6 6.5 11.6 39.7 0.8 0.8 21.3 39,243 516,789 60,148 45,602 9,119 75.8 8.6 11.3 678,326 59,080 38,990 42,967 66.0 11.5 17.4 — — — — — — — 93,301 954,027 30,860 451,266 1,791,187 1,654,724 136,463 131,064 78,169 263,878 (74,443) (133,257) 189,435 88,035 138,830 275,293 281,416 2,228,808 703,886 789,896 22.36 225.87 5.00 3,496,561 7.6 4.4 6.1 9.8 35.4 0.9 0.8 22.4 36,273 515,696 54,710 40,635 8,167 74.3 9.4 12.7 685,638 59,421 38,470 42,664 64.7 11.5 17.8 — — — — — — — 113,309 810,628 31,740 466,979 1,713,457 1,621,916 91,541 77,983 39,239 206,879 (210,749) (30,424) (3,870) (22,350) 131,329 222,870 274,702 2,302,437 819,831 798,280 11.24 228.45 4.00 3,492,380 5.3 2.3 4.2 5.1 34.7 1.0 0.8 35.6 34,919 468,321 49,487 35,639 7,208 72.0 9.5 13.1 683,369 60,213 38,582 43,203 64.1 11.3 17.7 — — — — — — — 124,772 841,765 32,584 475,462 1,601,013 1,535,027 65,986 36,391 18,886 200,124 (64,915) (85,569) 135,209 38,929 136,180 202,166 183,739 2,173,607 834,768 746,070 5.41 213.82 3.00 3,493,860 4.1 1.2 3.2 2.5 34.3 1.1 0.7 55.5 33,719 395,340 41,451 30,613 6,336 73.9 9.5 12.9 675,153 61,046 37,861 42,668 62.0 11.1 17.8 — — — — — — — 104,736 710,610 32,116 477,081 1,483,581 1,379,754 103,827 70,876 43,140 173,196 (333,744) 84,549 (160,548) 54,256 123,916 227,743 162,752 2,137,242 897,134 766,737 13.51 218.41 4.00 3,192,482 7.0 2.9 5.1 6.6 35.9 1.2 0.7 29.6 32,634 348,319 37,947 28,545 6,276 75.2 9.2 12.2 665,968 58,508 36,333 41,089 62.1 11.4 18.3 — — — — — — — 86,589 621,487 32,231 463,473 1,411,504 1,314,482 97,022 63,431 28,178 214,406 (166,323) 16,171 48,083 52,043 119,268 216,290 196,881 2,002,570 963,657 549,014 11.22 218.24 4.00 2,511,841 6.9 2.0 5.1 5.3 27.4 1.8 0.7 35.7 32,884 320,066 34,406 25,351 5,883 73.7 9.3 12.6 651,556 56,756 34,589 39,020 60.9 11.5 18.8 — — — — — — — 87,978 570,684 33,248 467,348 1,357,653 1,289,845 67,808 35,058 23,305 203,889 (139,619) (10,596) 64,270 27,870 118,440 186,248 211,698 1,928,021 938,819 520,254 9.29 207.35 2.00 2,507,572 5.0 1.7 3.7 4.7 27.0 1.8 0.7 21.5 32,731 280,637 29,768 22,430 5,168 75.3 9.4 12.5 652,611 56,796 35,983 40,574 63.4 11.5 18.1 — — — — — — — 86,057 557,445 32,413 453,606 1,228,353 1,282,600 (54,247) (95,593) (57,387) 82,991 (251,893) 173,791 (168,902) (123,902) 113,806 59,559 209,937 1,859,085 941,691 473,552 (24.67) 188.93 — 2,326,547 (4.4) (4.7) (2.8) (14.4) 25.5 2.0 0.7 — 32,578 214,124 26,723 20,220 4,666 75.7 8.0 10.6 630,976 57,104 35,397 39,894 62.0 11.0 17.8 — — — — — — — 55,750 422,449 31,829 458,732 U.S. dollars (Thousands) (Note 3) 2019 18,140,365 17,581,641 558,724 473,224 254,111 1,196,076 (2,115,390) 219,323 (919,314) (727,271) 1,614,802 2,173,527 3,228,530 23,524,331 7,744,757 9,749,407 0.75 29.14 — 5,640,981 6,247,927 753,036 943,646 234,613 Notes: 1. As of March 31, 2020, there were 62 consolidated subsidiaries and 16 equity-method subsidiaries and affiliates. 8. The Group conducted a 1-for-10 reverse stock split effective October 1, 2017. Calculations have been made assuming a reverse stock split at the beginning of the fiscal year ended 2. From April 1 to March 31 of the next year 3. U.S. dollar amounts in this report are translated, for convenience only, at the rate of ¥108.83 = US$1, the approximate exchange rate as of March 31, 2020. 4. Effective from the fiscal year ended March 2015, revenue of jet fuel which is resold to airlines outside the Group is offset by its purchasing cost and the net amount is recorded in operating revenues. 5. Substantial free cash flow is excluding purchase and redemption of marketable securities (time deposits and negotiable deposits of more than three months). 6. EBITDA = Operating income + Depreciation and amortization 7. Total shareholders’ equity = Shareholders’ equity + Accumulated other comprehensive income March 2018. 9. ROA = (Operating income + Interest and dividend income) / Simple average of total assets 10. ROE = Net income attributable to owners of the parent / Simple average of shareholders’ equity 11. Debt/equity ratio = Interest-bearing debt / Shareholders’ equity 12. Asset turnover = Operating revenues / Simple average of total assets 13. Revenues of LCC Operations include ancillary income. * Yen amounts are rounded down to the nearest million yen and percentages are rounded to the nearest one decimal place. U.S. dollar amounts are truncated. 98 99 Financial / Data Section Performance for Fiscal 2019 Overview of the ANA Group As of March 31, 2020, the ANA Group (“the Group”), led by holding company ANA HOLDINGS INC., consisted of 128 subsidiaries (including ALL NIPPON AIRWAYS CO., LTD.) and 45 affiliates. A total of 62 companies are treated as consolidated subsidiaries, with another 16 treated as equity-method subsidiaries and affiliates. The Group had 45,849 employees, up 2,383 employees year on year. During fiscal 2019, we executed various measures set forth in the FY2018–22 ANA Group Corporate Strategy (published February 1, 2018). We made progress in human resources and capital expendi- tures in advance of the 2020 slot expansions at the Tokyo metropoli- tan area airports, while also pursuing safety, quality and services. However, in the fourth quarter, impact from the spread of COVID-19 led to a sharp decline in demand for air transport. Consolidated Operating Revenues, Operating Expenses, and Operating Income Fiscal 2019 consolidated operating revenues amounted to ¥1,974.2 billion, a ¥84.0 billion (4.1%) decrease year on year. This decrease was mainly due to reduced revenues in our mainstay Air Transportation Business. Although we reduced costs by controlling the volume of opera- tions in response to the sharp decline in passenger demand, operat- ing income amounted to ¥60.8 billion, a ¥104.2 billion (63.2%) decrease year on year due to a significant decrease in operating revenues. Review by Segment The Group operates four reportable segments: Air Transportation, Airline Related, Travel Services, and Trade and Retail. Segment Information (Fiscal Year) 2019 2018 Change 2019 2018 Change 2019 2018 Change Operating Revenues Operating Income EBITDA (¥ Millions) Trade and Retail 144,750 150,679 (5,929) 2,909 3,706 (797) 4,214 5,060 (846) Others 44,223 40,958 3,265 3,526 2,275 1,251 3,788 2,511 1,277 Adjustments (395,923) (389,539) (6,384) (14,716) (15,302) 586 (14,716) (15,302) 586 Total (Consolidated) ¥1,974,216 ¥2,058,312 ¥(84,096) ¥ 60,806 ¥165,019 ¥(104,213) ¥236,545 ¥324,560 ¥(88,015) Notes: 1. “Others” represents all operating segments that are not included in reportable segments, including facility management, business support, and other operations. 2. Adjustments of segment profit represent the elimination of intersegment transactions, Group management expenses of ANA HOLDINGS INC., and other certain items. 3. Segment operating income is reconciled with operating income in the consolidated financial statements. 4. EBITDA = Operating income + Depreciation and amortization 19/4 5 6 7 8 9 10 11 12 20/1 2 3 (Year/ Month) Air Transportation ¥1,737,737 ¥1,814,417 ¥(76,680) ¥ 49,550 ¥160,556 ¥(111,006) ¥217,846 ¥313,504 ¥(95,658) Source: Bloomberg Airline Related 299,433 291,051 8,382 18,144 13,178 4,966 23,467 17,674 5,793 Global Air Transportation Passenger Volume by Region Travel Services 143,996 150,746 (6,750) 1,393 606 787 1,946 1,113 833 Management’s Discussion and Analysis Monthly Prices for Dubai Crude Oil and Singapore Kerosene (U.S. dollars per barrel) 100 80 60 40 20 19/4 5 6 7 8 9 10 11 12 20/1 2 3 (Year/ Month) Dubai Crude Oil Singapore Kerosene Source: Bloomberg Monthly Yen-Dollar Exchange Rate (Yen/U.S. dollars) 3,011 3,000 8,679 2,320 2,000 1,932 1,000 786 442 185 0 (CY) 2013 2014 2015 2016 2017 2018 2019 (Left) Total (Right) Asia-Pacific Africa Europe North America Middle East Latin America Source: International Air Transport Association (IATA), 2020 Economic Conditions General Economic Overview The Japanese economy recovered moderately during fiscal 2019 (April 1, 2019 to March 31, 2020) as corporate earnings remained at a high level and consumer spending rallied. Toward the end of the fiscal year, however, the economy deteriorated rapidly due to the effects of COVID-19, leading to an extremely severe situation. Looking ahead, we must pay close attention to risks that could degrade the global economy further as a result of the spread of the virus. Potential effects include worsening employment and personal income environments due to falling corporate profits, slowing con- sumer spending, and more. Fuel Price Trends The average price for Dubai crude oil was $60.5 per barrel during fiscal 2019. During the first half of the year, Dubai crude ranged around $60 per barrel as OPEC, Russia, and other major non-OPEC oil-producing countries deferred production increases. However, toward the end of the fiscal year, fears of global recession due to impact of the spread of COVID-19 led to a sudden decline in market conditions. As a result, the price of Dubai crude oil ended at $33.7 per barrel on March 31, 2020. The market price of Singapore kerosene tracked the price of crude oil. The average price for the fiscal year was $72.4 per barrel, ending at $31.1 per barrel on March 31, 2020. Foreign Exchange Market The Japanese yen averaged ¥108.7 to the U.S. dollar for fiscal 2019, ending the year at ¥108.8 per U.S. dollar. The value of the yen rose during the first half of the year due to concerns about the impact of intensifying trade frictions on the world economy. Toward the end of the fiscal year, risk aversion grew with the spread of the virus, and the value of the yen continued to appreciate. Air Transport Traffic Trends International Air Transport Association (IATA) member airlines reported 1,890 million passengers on scheduled international flights in 2019 (4.4% increase year on year). Passengers on scheduled domestic flights numbered 2,650 million (3.4% increase). At the same time, scheduled global air cargo volume decreased 2.4%. (Source: IATA World Air Transport Statistics, 2020) In Japan, passengers on trunk routes* decreased 2.2% to 42.49 million for fiscal 2019. The number of passengers on local routes* decreased 1.8% to 59.38 million. In total, Japanese air transport passengers numbered 101.87 million, a decrease of 2.0%. Domestic cargo volume decreased 5.6% to 0.77 million tons. The number of passengers carried by Japanese airlines on international services decreased 8.4% to 21.43 million, while the volume of international cargo handled by Japanese airlines increased 0.9% to 1.45 million tons. (Source: Ministry of Land, Infrastructure, Transport and Tourism Statistical Report on Air Transport) * Trunk routes refer to routes connecting Sapporo (New Chitose), Tokyo (Haneda), Tokyo (Narita), Osaka (Itami), Kansai, Fukuoka, and Okinawa (Naha) airports with one another. Local routes refer to all other routes. 120 110 100 RPK (Billions) 9,000 6,000 3,000 0 100 101 Financial / Data Section Management’s Discussion and Analysis Air Transportation Business Changes in Operating Income (FY2019 vs FY2018) (¥ Billions) ANA International Passenger Decrease in Revenues –76.6 Decrease in Profit –111.0 –37.6 ANA Domestic Passenger Revenues from contracted maintenance and handling, Mileage and Card, etc. Depreciation and amortization except aircraft, maintenance, etc. –16.6 ANA Cargo & Mail –24.6 ANA Other Revenues +13.9 LCC –11.6 Other Expenses +26.7 160.5 Commissions, advertising, In-flight services, Ground services, etc. Landing and navigation fees, Aircraft depreciation, Personnel, Outsourcing contracts, etc. Sales-Linked –0.2 Operation- Linked +27.0 Increase in Expenses +34.3 FY2018 Operating Income (Fiscal Year) Operating revenues Operating expenses Operating income 2019 2018 Change YoY (%) 1,737.7 1,814.4 1,688.1 1,653.8 –76.6 +34.3 49.5 160.5 –111.0 –4.2 +2.1 –69.1 –19.2 Fuel & Fuel Tax 49.5 FY2019 Operating Income Air Transportation Business operating revenues amounted to ¥1,737.7 billion, a year-on-year decrease of ¥76.6 billion (4.2%). Operating revenues through the third quarter trended firmly up owing to factors such as strong domestic passenger demand and expan- sion of international route networks, despite sluggish demand for international cargo business due to a cooling of the world economy caused by U.S.–China trade frictions. In the fourth quarter, demand for domestic and overseas travel declined sharply due to immigration restrictions in various countries around the world due to the spread of COVID-19, as well as voluntary limits on non-essential travel domesti- cally. Operating income amounted to ¥49.5 billion, a year-on-year ANA International Passenger Business A total of 9.41 million passengers used the ANA network in fiscal 2019 (6.7% decrease), while unit price rose 1.0% to ¥65,196. Operating revenues fell 5.8% year on year to ¥613.9 billion. We recorded a 4.4% increase in available seat-kilometers (ASK) and saw a 1.1% decrease in revenue passenger-kilometers (RPK). Load factor decreased 4.1 points to 72.9%. Although we captured demand by opening new routes and deploying ultra-wide body aircraft on Hawaii routes, the decline in demand due to COVID-19 that became apparent on China routes from the end of January spread to routes servicing Asia, North America, Europe, and Hawaii. As a result, both revenues and passen- ger numbers decreased to levels underperforming previous fiscal year. ANA actively promoted services to new cities in our route network, launching the Narita–Perth route (western Australia) in September, the Narita–Chennai route (southern India) in October, and the Narita–Vladivostok route (eastern Russia) in March 2020. In May, ANA introduced the Airbus A380 FLYING HONU, the world’s largest passenger aircraft, on the Narita–Honolulu route. However, we decrease of ¥111.0 billion (69.1%). This result was due to an increase in aircraft expenses, maintenance expenses, and other costs due to further improvements in safety, quality, and services and measures preparing for slot expansions at the Tokyo metropolitan area airports. On the other hand, performance was impacted negatively by flight cancellations and reductions on both international and domestic routes, despite controlled fuel expenses, landing and navigation fees, and other costs in response to decreasing demand for air travel. Results by business were as follows. suspended and reduced flights along 71 routes, affecting 2,814 flights by the end of March 2020 in response to the decrease in demand caused by the impact of COVID-19. For the first time in 10 years, ANA unveiled new seats for First Class and Business Class on Boeing 777-300ER aircraft. We intro- duced the upgraded aircraft on the Haneda–London route in August, the Haneda–New York and Narita–New York routes in November, and the Haneda–Frankfurt route in February 2020. We introduced our first private wide-seat with a closable door, called THE Room, in Business Class. These new seats offer the world’s first personal 4K-compatible monitor and other amenities, achieving the highest levels of passen- ger comfort. At the end of January, we signed a joint venture framework agreement with Singapore Airlines with the aim of strengthening our network and increasing our presence in the rapidly growing Asia / Oceania region. Going forward, we will deepen our partnership relations and work to improve competitiveness and customer conve- nience in the Asia / Oceania region. ANA International Passenger Business Results (¥ Billions) (Fiscal Year) ASK (Millions) RPK (Millions) Number of passengers (Thousands) Load factor (%) Passenger revenues (¥ Billions) Unit revenues (¥) Yield (¥) Unit price (¥) * Difference 2019 2018 YoY (%) 68,885 50,219 9,416 72.9 613.9 8.9 12.2 65,976 50,776 10,093 77.0 651.5 9.9 12.8 +4.4 –1.1 –6.7 –4.1* –5.8 –9.8 –4.7 18/4 65,196 64,556 +1.0 ANA Domestic Passenger Business In addition to robust business demand and domestic travel of passengers visiting Japan, we captured strong demand over the ten-day Golden Week holidays. We also offered various discount fares according to demand. These measures led to a positive trend through the third quarter; however, demand declined sharply due to impact of COVID-19 beginning at the end of February. As a result, revenues and passenger numbers decreased year on year. ASK grew 0.1% year on year, while RPK fell 3.0%. Load factor was 67.5%, a decrease of 2.1 points. Passenger numbers declined 3.2% to 42.91 million and unit price rose 0.8% to ¥15,844. Operating revenues were down 2.4% to ¥679.9 billion. ANA increased flights in our route network, introducing the Narita– Chubu route in May and the Chubu–Kumamoto route in October. ANA sought to improve efficiency further by optimizing the number of route flights and adjusting aircraft types flexibly based on demand predic- tions. During the phase of declining demand caused by COVID-19, we began adjusting the number of flights in March, while striving to 800 600 400 200 0 200 150 100 50 0 2015 2016 2017 2018 2019 (FY) (Left) Passenger Revenues (Right) ASK RPK Yield * Figures for ASK, RPK, and Yield are indexed using the figures for fiscal 2015 as 100. maintain our network as a public transportation provider. In total, 2,674 flights across 42 routes were suspended or reduced. We have offered discount fares that can be purchased as early as 355 days before boarding, aiming to capture demand at an early stage for periods such as the Golden Week holidays and summer vacations. In November, we introduced new seats on Boeing 777-200 aircraft, offering improved comfort and functionality with power reclining in Premium Class. We also introduced seats equipped with touch panel personal monitors in Economy Class. In addition, we renovated the ANA LOUNGE at Naha Airport in September under the supervision of Kengo Kuma, one of Japan’s leading architects. In November at Naha, we also altered the layout of the departure counter, and implemented the ANA Baggage Drop automated baggage drop machine, making it the fourth airport in Japan to be so equipped. These and other efforts were made to further improve service quality. ANA Domestic Passenger Business Results (¥ Billions) (Fiscal Year) ASK (Millions) RPK (Millions) Number of passengers (Thousands) Load factor (%) Passenger revenues (¥ Billions) Unit revenues (¥) Yield (¥) Unit price (¥) * Difference 2019 2018 YoY (%) 58,552 39,502 42,916 67.5 679.9 11.6 17.2 58,475 40,704 44,325 69.6 696.6 11.9 17.1 15,844 15,716 +0.1 –3.0 –3.2 –2.1* –2.4 –2.5 +0.6 +0.8 800 600 400 200 0 120 110 100 90 0 2015 2016 2017 2018 2019 (FY) (Left) Passenger Revenues (Right) ASK RPK Yield * Figures for ASK, RPK, and Yield are indexed using the figures for fiscal 2015 as 100. 102 103 Financial / Data Section Management’s Discussion and Analysis ANA Cargo and Mail Business The ANA Cargo and Mail Business recorded fiscal 2019 operating revenues of ¥136.1 billion, a year-on-year decrease of 15.3%. The International Cargo Business recorded operating revenues of ¥102.6 billion, down 17.9% compared to the previous fiscal year. Cargo volume decreased 5.2% to 860,000 tons. This was the result of consistently low cargo demand for to and from Japan stemming from the global economic slowdown caused by U.S.–China trade frictions. The significant reduction of flights due to the spread of COVID-19 in February and thereafter also had a negative effect on performance. Available ton-kilometers (ATK) rose 3.2% while revenue ton-kilometers (RTK) decreased 2.2%. We introduced the Boeing 777F wide-body cargo freighter to our route network on the Narita–Shanghai (Pudong) route in July and on the Narita–Chicago route in October. We also captured demand for oversize special cargo, such as semiconductor manufacturing equipment, which enjoys steady demand. Our efforts in the fourth quarter to respond to emergency supply transportation due to the outbreak of COVID-19 also made a positive contribution. Domestic Cargo Business operating revenues decreased 7.0% to ¥25.5 billion, reflecting a 5.2% decline in cargo volume to 370,000 tons. While we endeavored to grow revenues through non-scheduled extra cargo flights on the Okinawa–Haneda route during peak demand for flowers, air cargo demand overall was weak throughout the year. At the same time, the spread of COVID-19 caused flight suspensions and reductions. International Mail Business operating revenues decreased 6.6% to ¥4.7 billion, while Domestic Mail Business operating revenues were 2.9% lower at ¥3.1 billion. ANA Cargo and Mail Business Results International Cargo Business Results (Fiscal Year) 2019 2018 YoY (%) Cargo and mail services revenues (¥ Billions) International ATK (Millions) cargo RTK (Millions) Cargo volume (Thousand tons) 136.1 7,354 4,222 866 160.7 7,122 4,318 913 Cargo revenues (¥ Billions) 102.6 125.0 Unit price (¥/kg) Mail revenues (¥ Billions) Domestic ATK (Millions) cargo RTK (Millions) Cargo volume (Thousand tons) Cargo revenues (¥ Billions) Unit price (¥/kg) Mail revenues (¥ Billions) 118 4.7 137 5.1 1,705 1,720 387 373 25.5 68 3.1 408 393 27.4 70 3.2 –15.3 +3.2 –2.2 –5.2 –17.9 –13.4 –6.6 –0.9 –5.2 –5.2 –7.0 –1.9 –2.9 LCC Business Results The LCC Business recorded ¥81.9 billion in operating revenues, a 12.5% decrease year on year. This result was mainly due to a 10.6% decrease in passenger numbers to 7.28 million and a 2.1% decrease in unit price to ¥11,244. ASK and RPK declined 8.1% and 11.5%, respectively. Load factor was 83.1%, which was a decrease of 3.2 points compared to the previous fiscal year. Performance was inhibited by the impact of geopolitical risks in Hong Kong and South Korea, as well as a significant decline in demand due to the spread of COVID-19 toward the end of the fiscal year. Operations of Vanilla Air were terminated in October of this fiscal year, and we successfully completed the merger with Peach Aviation. In the route network, in addition to transferring 10 routes to Peach Aviation, we launched the Narita-Kagoshima and Narita-Nagasaki routes in March 2020. However, due to impact from the spread of COVID-19, we suspended and reduced flights on 23 routes begin- ning in February, which affected a total of 2,088 international and domestic flights. (¥ Billions) 150 1,600 1,200 100 800 50 400 0 0 18/4 2015 2013 2016 2014 2017 2015 2018 2016 2019 2017 (Left) International Cargo Revenues (Right) ATK RTK Unit Price * Figures for ATK, RTK, and Yield are indexed using the figures for fiscal 2015 as 100. 150 200 150 100 100 50 50 0 0 (FY) To promote sales, we conducted Flying Train Peach Sale on all 40 routes to celebrate the merger of the two LCCs. LCC Business Performance (Peach Aviation Limited, Vanilla Air Inc.) (Fiscal Year) ASK (Millions) RPK (Millions) Number of passengers (Thousands) Load factor (%) Passenger revenues (¥ Billions)*2 Unit revenues (¥) Yield (¥) Unit price (¥) 2019 2018 YoY (%) 11,076 12,052 9,202 7,288 83.1 81.9 7.4 8.9 10,394 8,153 86.2 93.6 7.8 9.0 11,244 11,482 –8.1 –11.5 –10.6 –3.2*1 –12.5 –4.7 –1.1 –2.1 *1 Difference *2 Operating revenues include incidental revenues. Others Other operating revenues in the Air Transportation Business amounted to ¥225.7 billion, a 6.6% increase year on year. Results include incidental revenues from mileage memberships, in-flight sales, contracted maintenance, etc. Operating Expenses Air Transportation Business operating expenses increased ¥34.3 billion (2.1%) year on year to ¥1,688.1 billion. Specific expense amounts and reasons for year-on-year changes are described below. Breakdown of Operating Revenues and Expenses (Fiscal Year) 2019 2018 Change Segment operating revenues ¥1,737,737 ¥1,814,417 ¥ (76,680) (¥ Millions) International Passenger Cargo Mail 613,908 102,697 4,764 651,587 125,015 5,100 Domestic Passenger 679,962 696,617 Cargo Mail LCC revenues Other revenues 25,533 3,136 81,953 27,454 3,230 93,611 225,784 211,803 Segment operating expenses 1,688,187 1,653,861 Fuel and fuel tax Landing and navigation fees Aircraft leasing fees Depreciation and amortization Aircraft maintenance Personnel 314,486 120,173 130,614 168,296 177,330 201,651 Sales commissions and promotion 105,192 Contracts Others 256,618 213,827 333,709 121,606 123,419 152,948 157,058 207,801 107,810 239,630 209,880 (37,679) (22,318) (336) (16,655) (1,921) (94) (11,658) 13,981 34,326 (19,223) (1,433) 7,195 15,348 20,272 (6,150) (2,618) 16,988 3,947 Segment operating income ¥ 49,550 ¥ 160,556 ¥(111,006) Fuel and aircraft fuel tax expenses amounted to ¥314.4 billion, a ¥19.2 billion (5.8%) decrease year on year. This expense accounted for 18.6% of Air Transportation Business operating expenses, com- pared with 20.2% in the previous fiscal year. This ¥19.2 billion decrease was mainly due to decreases in ANA price factors (includ- ing hedging effectiveness) of approximately ¥19.0 billion, an increase in ANA consumption volume factors of approximately ¥3 billion, and a decrease in LCC Business of approximately ¥3 billion. Fuel consumption volume increased due to the expansion of capacity in international services. The ANA Group is working to control fuel consumption volume by introducing fuel-efficient aircraft and other measures, including the adoption of efficient flight opera- tions. During fiscal 2019, we engaged in the same measures of fuel tax reduction as we followed in the previous fiscal year. Landing and navigation fees amounted to ¥120.1 billion, down ¥1.4 billion (1.2%) year on year. Passenger aircraft flights (excluding Peach Aviation and Vanilla Air flights) on ANA domestic operations increased 0.7%, while ANA international flights decreased 1.7% and freighter flights decreased 13.3%. These results were partly due to impact from suspended and reduced flights as a result of the spread of COVID-19. Aircraft leasing fees increased ¥7.1 billion (5.8%) year on year to ¥130.6 billion due to factors such as greater use of airline charters in the International Cargo Business. Depreciation and amortization expenses increased ¥15.3 billion (10.0%) to ¥168.2 billion. This increase was mainly due to introducing Boeing 777F and Airbus A380 aircraft in service during this fiscal year as we continue to update the ANA-owned fleet. Aircraft maintenance expenses increased ¥20.2 billion (12.9%) year on year to ¥177.3 billion. This increase was due to several factors, including increased maintenance frequency caused by Rolls-Royce engine inspection and maintenance. Personnel expenses decreased ¥6.1 billion (3.0%) year on year to ¥201.6 billion. This decrease reflected the impact of decreases in performance-linked lump-sum payments. Sales commissions and promotion expenses decreased ¥2.6 billion (2.4%) year on year to ¥105.1 billion. This decrease was mainly due to the decrease in passenger demand as a result of the spread of COVID-19. Contract expenses increased ¥16.9 billion (7.1%) year on year to ¥256.6 billion. This increase was mainly due to increases in out- sourced operations associated with advance preparations for slot expansions at Tokyo metropolitan area airports in 2020. Other expenses increased ¥3.9 billion (1.9%) year on year to ¥213.8 billion. This result was mainly due to increased expenses related to in-flight services. 104 105 Financial / Data Section Management’s Discussion and Analysis Airline Related Business Fiscal 2019 segment operating revenues increased ¥8.3 billion (2.9%) year on year to ¥299.4 billion. Operating income increased ¥4.9 billion (37.7%) to ¥18.1 billion. These increases were mainly due to increased contracts for airport ground support work (check-in procedures, baggage handling, etc.) at Kansai International Airport and Chubu International Airport. We also added MRO Japan Co., Ltd. as a newly consolidated subsidiary this year. MRO Japan has launched full-scale business development in Okinawa. Trade and Retail Fiscal 2019 operating revenues in our Trade and Retail business decreased ¥5.9 billion (3.9%) year on year to ¥144.7 billion. Operating income decreased ¥0.7 billion (21.5%) to ¥2.9 billion. Transaction volume for aircraft parts and other items rose, while sales decreased for nuts and other items in our food business. Retail business transaction volume decreased year on year at our airport ANA DUTY FREE SHOP retail locations and ANA FESTA airport shops, which also contributed to lower performance. Performance in the Airline Related Segment Performance in the Trade and Retail Segment (¥ Millions) (¥ Millions) (Fiscal Year) 2019 2018 Change (Fiscal Year) 2019 2018 Change Segment operating revenues ¥299,433 ¥291,051 Segment operating expenses 281,289 277,873 Segment operating income ¥ 18,144 ¥ 13,178 ¥8,382 3,416 ¥4,966 Segment operating revenues ¥144,750 ¥150,679 ¥(5,929) Segment operating expenses 141,841 146,973 (5,132) Segment operating income ¥ 2,909 ¥ 3,706 ¥ (797) Travel Services Fiscal 2019 segment operating revenues amounted to ¥143.9 billion, a ¥6.7 billion (4.5%) decrease year on year. Operating income increased ¥0.7 billion (129.9%) to ¥1.3 billion. Performance trended upward through the third quarter due to success in attracting custom- ers for products sold on the internet (both for domestic and overseas travel). We were also successful in capturing demand for travel during the ten-day Golden Week holidays. However, the impact of COVID-19 beginning at the end of January resulted in operating revenues that underperformed the previous fiscal year. Meanwhile, operating income rose year on year, mainly due to a decrease in system expenses. Performance in the Travel Services Segment Others Fiscal 2019 operating revenues in the Others segment increased ¥3.2 billion (8.0%) year on year to ¥44.2 billion. Meanwhile, operating income increased ¥1.2 billion (55.0%) to ¥3.5 billion. Subleasing transaction volume grew and we sold properties in our real estate- related business, while construction and facility management-related business revenues stemming from facility renovations at Haneda Airport terminals and construction-related revenues grew. Performance in the Others Segment (Fiscal Year) 2019 2018 Change (¥ Millions) Segment operating revenues Segment operating expenses ¥44,223 40,697 ¥ 3,526 ¥40,958 38,683 ¥ 2,275 ¥3,265 2,014 ¥1,251 (¥ Millions) Segment operating income (Fiscal Year) 2019 2018 Change Segment operating revenues ¥143,996 ¥150,746 Domestic package products 112,711 119,362 International package products Other revenues 20,925 10,360 20,979 10,405 Segment operating expenses 142,603 150,140 Segment operating income ¥ 1,393 ¥ 606 ¥(6,750) (6,651) (54) (45) (7,537) ¥ 787 Non-Operating Income / Expenses Net non-operating expenses amounted to ¥9.3 billion for fiscal 2019. This result was due to impairment loss on goodwill related to Peach Aviation Limited, which was offset in part by posting compensation related to delays of aircraft delivery and engine malfunctions. Non-Operating Income / Expenses (Fiscal Year) 2019 2018 Change (¥ Millions) Interest and dividend income ¥ 3,031 ¥ 2,926 ¥ Interest expenses Foreign exchange gain Foreign exchange loss Gain on sales of assets (6,291) (6,995) 473 — 6,746 — (1,761) 2,554 Loss on sales / disposal of assets (7,435) (11,758) 105 704 473 1,761 4,192 4,323 Impairment loss (25,159) (1,997) (23,162) Equity in earnings of unconsolidated subsidiaries and affiliates 1,210 1,559 (349) Gain on sales of investment securities 1,122 Valuation loss on investments in securities (853) — — 1,122 (853) Compensation payments received 17,897 6,810 11,087 Litigation settlement fees related to anti-trust law claims Loss on sales of shares of subsidiaries and affiliates Gain on donation of non-current assets Other, net Total — (6,423) 6,423 (7) (343) 336 3,553 (3,592) 2,512 1,920 1,041 (5,512) ¥ (9,305) ¥(10,996) ¥ 1,691 Net Income Attributable to Owners of the Parent The preceding factors combined to decrease income before income taxes by ¥102.5 billion (66.6%) year on year to ¥51.5 billion. After income taxes, municipal taxes, business taxes, and other adjust- ments, net income attributable to owners of the parent decreased ¥83.1 billion (75.0%) to ¥27.6 billion. Earnings per share were ¥82.66 compared with ¥331.04 for the previous fiscal year. Comprehensive income decreased ¥156.3 billion to a loss of ¥14.7 billion, mainly due to the decrease in net income attributable to owners of the parent. Cash Flows Fundamental Approach The ANA Group’s fundamental approach to cash management is to conduct continuous investments strategically to strengthen competi- tiveness over the medium and long term, while maintaining financial soundness. Capital expenditures are ordinarily kept within the scope of cash flows from operating activities, including repayment of lease obliga- tions, to generate free cash flow, which enables us to maintain a balance between total interest-bearing debt and shareholders’ equity. The Group’s primary means of raising funds are borrowings from banks and bond issuances. The Group has also concluded commit- ment lines totaling ¥153.6 billion (as of March 31, 2020) with major domestic financial institutions to ensure reliable access to working capital in case of emergency. Commitment lines were unused as of the end of fiscal 2019. The Group has access to the Japan Bank for International Cooperation (JBIC)’s guarantee system for investments in aircraft, our primary assets. Overview of Fiscal 2019 Free cash flow resulted in expenditures of ¥100.0 billion (sum of cash flows from operating activities and investing activities). Net cash provided by financing activities totaled ¥23.8 billion. As a result, cash and cash equivalents decreased ¥75.9 billion from the beginning of the fiscal year, amounting to ¥135.9 billion at the end of the fiscal year. Cash Flows from Operating Activities After adjusting the ¥51.5 billion in income before income taxes for depreciation and amortization and other non-cash items, net cash provided by operating activities amounted to ¥130.1 billion, ¥165.9 billion lower year on year. Interest Coverage Ratio* (Fiscal Year) Interest coverage ratio (Times) 2019 2018 20.4 41.3 * Interest coverage ratio = Cash flows from operating activities / Interest expenses 106 107 Financial / Data Section Management’s Discussion and Analysis Cash Flows from Investing Activities Net cash used in investing activities totaled ¥230.2 billion, ¥78.4 billion lower year on year. This result was mainly due to payments for purchases of property and equipment related to payments upon delivery of aircraft, purchases of spare parts, and advance payments for aircraft to be put into service in the future. Payments were also made for intangible assets, including investments in software. Net cash used in investing activities amounted to ¥209.3 billion when excluding cash movements that resulted in net outlays of ¥20.9 billion related to the acquisition and sale of time deposits and negotiable deposits of more than three months. Free Cash Flow As mentioned above, net cash provided by operating activities totaled ¥130.1 billion. Since net cash used in investing activities was ¥230.2 billion, free cash flow for fiscal 2019 amounted to a net expenditure of ¥100.0 billion, an increase of ¥87.5 billion compared to the previous fiscal year. Substantial free cash flow decreased ¥61.1 billion year on year to an outlay of ¥79.1 billion when excluding cash movements associated with the acquisition and sale of time deposits and negotiable deposits of more than three months. Cash Flows from Financing Activities Net cash provided by investing activities totaled ¥23.8 billion, up ¥70.3 billion year on year. This result was mainly due to dividend payments and loan repayments, offset in part by proceeds from issuance of bonds, etc. Capital Expenditures and Aircraft Procurement Capital Expenditures ANA Group capital expenditures are based on an approach of selection and concentration. We invest to strengthen safety, increase our competitiveness, and improve profitability. These expenditures primarily reflect aircraft-related investments, including the acquisition of aircraft, spare parts, and prepayment for aircraft, as well as information systems expenditures. As a result, capital expenditures for fiscal 2019 amounted to ¥351.3 billion, a decrease of 6.5% compared to the previous fiscal year. By segment, Air Transportation Business capital expenditures decreased 7.4% year on year to ¥343.4 billion. Airline Related expen- ditures increased 237.3% to ¥6.2 billion, while Travel Services expen- ditures increased 7.1% to ¥0.2 billion. Trade and Retail capital expenditures increased 94.6% to ¥2.2 billion, and Others decreased 47.6% to ¥0.1 billion. Capital Expenditures* / Depreciation and Amortization (¥ Billions) 400 300 281.4 254.4 304.7 375.8 351.3 138.8 140.3 150.4 159.5 175.7 200 100 0 18/4 2015 2016 2017 2018 2019 (FY) Capital Expenditures Depreciation and Amortization * Capital expenditures contains only fixed assets. Fundamental Approach to Aircraft Procurement Aircraft are major investments used over the long term (10-plus years). Decisions regarding the selection of aircraft types suited to routes and networks and the pursuit of the best fleet composition are among the most important issues for airline management. The ANA Group fleet strategy is based on three basic policies: (1) Strengthening cost competitiveness by introducing fuel-efficient aircraft; (2) Optimizing supply to demand by increasing the ratios of narrow- and medium-body aircraft; and (3) Enhancing productivity by integrating aircraft types. Fundamentally, the Group purchases and owns strategic aircraft we intend to use over the medium to long term. We employ operating leases to procure aircraft for use over the short term or for capacity adjustment. The Group may also utilize sale-leaseback transactions as a means to diversify corporate financing methods. In these and other ways, the Group selects the most economical aircraft procure- ment method. Aircraft Procured in Fiscal 2019 Based on our fleet strategy mentioned above, aircraft totaled 307 as of the end of fiscal 2019, an increase of 3 compared to the end of the previous fiscal year. During the fiscal year, the ANA Group added 21 new aircraft. These additional aircraft consisted of one Airbus A380, six Boeing 777-300s, two Boeing 777Fs, one Boeing 787-10, five Boeing 787-9s, two Airbus A320neos, and four Airbus A320-200s. Meanwhile, the Group sold or returned leased aircraft, consisting of five Boeing 767-300s, two Boeing 767-300Fs, seven Airbus A320-200s, and four Boeing 737-500s (18 aircraft total). The table below shows changes in the number of aircraft. Changes in the Number of Aircraft in Fiscal 2019 Aircraft Number of Aircraft as of March 31, 2020 Owned Leased ( ) changes Airbus A380 Boeing 777-300 Boeing 777-200 Boeing 777F (Freighter) Boeing 787-10 Boeing 787-9 Boeing 787-8 Boeing 767-300 Boeing 767-300F (Freighter) Airbus A321-200neo Airbus A321-200 Airbus A320-200neo Airbus A320-200 Boeing 737-800 Boeing 737-700 Boeing 737-500 Bombardier DHC-8-400 Total 2 (+1) 35 (+6) 20 2 2 (+2) (+1) 2 (+1) 26 16 2 2 (+2) (+1) 35 (+5) 29 (+3) (–5) (–2) 36 24 10 11 4 11 (+2) (–3) (–1) (+1) (–4) 41 39 8 3 24 31 23 (+3) 7 (–2) 0 0 11 (+2) 0 (–5) 24 (–1) 8 3 (+1) (–4) 24 (+6) (+2) (–8) 0 9 4 0 0 6 5 1 3 11 4 0 41 (+2) 15 0 0 0 307 (+3) 208 (+1) 99 (+2) Figures for Airbus A320-200s included 38 aircraft (all leased) operated by Peach Aviation Limited. Separate from the figures above, as of March 31, 2020, 19 aircraft were leased outside the Group (19 as of March 31, 2019). Aircraft Procurement Plan for Fiscal 2020 The ANA Group plans to add a total of 13 aircraft during fiscal 2020. Our plans call for purchasing one Airbus A380, five Boeing 787-9s, and seven Airbus A321neos. Meanwhile, the Group plans to retire nine aircraft, consisting of one Boeing 777-200, one Boeing 767-300, one Boeing 767-300F, three Boeing 737-700s, and three Boeing 737-500s. 108 109 Financial / Data Section Management’s Discussion and Analysis Financial Position Assets Total assets as of March 31, 2020 amounted to ¥2,560.1 billion, a decrease of ¥126.9 billion compared to March 31, 2019. Total current assets amounted to ¥571.1 billion as of March 31, 2020, a decrease of ¥129.0 billion from one year earlier. Cash and deposits amounted to ¥109.4 billion, an increase of ¥41.1 billion compared to the end of the previous fiscal year. Marketable securities decreased ¥96.1 billion to ¥129.2 billion. As a result, liquidity on hand amounted to ¥238.6 billion, down ¥55.0 billion year on year. Total non-current assets at the end of the fiscal year stood at ¥1,988.1 billion, up ¥1.7 billion from one year earlier. This increase was mainly due to an increase in aircraft and buildings and struc- tures, despite a decrease in intangible assets as a result of recording an impairment loss related to goodwill. Liabilities Total liabilities as of March 31, 2020 amounted to ¥1,491.2 billion, a decrease of ¥86.5 billion compared to the end of the previous fiscal year. Current liabilities totaled ¥530.5 billion at the end of the fiscal year, a decrease of ¥155.3 billion. This result was primarily due to a decrease in advance ticket sales. Long-term liabilities amounted to ¥960.7 billion as of March 31, 2020, an increase of ¥68.8 billion compared to the end of the previ- ous fiscal year. Interest-bearing debt, including finance lease obligations, increased ¥54.2 billion year on year to ¥842.8 billion. This change was the result of the issuance of ¥70.0 billion in bonds and borrow- ings that exceeded amounts in the previous fiscal year. These increases were offset in part by loan repayments. Debt/equity ratio amounted to 0.8 times, an increase of 0.1 point compared with the end of the previous fiscal year. Interest-Bearing Debt (End of Fiscal Year) Short-term debt: Short-term loans Current portion of long-term loans Current portion of bonds Finance lease obligations Long-term debt*: Bonds Convertible bonds with stock acquisition rights Long-term loans Finance lease obligations 2019 2018 Change ¥108,307 ¥112,987 ¥ (4,680) 429 84,057 20,000 3,821 336 77,883 30,000 4,768 93 6,174 (10,000) (947) ¥734,555 ¥675,662 ¥ 58,893 165,000 115,000 50,000 140,000 140,000 — 416,900 406,830 12,655 13,832 10,070 (1,177) Total interest-bearing debt ¥842,862 ¥788,649 ¥ 54,213 * Excluding current portion of long-term loans and current portion of bonds Net Assets Net assets as of March 31, 2020 amounted to ¥1,068.8 billion, a decrease of ¥40.4 billion compared to the end of the previous fiscal year. As a result of recording net income attributable to owners of the parents, shareholders’ equity amounted to ¥1,068.6 billion, ¥2.0 billion higher year on year. Total accumulated other comprehensive loss amounted to ¥7.6 billion, a decrease of ¥40.4 billion compared with the end of the previous fiscal year. This result was mainly due to decreases in unrealized gains on securities and deferred loss on derivatives under hedge accounting. As a result, total shareholders’ equity decreased ¥38.3 billion compared with the previous fiscal year-end, standing at ¥1,061.0 billion. Shareholders’ equity ratio increased 0.5 point to 41.4%. Book value per share (BPS) at the end of the fiscal year was ¥3,171.80, compared to ¥3,285.46 as of the end of the previous fiscal year. Interest-Bearing Debt / Debt/Equity Ratio* (¥ Billions) 1,000 750 703.8 729.8 798.3 788.6 0.9 0.8 0.8 0.7 500 250 0 18/4 842.8 0.8 2015 2016 2017 2018 2019 (Left) Interest-Bearing Debt (Right) Debt/Equity Ratio * Excluding off-balanced lease obligations (Times) 1.2 1.0 0.8 0.6 0 (FYE) Bond Ratings The Company has obtained credit ratings on its various long-term bonds from the Japan Credit Rating Agency, Ltd. (JCR) and Rating and Investment Information, Inc. (R&I). Bond ratings as of March 31, 2020 were as follows: Bond Ratings Issuer rating Outlook JCR A Stable R&I A– Stable (¥ Millions) Retirement Benefit Obligations Allocation of Profits Basic Policy on Allocation of Profits Shareholder returns are an important management priority for the Group. The Group strives to bolster shareholder returns while maintaining financial soundness. This goal will be accomplished as we secure the funds needed to conduct growth investments (aircraft, etc.) to support future business development. We examine the possibility of further shareholder returns through dividend increases and share buybacks on an ongoing basis, while considering the appropriate level for free cash flow. Dividends for Fiscal 2019 The impact of COVID-19 on Group performance has been significant. At present, we cannot forecast when the pandemic will slow. Given such unprecedented and severe economic conditions, securing liquidity on hand has become an urgent issue. Therefore, we deeply regret to announce that we will not be providing dividends for this fiscal year. The ANA Group’s defined benefit plans consist of defined benefit corporate pension plans and lump-sum retirement benefit plans. In addition, the Group has adopted a defined contribution pension plan. Certain employees are entitled to additional benefits upon retirement. Certain consolidated subsidiaries adopting defined-benefit corporate pension plans and lump-sum retirement benefit plans use a simplified method for calculating retirement benefit expenses and liabilities. Retirement Benefit Obligation and Related Expenses (Fiscal Year / End of Fiscal Year) Retirement benefit obligation Plan assets at fair value Unfunded retirement benefit obligation Liability for retirement benefits Asset for retirement benefits Net liability arising from defined benefit obligation in the consolidated balance sheet Net periodic benefit costs Main basis for actuarial calculations (¥ Millions) 2019 2018 ¥(225,286) ¥(223,723) 62,717 65,990 (162,569) (157,733) (163,384) (158,209) 815 476 (162,569) (157,733) 15,537 15,474 Discount rates 0.1–1.2% 0.1–1.2% Expected rates of return on plan assets 1.0–2.5% 1.0–2.5% Contribution to defined contribution pension plans ¥ 4,381 ¥ 4,423 Fuel and Exchange Rate Hedging The ANA Group pursues and conducts optimal hedge transactions that reduce the impact of volatility in fuel prices and foreign exchange rates to control the risk of fluctuations in earnings. The objective of this hedging is to both stabilize profitability and equalize expenses in response to rising fuel surcharges and foreign currency revenues associated with growth in ANA international business. The Group conducts fuel hedging (for ANA brands) three years in advance of the applicable period after considering fuel surcharge revenues. The Group hedges (for ANA HOLDINGS and ANA brands) U.S. dollar payments for fuel expenses three years in advance and U.S. dollar payments associated with capital expenditures for aircraft and other items five years in advance of the payment periods. Based on a balance of foreign currency revenues, revenues linked to foreign exchange market fluctuations, and foreign currency expenses with respect to U.S. dollar payments, the Group uses forward exchange agreements to hedge any portion of foreign currency expenses in excess of foreign currency revenues. 110 111 Financial / Data Section Operating Risks The following describes major risks related to business and accounting conditions, etc., recognized by management as having a potentially material impact on the consolidated Group financial condition, earnings, and cash flows. Further, the forward-looking statements that follow are based on Group judgments as of March 31, 2020. Category Risk Factors Description Response Measures International Situation • Decline in demand for international routes to North America, Europe, China, and Asia due to political instability, international conflicts, large-scale terrorist attacks, deterioration in diplomatic relations, etc. Economic Recession • Decline in demand for air transportation due to economic stagnation in Japan and overseas • Scale back operations in a flexible manner in response to sharp decline in demand • Build a business portfolio that does not depend excessively on international business • Conduct ongoing cost structure reform to reduce costs and add liquidity to fixed costs • Ensure liquidity on hand Government Air Transportation Policies External Environment Fluctuations in Crude Oil Prices and Exchange Rates • Slots at congested airports in the Tokyo metropolitan area (Haneda, Narita) allocated to the advantage of other carriers • Contraction or elimination of reduction measures related to jet fuel taxes, landing fees, and air navigation service charges • Quick, sharp rises in crude oil prices outpacing hedges, other self-directed efforts to compensate, and ability to pass on costs in airfares • Sharp declines in the yen in foreign exchange markets driving aircraft and fuel procurement costs outpacing self-directed efforts to compensate • Consult with the Ministry of Land, Infrastructure, Transport and Tourism (MLIT) and make requests on an equal footing with overseas airlines • Systematic and continuous hedging transactions of crude oil commodity derivatives • Use foreign currency generated for foreign currency expenditures to the extent possible • Use forward exchange agreements and currency options for a portion of foreign currencies • Scale back operations in a flexible manner in response to • Outbreak of serious infectious disease resulting in sharp decline in demand Infectious Diseases and Disasters sharply lower air transportation demand due to decreased demand in areas affected and voluntary restraints on domestic and international travel • Significant reduction in air transportation demand stemming from disasters or events that restrict airport operations or flight paths for an extended time; disaster- related damage to ANA Group facilities affecting flights • Obsolescence of current business models due to Corporate Strategy (Business Structure) intensified competition or changes in consumer behavior • Dependence on revenues and profits from specific businesses Aviation Safety (Aircraft Accidents, etc.) • Aircraft accidents causing loss of customer confidence and public reputation having a significant impact on Group management • Conduct ongoing cost structure reform to reduce costs and add liquidity to fixed costs • Ensure liquidity on hand • Implement measures for facilities and equipment to prevent loss of airport administrative functions • Coordinate with airport operating companies to strengthen overall airport disaster-response measures based on the fiscal 2019 Guidelines (A2-BCP) of the MLIT • Review business models and cost structures focused on the Air Transportation Business in anticipation of future demand trends and changes in consumer behavior • Differentiation strategy to build a business portfolio and secure competitive advantage in each business • Build and implement organizational measures, including safety risk management systems, safety audits by specialty organizations, and collecting and disseminating the latest information related to safety internally • Conduct ongoing training and education, including training for Group employees engaged directly in flight operations, hands-on training for all Group employees, etc. • Leverage air transportation insurance to cover damage reparations, and restoration / replacements of operating equipment International Environment IT Systems and Information Leakage Profit Structure Finances • Significant impact of systems failures or cyber terrorism on operations maintenance and services due to high degree of dependence on systems • 24/7/365 monitoring of defense in depth (access restric- tions, antivirus measures) and other defense measures • Implementation of systems and operational measures to • Leakage of personal information that leads to payment of significant sanctions based on violations of the law, as well as decline in customer base due to loss of trust prevent information leakage • Implementation of security literacy education for employees • Major impact of significant demand decreases on profits due to inflexible fixed and operating costs • Optimize supply to demand by placing appropriate aircraft into service depending on demand and reservation trends • Particularly large impact on revenues if summer demand • Conduct ongoing cost structure reform to reduce costs declines significantly and add liquidity to fixed costs • Deterioration in the profitability of each segment or a decision to sell assets forcing the Group to recognize asset impairment losses or loss on sales of property and equipment • Plan and execute ANA Group Corporate Strategy and profit plans • Write-downs of deferred income taxes due to declining • Monitor the progress of profit plans business profits that result in lower future taxable income than estimates used in current tax planning The following describes matters in addition to the risks noted above that could have a material impact on investor decisions. (1) Important Factors The ANA Group has experienced a significant impact due to the spread of COVID-19. We expect that future business conditions will continue to be extremely challenging. Given these unprecedented circumstances, we have limited the scale of Air Transportation Business operations and reduced fuel expenses and other operations-related costs. We have reduced personnel expenses by cutting officer remuneration and manage- ment salaries, as well as by adopting a temporary leave program. In addition, the Group is reviewing and controlling capital expendi- ture in aircraft and other areas, while also revising the timing of investments. Over the three months between April and June of this year, we borrowed total of ¥535 billion from private financial institu- tions and the Development Bank of Japan. Further, we expanded our existing commitment line of ¥150 billion by another ¥350 billion. In the future, we will raise more funds as necessary to secure liquidity on hand for every Group company. Accordingly, it is our judgment that there are no material uncertainties regarding the going concern assumption for the ANA Group. (2) Risks Related to the International Situation The Group currently operates international routes, primarily to North America, Europe, China, and other parts of Asia. Going forward, incidents including political instability, international conflicts, large- scale terrorist attacks, or deterioration in diplomatic relations with countries where the Group operates and has offices and other bases could affect the Group’s performance due to the accompa- nying decrease in demand for travel on these international routes. (3) Risks Related to Statutory Regulations As an airline operator, the Group undertakes operations based on the stipulations of statutory regulations relating to airline operations. The Group is required to conduct passenger and cargo operations on international routes in accordance with the stipulations of international agreements, including treaties, bilateral agreements, and the decisions of the International Air Transport Association (IATA) and the International Civil Aviation Organization (ICAO). The Group’s fares, airspace, operating schedule, and safety manage- ment are subject to a variety of constraints due to these regulations. Further, the Group’s operations are constrained by the Japanese Antitrust Law and similar laws and regulations in other countries with regard to the pricing of fares and charges. (4) Risks Related to Environmental Regulations In recent years, numerous Japanese and overseas statutory environmental protection regulations have been introduced or strengthened with regard to such issues as noise, aircraft emissions of CO2 and other greenhouse gases, use of environmentally pollut- ing substances and their disposal, and energy use at major offices. The ANA Group incurs significant costs to comply with these laws and regulations. In addition to the emissions trading and reduction schemes to be adopted in 2021 related to controlling greenhouse gases generated by international aviation, if a globally shared environmental tax is adopted, business activities could be restricted or significant additional costs may be incurred. (5) Risks Related to the Business Environment of the Airline Industry There could be material changes in the current competitive and business environment within Japan, such as changes in aviation policy or regional policy, as well as changes in the standing of competitors due to mergers or capital tie-ups stemming from bankruptcies and other factors. These changes could affect the Group’s performance. 1. Risks Related to Airport Slots Differences in the number of slots allocated at congested Tokyo metropolitan area airports (Haneda, Narita) or the timing of alloca- tions from ANA Group projections could affect the achievement of the targets of the Group corporate strategy. 2. Risks Related to Public-Sector Fees Public-sector fees include jet fuel taxes, landing fees, and air navigation service charges. The Japanese government is currently implementing temporary measures to reduce jet fuel taxes and landing fees but could scale back or terminate these measures in the future, which could affect the Group’s performance. (6) Risk of Economic Recession The airline industry is susceptible to the effects of economic trends, and if the domestic or global economy is sluggish, this may cause a decline of demand for air travel due to deterioration in personal consumption and corporate earnings. International operations (passenger and cargo) depend on overseas markets, especially China, other parts of Asia, and North America, and economic conditions in these regions could lead to a decline in the passenger and cargo volume or a fall in the unit price. 112 113 Financial / Data Section Operating Risks (7) Risks Related to Crude Oil Price Fluctuations Jet fuel is a crude oil derivative and its price tracks the price of crude oil. Variance that exceeds the Group estimates for factors that affect the price of crude oil, including political instability in the oil-producing nations of the Middle East, the shale oil production structure in the U.S., increased demand for crude oil due to rapid economic growth in emerging countries, reductions in oil stockpiles or reserves, speculative investment in crude oil, and natural disasters can affect the Group’s performance as follows. 1. Risk of Increase in Crude Oil Prices Generally, an increase in the price of crude oil causes an increase in the price of jet fuel, which imposes substantial additional costs on the Group. Accordingly, to mitigate the risk of fluctuations in the price of jet fuel and to stabilize operating income, the Group hedges risks using crude oil and jet fuel commodity derivatives in planned, continuous hedging transactions for specific periods of time. In the event that crude oil prices rise over a short period, there are limitations to the Group’s ability to offset increases in crude oil prices through ongoing cost reductions as well as raising fares and charges. For these reasons, the Group may be unable to avoid the influence of a sharp increase in crude oil prices completely, depending on factors such as hedging positions. 2. Risk of Sudden Decrease in Crude Oil Prices The Group conducts hedge transactions against changes in the price of crude oil to mitigate risk. Therefore, a sudden decrease in oil prices may not directly contribute to earnings because, in addition to decreases in or expiration of fuel surcharges, hedge positions and other market conditions may preclude the immediate reflection of a sudden drop in fuel expenses in results. (8) Risks Related to Foreign Exchange Rate Fluctuations The Group’s expenditures in foreign currencies are greater than its revenues in foreign currencies. Therefore, depreciation of the yen affects the Group’s profits. Accordingly, to the greatest extent possible, foreign currency taken in as revenue is used to pay expenses denominated in the same foreign currency to minimize the impact on operating income from the risk of fluctuations in foreign exchange rates. In addition, the Group uses forward exchange agreements and currency options for a portion of the foreign currency needed for purchases of aircraft and jet fuel to stabilize and limit payment amounts on a yen conversion basis. However, there are limits to the extent to which the Group can reduce and offset costs by adjusting fares and charges should costs increase due to the rapid depreciation of the yen in the foreign exchange market over a short period of time. Accordingly, such an occurrence could, depending on hedge positions and other factors, affect the Group’s profit and expenditures. Conversely, if the yen should appreciate rapidly in the foreign exchange market over a short period of time, depending upon hedge positions and other factors, this may preclude immediate reflection in lower fuel expenses and impact the Group’s ability to enjoy the benefits of the appreciation of the yen. (9) Risks Related to Competition The possibility of future increases in costs related to the Group’s operations due to such factors as jet fuel expenses, financing cost, and responses to environmental regulations cannot be ruled out. If such costs increase, in order to secure income, it will be neces- sary for the Group to cut costs through such means as reducing indirect fixed costs, and to pass on costs through higher fares and charges. However, because the Group is in competition with other airlines and LCCs in Japan and overseas as well as with alternative modes of transportation, such as the Shinkansen, on certain routes, passing on costs could diminish competitiveness. Further, price competition with competitors greatly restricts the passing on of costs that could affect the Group’s performance. (10) Risks Related to the Outbreak and Spread of New Infectious Diseases All Group businesses, including but not limited to international routes, are exposed to the risk of a decline in demand due to the outbreak and spread of new infectious diseases. The spread of disease and the harm it may cause, including reduced desire to travel by air among customers due to rumors, as well as restrictions on entry and exit from countries and voluntary restraints on movement within Japan, such as during the global spread of COVID-19, could affect Group’s performance by causing the number of passengers on the Group’s domestic and international routes to drop sharply. Further, more employees and contractors than expected could fall ill due to the spread of new and highly contagious infectious diseases, or due to increased virulence caused by changes in disease profile, which could affect the continuity of Group’s business. (11) Risks Related to Disasters The extended closure or operational restriction of airports or flight path restrictions due to disasters including an earthquake, a tsunami, a flood, a typhoon, heavy snow, a volcanic eruption, an infectious disease, a strike, or a riot could impact flight operations using affected airports and routes or result in significantly reduced demand for air transportation, which could affect the Group’s performance. In particular, the Group’s data center is located in the Tokyo metropolitan area, while the operational control for all of the Group’s domestic and international flights is conducted at Haneda Airport and most of the Group’s passengers use Tokyo metropolitan area airports. As a result, a major disaster, such as an earthquake or a typhoon; a disaster at the abovementioned facilities, such as a fire; or a strike that closes the airports or limits their access could lead to a long-term shutdown of the Group’s information systems, operational control functions, or its operations themselves that could significantly affect the Group’s performance. 3. Risks Related to Investments The Group may enter new businesses and invest in or acquire other companies to further expand its business in growth areas. These investments and other initiatives may not produce the intended effects. Moreover, if the interests of equity investors do not align, the joint venture may not operate in the manner the Group considers appropriate. If joint venture operations deteriorate, the Group may be exposed to an economic burden. In addition, equity investors other than the Group may experience poor financial results or withdraw from the business. The Group may also expand into foreign countries, and enter into businesses with remote relation to the airline business. These initiatives may incur unforeseen detriments. (13) Risks Related to Ineffective Strategic Alliances The Group belongs to the Star Alliance. Based on Antitrust Immunity (ATI) approval, joint venture operations are introduced in collabora- tion with United Airlines in the network between Asia and the United States, and with Lufthansa and Lufthansa group companies, Swiss International Air Lines, Austrian Airlines, and Lufthansa Cargo AG. in the network between Japan and Europe. The Group has also entered into individual agreements, mainly in Asia, that go beyond the frameworks of these alliances. However, the benefits of Star Alliance membership might diminish if the alliance is broken up by antitrust laws in various countries; an alliance partner withdraws from the Star Alliance or changes its business policies; another alliance group becomes more competitive; bilateral alliances between member companies end; an alliance partner performs poorly, restructures, or becomes less creditworthy; or restrictions on alliance activities are tightened due to external factors. Such eventualities could affect Group management. (12) Risks Related to the Group’s Management Strategy 1. Risks Related to the Group’s Fleet Strategy In the Air Transportation Business, the Group is pursuing a fleet strategy centered on introducing highly economical aircraft, inte- grating aircraft types, and better optimizing supply to demand. This strategy involves ordering aircraft from The Boeing Company, Airbus S.A.S., Bombardier Inc., and Mitsubishi Aircraft Corporation. Delays in delivery from any of those four companies for financial or other reasons could create obstacles to Group operations. In addition, elements of the fleet strategy could prove ineffective or their expected benefits could diminish significantly due to the factors given below. 1) Dependence on The Boeing Company In accordance with the above fleet strategy, the Group has ordered a large number of aircraft from The Boeing Company (Boeing). Therefore, should financial or other issues render Boeing unable to fulfill its agreements with the Group or compa- nies such as those that maintain Boeing products, the Group would be unable to acquire or maintain aircraft in accordance with its fleet strategy. Such eventualities could affect the Group’s operations. 2) Delay of Aircraft Development Plans by Mitsubishi Aircraft Corporation The Group has decided to introduce the Mitsubishi Space Jet (formerly MRJ) that Mitsubishi Aircraft Corporation is developing, with delivery scheduled after fiscal 2021. Further delivery delays could create obstacles to Group’s operations. 2. Risks to Business Structure Our Air Transportation Business and Airline Related Business account for the majority of consolidated operating revenues. In addition, the Air Transportation Business is closely interconnected with our Travel Services and Trade and Retail businesses. In this way, the ANA Group business structure is heavily dependent on the Air Transportation Business. It may not be possible for other operat- ing segments to compensate for an event that affects the overall Air Transportation Business revenues, which could have a significant impact on Group performance. 114 115 Financial / Data Section Operating Risks (14) Risks Related to Air Safety 1. Aircraft Accidents An aircraft accident involving a flight operated by the Group or a code-share partner could cause a drop in customer confidence and impair the Group’s public reputation, creating a medium- to long- term downturn in demand that could significantly affect the Group’s performance. Major accidents suffered by other airlines could similarly lead to a reduction in aviation demand that could affect the Group’s performance. An aircraft accident would give rise to significant expenses including compensation for damages and the repair or replacement of aircraft, but aviation insurance would not cover all such direct expenses. 2. Violations of the Civil Aeronautics Act, etc. ANA Group businesses are required to comply with the Civil Aeronautics Act and notifications from government agencies. Serious violations of the Civil Aeronautics Act could result in disad- vantageous treatment (administrative penalties, administrative guidance). In the past, the ANA Group has received a Business Improvement Order due to violations of warnings related to insuffi- cient maintenance and excessive consumption of alcohol among flight crew. In addition to the negative impact on confidence in ANA Group operational safety, this kind of disadvantageous treatment could lead to a suspension of operations or revocation of business licenses, depending on recurrence or the severity of the violation. Such disadvantageous treatment could have a serious impact on Group performance. 3. Technical Circular Directives If an issue arises that significantly compromises the safety of an aircraft, MLIT by law issues a technical circular directive. In some cases, all aircraft of the same model might be grounded until the measures to improve the airworthiness of the aircraft and equip- ment have been implemented as directed. Even when the law does not require a directive to be issued, in some cases when safety cannot be confirmed from a technical perspective, operation of the same model might be voluntarily suspended and inspections and other maintenance activities may be performed. The occurrence of such a situation could affect the Group’s safety credibility or performance. In particular, the Group is moving forward with fleet consolidation to new aircraft models, such as the Boeing 787. An unanticipated design defect or technical issue with these new models, which serve as mainstay aircraft, could have a serious impact on Group performance. (15) Risks Related to Unauthorized Disclosure of Customer Information and Other Data The Group holds a large amount of information relating to custom- ers, such as that pertaining to the approximately 36.65 million members (as of the end of March 2020) of the ANA Mileage Club. The Personal Information Protection Law of Japan and similar laws in countries overseas require proper management of such personal information. The Group has established a privacy policy, apprised customers of the Group’s stance regarding the handling of personal information, and established measures to counter any foreseeable contingency to ensure information security, including in its IT systems. In addition, work procedures and information systems are continuously monitored and revised to eliminate any potential security gaps. Despite these precautions, the occurrence of a major leak of personal information caused by unauthorized access, an error in conducting business, or some other factor could carry significant costs, in terms of both compensation and loss of public confidence, which could affect the Group’s performance. (16) Risks Related to IT Systems The Group is highly dependent on information systems for such critical functions as customer service and operational management. A major disruption of one of those systems or of telecommunica- tions networks caused by natural disasters, accidents, computer viruses or unauthorized access, power supply constraints, large- scale power outages, or system failures or malfunctions would make it difficult to maintain customer service and operations and would result in a loss of public confidence, which could affect the Group’s performance. Further, the Group’s information systems are also used by its partner airlines so there is a possibility that the impact of systems failure would not be limited to the Group. (17) Risks Related to Personnel and Labor Many Group employees belong to labor unions. Events including a collective strike by Group employees could have an effect on the Group’s aircraft operation. (18) Risk of Inability to Secure Required Personnel The growth of our LCC Business and other factors have increased demand for flight crews and other personnel. A certain period of time is required to cultivate and train flight crews and other personnel. Inability to secure the required number of competent flight crews and other personnel in a timely manner could affect the Group’s performance. In addition, a change of the supply–demand balance, in labor markets could lead to personnel shortages in airport handling and other operations, as well as a sharp increase in wage levels. (19) Risks Related to Profit Structure Expenses that are largely unaffected by passenger load factors, including fixed costs such as aircraft expenses, along with fuel expenses and landing and navigation fees which are largely deter- mined by the type of aircraft, account for a significant proportion of the Group’s costs, which limits the Group’s ability to immediately change the scale of its operations in response to changes in economic conditions. Therefore, decreases in the number of passengers or volume of cargo could have a large impact on the Group’s revenue and expenses. Moreover, a significant decrease in demand during the summer could affect the Group’s performance for that fiscal year, as passenger service sales typically increase during summer. (20) Financial Risks 1. Increase in the Cost of Financing The Group raises funds to acquire aircraft primarily through bank loans and bond issuances. However, the cost of financing could increase due to deteriorating conditions in the airline industry, turmoil in capital and financial markets, changes in the tax system or government interest policy, changes to the guarantee systems at governmental financial institutions, or a downgrade of the Company’s credit rating that makes it difficult or impossible to finance on terms advantageous to the Group. Such eventualities could affect the Group’s performance. 2. Risks Related to Asset Impairment or Other Issues The Group owns extensive property and equipment as a function of its businesses. If the profitability of various operations deteriorates, or a decision is made to sell assets, the Group may be required to recognize asset impairment losses or loss on sales of property and equipment in the future. 3. Risks Related to Deferred Income Taxes If declining business profits result in lower future taxable income than estimates used in current tax planning, the recoverable amount of deferred income taxes could decrease, leading to a write-down of deferred income taxes. (21) Risks Related to Litigation The Group could be subject to various lawsuits in connection with its business activities, which could affect the Group’s performance. (22) Risk of Inability to Secure Aircraft Fuel The Group sees the slot expansions at Tokyo metropolitan area airports as a major business opportunity. As we plan for business growth, aircraft fuel consumption volume is expected to increase. If we are not able to secure appropriate volumes of aircraft fuel, this development could have an effect on Group aircraft operations. 116 117 Financial / Data Section Consolidated Financial Statements Consolidated Balance Sheet ANA HOLDINGS INC. and its consolidated subsidiaries As of March 31, 2020 ASSETS Current assets: Cash and deposits (Notes 15 and 20) Marketable securities (Notes 4 and 15) Notes and accounts receivable (Note 15) Accounts receivable from and advances to unconsolidated subsidiaries and affiliates Lease receivables (Note 7) Inventories (Notes 5, 7 and 22) Prepaid expenses and other Allowance for doubtful accounts Total current assets Property and equipment: Land (Note 7) Buildings and structures (Note 7) Aircraft (Note 7) Machinery and equipment Vehicles Furniture and fixtures Lease assets (Note 12) Construction in progress Total Accumulated depreciation Net property and equipment Investments and other assets: Investment securities (Notes 4 and 15) Investments in and advances to unconsolidated subsidiaries and affiliates (Note 6) Lease and guaranty deposits Deferred income taxes (Note 10) Goodwill Intangible assets Other assets Total investments and other assets TOTAL (Note 17) Yen (Millions) 2020 2019 U.S. dollars (Thousands) (Note 2) 2020 ¥ 109,447 ¥ 68,301 $ 1,005,669 129,200 98,944 2,851 22,823 67,312 225,360 187,529 4,204 26,491 62,130 1,187,172 909,161 26,196 209,712 618,505 141,123 126,672 1,296,728 (538) (457) (4,943) 571,162 700,230 5,248,203 53,886 306,084 54,270 268,082 495,139 2,812,496 2,120,347 1,961,881 19,483,111 112,343 105,594 1,032,279 32,741 65,428 11,170 30,858 56,015 12,330 300,845 601,194 102,637 180,005 286,635 1,654,001 2,882,004 2,775,665 26,481,705 (1,301,678) (1,228,595) (11,960,654) 1,580,326 1,547,070 14,521,051 108,156 120,619 42,322 18,501 99,824 24,461 101,062 14,339 408,665 42,790 24,330 85,307 51,132 104,048 11,596 439,822 993,806 388,881 169,999 917,247 224,763 928,622 131,755 3,755,076 ¥ 2,560,153 ¥ 2,687,122 $ 23,524,331 LIABILITIES AND NET ASSETS Current liabilities: Short-term loans (Notes 7 and 15) Current portion of long-term debt (Notes 7 and 15) Accounts payable (Note 15) Accounts payable to unconsolidated subsidiaries and affiliates Advance ticket sales Accrued expenses Income taxes payable Other current liabilities (Note 9) Total current liabilities Long-term liabilities: Long-term debt (Notes 7 and 15) Liability for retirement benefits (Note 8) Deferred income taxes (Note 10) Asset retirement obligations (Note 9) Other long-term liabilities Total long-term liabilities Contingent liabilities (Note 14) Net assets (Note 13): Common stock: Yen (Millions) 2020 2019 U.S. dollars (Thousands) (Note 2) 2020 ¥ 429 ¥ 336 $ 3,941 107,878 196,391 4,325 112,651 229,712 4,544 991,252 1,804,566 39,740 111,827 218,950 1,027,538 36,974 8,441 64,281 60,590 21,374 37,776 339,740 77,561 590,655 530,546 685,933 4,874,997 734,555 163,384 112 1,224 61,462 675,662 158,209 110 3,371 54,524 6,749,563 1,501,277 1,029 11,246 564,752 960,737 891,876 8,827,869 Authorized – 510,000,000 shares; Issued – 348,498,361 shares in 2020 and 2019 Capital surplus Retained earnings 318,789 258,470 550,839 318,789 258,448 548,439 2,929,238 2,374,988 5,061,462 Treasury stock – 13,978,652 shares in 2020 and 13,868,935 shares in 2019 (59,435) (59,032) (546,126) Accumulated other comprehensive income: Unrealized gain on securities Deferred gain (loss) on derivatives under hedge accounting Foreign currency translation adjustments Defined retirement benefit plans Total Non-controlling interests Total net assets TOTAL See accompanying notes to consolidated financial statements. 22,120 (14,595) 2,668 37,622 10,636 2,873 203,252 (134,108) 24,515 (17,828) (18,362) (163,815) 1,061,028 1,099,413 9,749,407 7,842 9,900 72,057 1,068,870 1,109,313 9,821,464 ¥2,560,153 ¥2,687,122 $23,524,331 118 119 Financial / Data Section Consolidated Statement of Comprehensive Income ANA HOLDINGS INC. and its consolidated subsidiaries Year Ended March 31, 2020 Net income Other comprehensive income (loss) (Note 11): Unrealized gain (loss) on securities Deferred gain (loss) on derivatives under hedge accounting Foreign currency translation adjustments Defined retirement benefit plans Share of other comprehensive income (loss) in affiliates Total other comprehensive income (loss) (Note 11) Comprehensive income (loss) Total comprehensive income (loss) attributable to: Owners of the parent Non-controlling interests See accompanying notes to consolidated financial statements. Yen (Millions) 2020 ¥ 25,919 2019 ¥111,837 (15,369) (25,227) (221) 539 (383) (40,661) ¥(14,742) 13,115 14,115 (382) 2,930 15 29,793 ¥141,630 U.S. dollars (Thousands) (Note 2) 2020 $ 238,160 (141,220) (231,801) (2,030) 4,952 (3,519) (373,619) $(135,458) ¥(12,749) (1,993) ¥140,613 1,017 $(117,146) (18,312) Consolidated Statement of Income ANA HOLDINGS INC. and its consolidated subsidiaries Year Ended March 31, 2020 Operating revenues (Note 17) Cost of sales (Note 22) Gross profit Selling, general and administrative expenses (Notes 8 and 18) Operating income (Note 17) Other income (expenses): Interest income Dividend income Equity in earnings of unconsolidated subsidiaries and affiliates Foreign exchange gain (loss), net Gain on sales of assets Gain on donation of non-current assets Interest expenses Loss on sales of assets Loss on disposal of assets Impairment loss (Note 21) Other, net (Note 22) Other income (expenses), net Income before income taxes Income taxes (Note 10): Current Deferred Total income taxes Net income Net income (loss) attributable to non-controlling interests Net income attributable to owners of the parent Yen (Millions) 2020 ¥1,974,216 1,583,434 390,782 329,976 60,806 2019 ¥2,058,312 1,559,876 498,436 333,417 165,019 958 2,073 1,210 473 6,746 3,553 (6,291) (302) (7,133) (25,159) 14,567 (9,305) 51,501 767 2,159 1,559 (1,761) 2,554 2,512 (6,995) (641) (11,117) (1,997) 1,964 (10,996) 154,023 24,407 1,175 25,582 25,919 (1,736) ¥ 27,655 47,354 (5,168) 42,186 111,837 1,060 ¥ 110,777 Yen 2020 2019 U.S. dollars (Thousands) (Note 2) 2020 $18,140,365 14,549,609 3,590,756 3,032,031 558,724 8,802 19,048 11,118 4,346 61,986 32,647 (57,805) (2,774) (65,542) (231,177) 133,850 (85,500) 473,224 224,267 10,796 235,063 238,160 (15,951) $ 254,111 U.S. dollars (Note 2) 2020 Per share of common stock (Notes 3, 13 and 19): Basic net income Cash dividends applicable to the year ¥82.66 – ¥331.04 75.00 $0.75 – Net income per share assuming full dilution is not disclosed as the Company had no potentially dilutive shares outstanding during the years ended March 31, 2020 and 2019. See accompanying notes to consolidated financial statements. 120 121 Financial / Data Section Consolidated Statement of Changes in Net Assets ANA HOLDINGS INC. and its consolidated subsidiaries Year Ended March 31, 2020 Consolidated Statement of Cash Flows ANA HOLDINGS INC. and its consolidated subsidiaries Year Ended March 31, 2020 Thousands Number of shares of common stock outstanding Common stock Capital surplus Retained earnings Treasury stock Total shareholders’ equity Unrealized gain on securities Deferred gain (loss) on derivatives under hedge accounting Foreign currency translation adjustments Defined retirement benefit plans Non- controlling interests Total net assets Total Yen (Millions) Accumulated other comprehensive income 334,632 ¥318,789 ¥268,208 ¥457,746 ¥(59,015) ¥ 985,728 ¥ 24,467 ¥ (3,471) ¥3,201 ¥(21,264) ¥ 2,933 ¥11,891 ¥1,000,552 110,777 (20,084) 110,777 (20,084) (41) 24 (41) 24 (10) 7 (9,760) (9,760) – 13,155 14,107 (328) 2,902 29,836 (1,991) 110,777 (20,084) (41) 24 (9,760) 27,845 Balance at April 1, 2018 N et income attributable to owners of the parent C ash dividends ¥60.00 per share (Note 13) P urchase of treasury stock (Note 13) D isposal of treasury stock (Note 13) C hange in the parent’s ownership interest due to transactions with non-controlling interests Net changes in the year Total changes during the fiscal year Balance at March 31, 2019 334,629 318,789 258,448 548,439 (59,032) 1,066,644 – (9,760) 90,693 (17) 80,916 13,155 37,622 14,107 10,636 (328) 2,902 2,873 (18,362) 29,836 32,769 (1,991) 108,761 9,900 1,109,313 (125) 15 N et income attributable to owners of the parent C ash dividends ¥75.00 per share (Note 13) P urchase of treasury stock (Note 13) D isposal of treasury stock (Note 13) C hange in the parent’s ownership interest due to transactions with non-controlling interests C hanges in scope of consolidation Net changes in the year Total changes during the fiscal year 27,655 27,655 (25,105) (25,105) (453) (453) 50 50 22 (150) 22 (150) 27,655 (25,105) (453) 50 22 (150) – 22 2,400 (403) 2,019 (15,502) (25,231) (205) 534 (40,404) (2,058) (40,443) – (15,502) (25,231) (205) 534 (40,404) (2,058) (42,462) Balance at March 31, 2020 334,519 ¥318,789 ¥258,470 ¥550,839 ¥(59,435) ¥1,068,663 ¥ 22,120 ¥(14,595) ¥2,668 ¥(17,828) ¥ (7,635) ¥ 7,842 ¥1,068,870 Thousands Number of shares of common stock outstanding Common stock Capital surplus Retained earnings Treasury stock U.S. dollars (Thousands) (Note 2) Accumulated other comprehensive income Total shareholders’ equity Unrealized gain on securities Deferred gain (loss) on derivatives under hedge accounting Foreign currency translation adjustments Defined retirement benefit plans Non- controlling interests Total net assets Total 334,629 $2,929,238 $2,374,786 $5,039,410 $(542,423) $9,801,010 $ 345,695 $ 97,730 $26,398 $(168,721) $ 301,102 $90,967 $10,193,080 (125) 15 254,111 254,111 (230,680) (230,680) (4,162) (4,162) 459 459 202 (1,378) 202 (1,378) 254,111 (230,680) (4,162) 459 202 (1,378) – 202 22,052 (3,703) 18,551 (142,442) (231,838) (1,883) 4,906 (371,257) (18,910) (371,616) – (142,442) (231,838) (1,883) 4,906 (371,257) (18,910) (390,168) Balance at March 31, 2019 N et income attributable to owners of the parent C ash dividends $0.68 per share (Note 13) P urchase of treasury stock (Note 13) D isposal of treasury stock (Note 13) C hange in the parent’s ownership interest due to transactions with non-controlling interests C hanges in scope of consolidation Net changes in the year Total changes during the fiscal year Balance at March 31, 2020 334,519 $2,929,238 $2,374,988 $5,061,462 $(546,126) $9,819,562 $ 203,252 $(134,108) $24,515 $(163,815) $ (70,155) $ 72,057 $ 9,821,464 See accompanying notes to consolidated financial statements. Cash flows from operating activities: Income before income taxes Adjustments for: Depreciation and amortization (Note 17) Impairment loss (Note 21) Amortization of goodwill (Note 17) Loss on disposal and sales of property and equipment Gain on sales and valuation of investment securities Loss on sales of shares of subsidiaries and affiliates Increase in allowance for doubtful accounts Increase in liability for retirement benefits Interest and dividend income Interest expenses Foreign exchange loss (gain) Decrease (increase) in notes and accounts receivable Increase in other current assets Increase (decrease) in notes and accounts payable Increase (decrease) in advance ticket sales Other, net Subtotal Interest and dividends received Interest paid Income taxes paid Net cash provided by operating activities Cash flows from investing activities: Increase in time deposits Proceeds from withdrawal of time deposits Purchases of marketable securities Proceeds from redemption of marketable securities Purchases of property and equipment Proceeds from sales of property and equipment Purchases of intangible assets Purchases of investment securities Proceeds from sales of investment securities Other, net Net cash used in investing activities Cash flows from financing activities: Increase in short-term loans, net Proceeds from long-term loans Repayment of long-term loans Proceeds from issuance of bonds Repayment of bonds Repayment of finance lease obligations Payment for purchases of investments in subsidiaries with no changes in scope of consolidation Net increase of treasury stock Payment for dividends Other, net Net cash provided by (used in) financing activities Effect of exchange rate changes on cash and cash equivalents Net decrease in cash and cash equivalents Cash and cash equivalents at beginning of year Net increase resulting from changes in scope of consolidation Cash and cash equivalents at end of year (Note 20) See accompanying notes to consolidated financial statements. Yen (Millions) 2020 2019 U.S. dollars (Thousands) (Note 2) 2020 ¥ 51,501 ¥ 154,023 $ 473,224 175,739 25,159 4,006 689 (269) 7 419 5,503 (3,031) 6,291 273 82,312 (9,284) (38,045) (107,123) (14,510) 179,637 3,831 (6,371) (46,928) 130,169 (55,819) 50,789 (175,070) 159,200 (317,604) 151,652 (33,757) (8,339) 1,424 (2,694) 159,541 1,997 4,031 9,204 (149) 343 51 4,801 (2,926) 6,995 (534) (7,195) (20,788) 3,355 37,597 12,694 363,040 3,447 (7,175) (63,164) 296,148 (45,811) 30,794 (176,060) 196,582 (336,807) 84,917 (39,057) (18,978) 153 (4,404) 1,614,802 231,177 36,809 6,330 (2,471) 64 3,850 50,565 (27,850) 57,805 2,508 756,335 (85,307) (349,581) (984,314) (133,327) 1,650,620 35,201 (58,540) (431,204) 1,196,076 (512,900) 466,681 (1,608,655) 1,462,831 (2,918,349) 1,393,476 (310,181) (76,624) 13,084 (24,754) (230,218) (308,671) (2,115,390) 98 96,684 (82,035) 69,586 (30,000) (4,609) (96) (405) (25,105) (249) 23,869 (274) (76,454) 211,838 553 156 69,710 (87,903) 19,876 (10,000) (5,602) (11,326) (17) (20,084) (1,290) (46,480) 332 (58,671) 270,509 – 900 888,394 (753,790) 639,400 (275,659) (42,350) (882) (3,721) (230,680) (2,287) 219,323 (2,517) (702,508) 1,946,503 5,081 ¥ 135,937 ¥ 211,838 $ 1,249,076 122 123 Financial / Data Section Notes to Consolidated Financial Statements ANA HOLDINGS INC. and its consolidated subsidiaries Year Ended March 31, 2020 1. Basis of presenting consolidated financial statements The accompanying consolidated financial statements of ANA HOLDINGS INC. (hereinafter referred to as the “Company”) and its consolidated subsidiaries have been prepared in accordance with the provisions set forth in the Japanese Financial Instruments and Exchange Act and its related accounting regulations and in accordance with accounting principles generally accepted in Japan (“Japanese GAAP”), which are different in certain respects as to the application and disclosure requirements of International Financial Reporting Standards (“IFRS”). In preparing these consolidated financial statements, certain reclassifications and rearrangements have been made to the consolidated financial statements issued domestically in order to present them in a form which is more familiar to readers outside Japan. In addition, certain reclassifi- cations have been made in the consolidated financial statements of the previous fiscal year to conform to the classifications used in the current fiscal year. 2. Translation of financial statements The consolidated financial statements presented herein are expressed in Japanese yen and, solely for the convenience of readers outside of Japan, have been translated into U.S. dollars at the rate of ¥108.83 = US$1, the approximate exchange rate prevailing on the Tokyo Foreign Exchange Market on March 31, 2020. This translation should not be construed as a representation that the amounts shown could be converted into U.S. dollars at that or any other rate. Translations of U.S. dollars are rounded down to the nearest thousand and, therefore, the totals shown in tables do not necessarily agree with the sums of the individual amounts. 3. Summary of significant accounting policies (a) Consolidation The consolidated financial statements as of March 31, 2020 include the accounts of the Company and its 62 (62 in 2019) significant subsidiaries (collectively, the “Group”). Under the control and influence concepts, those companies in which the Company, directly or indirectly, is able to exercise control over operations are fully consolidated, and those companies over which the Group has the ability to exercise significant influence are accounted for by the equity method. (d) Allowance for doubtful accounts The allowance for doubtful accounts is stated in amounts considered to be appropriate based on the Group’s past credit loss experience and an evaluation of potential losses in the receivables outstanding. (e) Inventories Inventories include aircraft spare parts, supplies and stock in trade of consolidated subsidiaries, and are stated at cost, principally determined by the moving-average method. The net book value of inventories in the consolidated balance sheet is written down when their net realizable value is less than book value. See Note 5 “Inventories” and Note 22 “Supplementary information for the consolidated statement of income” for addi- tional information. (f) Property and equipment (excluding leased assets) Property and equipment, excluding leased assets, are stated at cost less accumulated depreciation. Depreciation of property and equipment is computed based on the estimated useful lives. Major assets are depreciated by the following method: Buildings ................................... Straight-line method Aircraft ...................................... Straight-line method The Company and certain subsidiaries employ principally the following useful lives for major property and equipment, based upon the Company’s estimate of durability: Buildings ................................... 3–50 years Aircraft ...................................... 9–20 years Major additions and improvements are capitalized at cost. Maintenance and repairs, including minor remodels and improvements, are charged to income as incurred. The Group reviews its long-lived assets for impairment whenever events or changes in circumstance indicate the carrying amount of an asset or asset group may not be recoverable. The assets of the Group are grouped by individual property in the case of rental real estate, assets determined to be sold and idle assets, and by management accounting categories in the case of business assets. An impairment loss is recognized if the carrying amount of an asset or asset group exceeds the sum of the undiscounted future cash flows expected to result from the continued use and eventual disposition of the asset or asset group. The impairment loss would be measured as the amount by which the carrying amount of the asset exceeds its recoverable amount, which is the higher of the discounted cash flows from the continued use and eventual disposition of the asset or the net selling price at disposition. See Note 21 “Impairment loss” for additional information. Investments in 16 (16 in 2019) unconsolidated subsidiaries and significant affiliates are accounted for by the equity method. (g) Intangible assets and amortization (excluding leased assets) The difference between the cost and the underlying net assets at dates of acquisition of consolidated subsidiaries and companies accounted for by the equity method is amortized using the straight-line method over a period of 10 to 15 years. Intangible assets are amortized principally by the straight-line method. Cost of software purchased for internal use is amortized by the straight- line method over five years, the estimated useful life of purchased software. Investments in 95 (94 in 2019) subsidiaries and affiliates which are not consolidated or accounted for by the equity method are stated at cost. If the equity method of accounting had been applied to the investments in these companies, the effect on the accompanying consolidated financial statements would not be material. All significant intercompany balances and transactions have been eliminated in consolidation. All material unrealized profit included in assets resulting from transactions within the Group is also eliminated. Certain subsidiaries have fiscal years ending on December 31 and February 29, and necessary adjustments for significant transactions, if any, are made in consolidation. (b) Foreign currency translation All short-term and long-term monetary receivables and payables denominated in foreign currencies are translated into yen at the rates of exchange in effect at the balance sheet date, except for payables and receivables hedged by qualified forward exchange contracts, and differ- ences arising from the translation are included in the consolidated statement of income. The balance sheet accounts of consolidated foreign subsidiaries are translated into yen at the rates of exchange in effect at the balance sheet date, except for the components of net assets excluding non-controlling interests which are translated at their historical exchange rates. Revenue and expense accounts are translated at the average rate of exchange in effect during the year. Differences arising from the translation are presented as foreign currency translation adjustments in net assets. (c) Marketable securities and investment securities Marketable securities and investment securities are classified into three categories: trading, held-to-maturity or available-for-sale. Under the accounting standard, trading securities are carried at fair value and held-to-maturity securities are carried at amortized cost. Marketable securities classified as available-for-sale securities are carried at fair value with changes in unrealized holding gain or loss, net of the applicable income taxes, included directly in net assets. Non-marketable securities classified as available-for-sale securities are carried at cost, determined by the moving-average method. See Note 4 “Marketable securities and investment securities” for additional information. (h) Retirement benefits The retirement benefit plans of the Group cover substantially all employees other than directors and corporate auditors. Under the terms of this plan, eligible employees are entitled, upon mandatory retirement or earlier voluntary severance, to lump-sum payments or annuity payments based on their compensation at the time of leaving and years of service with the Company and subsidiaries. The Company and certain significant domestic subsidiaries have trustee employee pension funds to provide coverage for part of the lump-sum benefits or annuity payments. The Company and certain consolidated subsidiaries sponsor defined contribution pension plans as well as defined benefit pension plans. The Company accounts for the liability for retirement benefits based on the projected benefit obligations and plan assets at the balance sheet date. The projected benefit obligations are attributed to periods on a benefit formula basis. Actuarial gains and losses and past service costs that are yet to be recognized in profit or loss are recognized within net assets (accumulated other comprehensive income), after adjusting for tax effects, and are recognized in profit or loss over the average remaining service years of employees. (i) Income taxes The provision for income taxes is computed based on the pretax income included in the consolidated statement of income. The asset and liability approach is used to recognize deferred tax assets and liabilities for the expected future tax consequences of temporary differences between the carrying amounts and the tax bases of assets and liabilities. Deferred taxes are measured by applying currently enacted income tax rates to the temporary differences. See Note 10 “Income taxes” for additional information. (j) Leases Leased assets arising from transactions under finance lease contracts are depreciated to a residual value of zero by the straight-line method using the term of the contract as the useful life. 124 125 Financial / Data Section Notes to Consolidated Financial Statements (k) Derivatives (2) Application date The Group uses derivatives, such as forward foreign currency exchange contracts, interest rate swaps, and commodity options and swaps are to limit its exposure to fluctuations in foreign currency exchange rates, interest rates and commodity prices. The Group does not use derivatives for trading purposes. Derivative financial instruments are carried at fair value with changes in unrealized gains or losses charged or credited to income, except for those which meet the criteria for deferral hedge accounting under which an unrealized gain or loss is deferred. Receivables and payables hedged by qualified forward exchange contracts are translated at the corresponding foreign exchange contract rates. Interest rate swaps that qualify for hedge accounting and meet specific matching criteria are not measured at fair value, but the differential paid or received under the swap agreements is recognized and included in interest expenses. (l) Revenue recognition Passenger revenues, cargo and other operating revenues are recorded when services are provided. (m) Cash equivalents Cash equivalents are short-term investments that are readily convertible into cash and exposed to insignificant risk of changes in value. Cash equivalents include time deposits and negotiable certificates of deposit, all of which mature or become due within three months of the date of acquisition. See Note 20 “Supplementary cash flow information” for additional information. (n) Per share information Basic net income per share is computed by dividing net income attributable to common shareholders by the weighted-average number of common shares outstanding for the period, retroactively adjusted for stock splits. Diluted net income per share reflects the potential dilution that could occur if securities were exercised or converted into common stock. Diluted net income per share of common stock assumes full conversion of the outstanding convertible notes and bonds at the beginning of the year (or at the time of issuance) with an applicable adjustment for related interest expense, net of tax, and full exercise of outstanding warrants. Diluted net income per share is not presented as the effect of including potential common shares is anti-dilutive. Cash dividends per share presented in the accompanying consolidated statement of income are dividends applicable to the respective fiscal years, including dividends to be paid after the end of the year. (o) Share remuneration plan for directors The Company has transactions for delivery of the Company’s treasury stock through a trust as a share remuneration plan (the “Trust for Delivery of Shares to Directors”) in order to improve its operating performance, increase its corporate value, and raise the directors’ awareness of shareholder-oriented management. (1) Transaction outline Trust for Delivery of Shares to Directors is a system in which funds are contributed by the Company, and shares acquired are distributed to the Company’s directors in accordance with the Company’s operating performance, etc. (2) The Company’s treasury stock remaining in the trust The Company’s treasury stock remaining in the trust is recorded at book value (excluding associated expenses) of the trust and is reflected as treasury stock in net assets. The book value was ¥340 million for the previous fiscal year and ¥717 million for the current fiscal year. The number of shares was 107 thousand shares for the previous fiscal year and 209 thousand shares for the current fiscal year. (p) Unapplied new accounting standard “Accounting Standard for Revenue Recognition” (Accounting Standards Board of Japan (“ASBJ”) Statement No. 29 – March 31, 2020) “Implementation Guidance on Accounting Standard for Revenue Recognition” (ASBJ Guidance No. 30 – March 31, 2020) “Implementation Guidance on Disclosures about Fair Value of Financial Instruments” (ASBJ Guidance No. 19 – March 31, 2020) (1) Overview The International Accounting Standards Board (“IASB”) and Financial Accounting Standards Board (“FASB”) issued a new revenue standard, “Revenue from Contracts with Customers” (International Financial Reporting Standard 15 (“IFRS 15”) and Accounting Standard Codification 606 (“Topic 606”) issued by the IASB and FASB, respectively), on May 2014. Against the background of the fact that IFRS 15 will be effective from periods beginning on or after January 1, 2018 and Topic 606 will be effec- tive from periods beginning on or after December 15, 2017, the ASBJ issued ASBJ Statement No. 29, “Accounting Standard for Revenue Recognition,” and ASBJ Guidance No. 30, “Implementation Guidance on Accounting Standard for Revenue Recognition.” The core principle of the standard and guidance is that an entity should recognize revenue to depict the transfer of promised goods or services to customers in an amount that reflects the consideration to which the entity expects to be entitled in exchange for those goods or services. The ASBJ’s primary policy for developing its accounting standard for revenue recognition was to include the basic principles of IFRS 15 for the purpose of comparability, between financial statements in accordance with Japanese GAAP and those in accordance with IFRS or accounting principles generally accepted in the United States of America. Also, for particular items for which industrial practice should be taken into consid- eration, alternative means are to be provided to the extent that comparability is maintained. 126 The Company will apply the accounting standard and guidance for annual periods beginning on or after April 1, 2021, and is in the process of measuring the effects of applying the accounting standard and guidance on its consolidated financial statements in future applicable periods. “Accounting Standard for Fair Value Measurement” (ASBJ Statement No. 30 – July 4, 2019) “Accounting Standard for Measurement of Inventories” (ASBJ Statement No. 9 – July 4, 2019) “Accounting Standard for Financial Instruments” (ASBJ Statement No. 10 – July 4, 2019) “Implementation Guidance on Accounting Standard for Fair Value Measurement” (ASBJ Guidance No. 31 – July 4, 2019) “Implementation Guidance on Disclosures about Fair Value of Financial Instruments” (ASBJ Guidance No. 19 – March 31, 2020) (1) Overview The IASB and FASB established almost the same detailed implementation guidance for Fair Value Measurement (IFRS 13 and Topic 820 issued by IASB and FASB, respectively). The ASBJ has since made efforts to align Japanese GAAP to International Accounting Standards, so as to incorporate the aforementioned implementation guidance for Fair Value Measurement and Disclosures. This resulted in them issuing ASBJ Statement No. 30, “Accounting Standard for Fair Value Measurement.” The ASBJ’s primary policy for developing its Accounting Standard for Fair Value Measurement was to include the basic principles of IFRS 13 for the purpose of comparability, between financial statements in accordance with Japanese GAAP and those in accordance with IFRS or account- ing principles generally accepted in the United States of America. Also, for particular items for which industrial practice should be taken into consideration, alternative means are to be provided to the extent that comparability is maintained. (2) Application date The Company will apply the accounting standard and guidance for annual periods beginning on or after April 1, 2021, and is in the process of measuring the effects of applying the accounting standard and guidance on its consolidated financial statements in future applicable periods. “Accounting Standard for Disclosure of Accounting Estimates” (ASBJ Statement No. 31 – March 31, 2020) (1) Overview Regarding “key sources of estimation uncertainty,” required to be disclosed in accordance with “Presentation of Financial Statements” (International Accounting Standards 1 (“IAS 1”), issued by the IASB in 2003, the ASBJ was requested that it should consider to require disclosure of such note information for the purpose of enhancing usability of Financial Statements. In response to such requests, the ASBJ developed and issued ASBJ Statement No. 31. The ASBJ’s primary policy for developing its accounting standards is not requiring the expansion of individual notes but leading a company to determine the specific content of disclosure in light of the purpose of disclosure by showing their principle and the purpose of disclosure. (2) Application date The Company will apply the accounting standard on March 31, 2021. “Accounting Standard for Accounting Policy Disclosures, Accounting Changes and Error Corrections” (ASBJ Statement No. 24 – March 31, 2020) (1) Overview The ASBJ revised and issued “Accounting Standard for Accounting Policy Disclosures, Accounting Changes and Error Corrections,” in order to enhance note information on accounting principles and procedures that were adopted when the provisions of relevant accounting standards are not clear. Also, in consideration of affect on accounting practices, the guidance is subject to applicable No. 24 of annotations on the accounting principles. (2) Application date The Company will apply the accounting standard on March 31, 2021. (q) Additional information Accounting estimates associated with the spread of COVID-19 Demand for air transportation in Japan and overseas decreased rapidly toward the end of the current fiscal year due to immigration restrictions imposed by various countries and the impact of the voluntary restraint of staying home within Japan resulting from the spread of COVID-19. Accounting estimates in the current fiscal year, such as the valuation of goodwill and the recoverability of deferred tax assets, are based on the certain assumption that the situation will continue until the second quarter of the next fiscal year and the demand will pick up gradually afterwards. 127 Financial / Data Section Notes to Consolidated Financial Statements 4. Marketable securities and investment securities Marketable and investment securities at March 31, 2020 and 2019 are summarized as follows: Current: Negotiable certificates of deposits Other Total Non-current: Marketable equity securities Other Total Yen (Millions) 2020 2019 ¥129,200 – ¥129,200 ¥ 84,141 24,014 ¥108,156 ¥225,360 – ¥225,360 ¥ 88,385 32,234 ¥120,619 U.S. dollars (Thousands) 2020 $1,187,172 – $1,187,172 $ 773,141 220,656 $ 993,806 The costs and aggregate fair values of marketable and investment securities at March 31, 2020 and 2019 were as follows: As of March 31, 2020 Securities classified as: Available-for-sale: Negotiable certificates of deposit Marketable equity securities Held-to-maturity As of March 31, 2019 Securities classified as: Available-for-sale: Negotiable certificates of deposit Marketable equity securities Held-to-maturity As of March 31, 2020 Securities classified as: Available-for-sale: Negotiable certificates of deposit Marketable equity securities Held-to-maturity Cost Unrealized gains Unrealized losses Fair value Yen (Millions) ¥129,200 51,453 938 ¥ – 36,211 1,632 ¥ – (3,523) – ¥129,200 84,141 2,570 Cost Unrealized gains Unrealized losses Fair value Yen (Millions) ¥225,360 35,574 – ¥ – 52,916 – ¥ – (105) – ¥225,360 88,385 – Cost Unrealized gains Unrealized losses Fair value U.S. dollars (Thousands) $1,187,172 472,783 8,618 $ – 332,729 14,995 $ – $1,187,172 (32,371) – 773,141 23,614 The proceeds, realized gains, and realized losses on the available-for-sale securities sold during the years ended March 31, 2020 and 2019 were as follows: Proceeds Gain on sales Loss on sales Yen (Millions) 2020 ¥1,309 1,122 – 2019 ¥559 333 – U.S. dollars (Thousands) 2020 $12,027 10,309 – The redemption schedule of available-for-sale securities with maturities and held-to-maturity securities at March 31, 2020 and 2019 is summarized as follows: Bonds: Within 1 year Over 1 year to 5 years Over 5 years to 10 years Over 10 years Other securities with maturities: Within 1 year Over 1 year to 5 years Over 5 years to 10 years Over 10 years Total: Within 1 year Over 1 year to 5 years Over 5 years to 10 years Over 10 years 5. Inventories Inventories at March 31, 2020 and 2019 consisted the following: Inventories (Merchandise) Inventories (Supplies) Total Yen (Millions) 2020 2019 ¥ – – – – 129,200 5,299 2,025 – ¥129,200 5,299 2,025 – ¥ – – – – 225,360 – 6,389 – ¥225,360 – 6,389 – U.S. dollars (Thousands) 2020 $ – – – – 1,187,172 48,690 18,607 – $1,187,172 48,690 18,607 – Yen (Millions) 2020 ¥13,490 53,822 ¥67,312 2019 ¥13,707 48,423 ¥62,130 U.S. dollars (Thousands) 2020 $123,954 494,551 $618,505 6. Investments in and advances to unconsolidated subsidiaries and affiliates Investments in and advances to unconsolidated subsidiaries and affiliates at March 31, 2020 and 2019 consisted of the following: Investments in capital stock Advances Total 7. Short-term loans and long-term debt Yen (Millions) 2020 ¥37,508 4,814 ¥42,322 2019 ¥38,565 4,225 ¥42,790 U.S. dollars (Thousands) 2020 $344,647 44,234 $388,881 Short-term loans and current portion of long-term debt at March 31, 2020 and 2019 consisted of the following: Yen (Millions) 2020 ¥ 429 84,057 20,000 3,821 ¥108,307 2019 ¥ 336 77,883 30,000 4,768 ¥112,987 U.S. dollars (Thousands) 2020 $ 3,941 772,369 183,772 35,109 $995,194 The breakdown of securities for which fair value cannot be reliably determined at March 31, 2020 and 2019 is as follows: Available-for-sale Yen (Millions) 2020 ¥23,076 2019 ¥32,234 U.S. dollars (Thousands) 2020 $212,037 Short-term loans Current portion of long-term loans Current portion of bonds Current portion of finance lease obligations Total 128 129 The average interest rates on the above short-term loans were 1.43% and 2.42% per annum in 2020 and 2019, respectively. Financial / Data Section Notes to Consolidated Financial Statements Long-term debt at March 31, 2020 and 2019 consisted of the following: The following assets were pledged as collateral for short-term and long-term debt at March 31, 2020 and 2019: Bonds: 1.22% notes due 2024 1.20% notes due 2026 0.38% notes due 2019 0.99% notes due 2036 0.26% notes due 2020 0.88% notes due 2037 Convertible bonds with stock acquisition rights due 2022 Convertible bonds with stock acquisition rights due 2024 0.82% notes due 2038 0.47% notes due 2028 0.27% notes due 2026 0.84% notes due 2039 0.27% notes due 2025 0.28% notes due 2029 0.69% notes due 2039 Yen (Millions) 2020 2019 ¥ 30,000 15,000 – 20,000 20,000 10,000 70,000 70,000 10,000 10,000 5,000 15,000 30,000 10,000 10,000 325,000 ¥ 30,000 15,000 30,000 20,000 20,000 10,000 70,000 70,000 10,000 10,000 – – – – – 285,000 U.S. dollars (Thousands) 2020 $ 275,659 137,829 – 183,772 183,772 91,886 643,204 643,204 91,886 91,886 45,943 137,829 275,659 91,886 91,886 2,986,308 Loans, principally from banks: S ecured, bearing interest from 0.07% to 2.11% in 2020 and 0.13% to 2.11% in 2019, maturing in installments through 2040 287,827 281,235 2,644,739 U nsecured, bearing interest from 0.46% to 2.23% in 2020 and 0.46% to 2.23% in 2019, maturing in installments through 2031 Finance lease obligations: Finance lease agreements expiring through 2031 Less current portion Total The details of the convertible bonds with stock acquisition rights are as follows: Class of shares to be issued Total issue price of stock acquisition rights Initial conversion price Total issue price Total issue price of shares issued upon the exercise of stock acquisition rights Percentage of stock acquisition rights granted Exercise period 213,130 500,957 16,476 842,433 107,878 203,478 484,713 18,600 788,313 112,651 1,958,375 4,603,114 151,392 7,740,815 991,252 ¥734,555 ¥675,662 $6,749,563 Zero coupon convertible bonds due 2022 Common stock Zero ¥5,180 ($47.59) per share ¥70,000 million ($643,204 thousand) – 100.0% October 3, 2017 through September 2, 2022 If all of these outstanding warrants had been exercised at March 31, 2020, 13,513,513 shares of common stock would have been issued. Class of shares to be issued Total issue price of stock acquisition rights Initial conversion price Total issue price Total issue price of shares issued upon the exercise of stock acquisition rights Percentage of stock acquisition rights granted Exercise period Zero coupon convertible bonds due 2024 Common stock Zero ¥5,100 ($46.86) per share ¥70,000 million ($643,204 thousand) – 100.0% October 3, 2017 through September 5, 2024 If all of these outstanding warrants had been exercised at March 31, 2020, 13,725,490 shares of common stock would have been issued. The conversion price of the convertible bonds is subject to adjustments to reflect stock splits and certain other events. As is customary in Japan, short-term and long-term bank loans are made under general agreements which provide that security and guarantees for future and present indebtedness will be given upon request of the bank, and that the bank shall have the right, as the obligation becomes due or in the event of default and certain other specified events, to offset cash deposits against such obligations due to the bank. Assets at net book value: Aircraft (including aircraft spare parts included in inventories) Land and buildings Lease receivables Others Total The aggregate annual maturities of long-term debt after March 31, 2020 are as follows: Years ending March 31 2021 2022 2023 2024 2025 Thereafter Total 8. Retirement benefit plans Yen (Millions) 2020 2019 ¥510,607 2,956 12,751 11,135 ¥537,449 ¥497,719 2,678 14,479 11,135 ¥526,012 Yen (Millions) ¥107,878 73,806 132,942 87,388 115,134 325,285 ¥842,433 U.S. dollars (Thousands) 2020 $4,691,785 27,161 117,164 102,315 $4,938,426 U.S. dollars (Thousands) $ 991,252 678,176 1,221,556 802,977 1,057,925 2,988,927 $7,740,815 The Company and certain consolidated subsidiaries provide defined contribution pension plans as well as defined benefit pension plans, i.e., defined benefit corporate pension plans and lump-sum payment plans for the benefit of employees. Premium severance pay may be paid at the time of retirement of eligible employees in certain cases. Certain consolidated subsidiaries adopting defined benefit corporate pension plans and lump-sum payment plans use a simplified method for calculating retirement benefit expenses and liabilities. (a) The changes in the defined benefit obligation for the years ended March 31, 2020 and 2019 are as follows: Balance at the beginning of the fiscal year Service cost Interest cost Actuarial losses (gains) Benefits paid Accrued past service cost Decrease due to transition to the defined contribution pension plans Other Balance at the end of the fiscal year (b) The changes in plan assets for the years ended March 31, 2020 and 2019 are as follows: Balance at the beginning of the fiscal year Expected return on plan assets Actuarial losses Employer contributions Benefits paid Decrease due to transition to the defined contribution pension plans Other Balance at the end of the fiscal year Yen (Millions) 2020 ¥223,723 10,216 1,687 2,119 (12,958) – – 499 ¥225,286 2019 ¥227,114 10,036 1,711 (76) (12,342) 0 (2,827) 107 ¥223,723 Yen (Millions) 2020 ¥65,990 782 (1,510) 2,611 (5,156) – – ¥62,717 2019 ¥70,661 834 (421) 2,455 (5,253) (2,827) 541 ¥65,990 U.S. dollars (Thousands) 2020 $2,055,710 93,871 15,501 19,470 (119,066) – – 4,585 $2,070,072 U.S. dollars (Thousands) 2020 $606,358 7,185 (13,874) 23,991 (47,376) – – $576,284 130 131 Financial / Data Section Notes to Consolidated Financial Statements (c) A reconciliation between the liability recorded in the consolidated balance sheet and the balances of the defined benefit obligation and plan (2) Method of determining the expected rate of return on plan assets assets at March 31, 2020 and 2019 is as follows: Funded defined benefit obligation Plan assets at fair value Unfunded defined benefit obligation Net liability arising from defined benefit obligation in the consolidated balance sheet Liability for retirement benefits Asset for defined benefits Net liability arising from defined benefit obligation in the consolidated balance sheet Yen (Millions) 2020 ¥ 74,336 (62,717) 11,619 150,950 ¥162,569 ¥163,384 (815) ¥162,569 2019 ¥ 77,533 (65,990) 11,543 146,190 ¥157,733 ¥158,209 (476) ¥157,733 (d) The components of net periodic benefit costs for the years ended March 31, 2020 and 2019 are as follows: Service cost Interest cost Expected return on plan assets Recognized actuarial losses Amortization of past service cost Net periodic benefit costs Yen (Millions) 2020 ¥10,216 1,687 (782) 3,569 847 ¥15,537 2019 ¥10,036 1,711 (834) 3,676 885 ¥15,474 U.S. dollars (Thousands) 2020 $ 683,046 (576,284) 106,762 1,387,025 $1,493,788 $1,501,277 (7,488) $1,493,788 U.S. dollars (Thousands) 2020 $ 93,871 15,501 (7,185) 32,794 7,782 $142,763 (e) Amounts recognized in other comprehensive income (before income tax effect) related to the defined retirement benefit plans for the years ended March 31, 2020 and 2019 are as follows: Past service cost Actuarial losses Total Yen (Millions) 2020 ¥(847) 60 ¥(787) 2019 ¥ (885) (3,331) ¥(4,216) U.S. dollars (Thousands) 2020 $(7,782) 551 $(7,231) (f) Amounts recognized in accumulated other comprehensive income (before income tax effect) related to the defined retirement benefit plans at March 31, 2020 and 2019 are as follows: Unrecognized actuarial losses Unrecognized past service cost Total (g) Plan assets (1) Components of plan assets Plan assets at March 31, 2020 and 2019 consisted of the following: Bonds General accounts Stocks Cash and deposits Other Total Yen (Millions) 2020 ¥17,378 8,281 ¥25,659 2019 ¥17,277 9,169 ¥26,446 U.S. dollars (Thousands) 2020 $159,680 76,091 $235,771 2020 2019 43% 13 10 4 30 100% 44% 12 11 2 31 100% The expected rate of return on plan assets has been estimated based on the anticipated allocation to each plan asset class and the expected long-term returns on plan assets held in each category. (h) Assumptions used for the years ended March 31, 2020 and 2019 are set forth as follows: Discount rates Expected rates of return on plan assets (i) Defined contribution pension plans 2020 0.1 – 1.2% 1.0 – 2.5% 2019 0.1 – 1.2% 1.0 – 2.5% The contributions to the defined contribution pension plans of the Company and certain subsidiaries were ¥4,381 million ($40,255 thousand) and ¥4,423 million for the years ended March 31, 2020 and 2019, respectively. 9. Asset retirement obligations (a) Asset retirement obligations recorded on the consolidated balance sheet (1) Overview of asset retirement obligations The Company and its domestic subsidiaries enter into agreements with national government entities that allow for the use of Japanese government property and have entered into real estate lease contracts with such entities for the Head Office, sales branches, airport branches, and certain other offices. As the Company and its domestic subsidiaries have restoration obligations for such properties at the end of each lease period, related legal obligations required by law and the contracts are recorded on the consolidated balance sheet as asset retirement obligations. (2) Calculation of asset retirement obligations The Group estimates the expected period of use as 1 to 30 years and calculates the amount of asset retirement obligations with a discount rate of 0% to 2.27%. The following table indicates the changes in asset retirement obligations for the years ended March 31, 2020 and 2019: Balance at the beginning of the fiscal year Liabilities incurred due to the acquisition of property and equipment Accretion expense Liabilities settled Other Balance at the end of the fiscal year Yen (Millions) 2020 ¥ 3,853 57 19 (513) (2,161) ¥ 1,255 2019 ¥1,319 67 389 (320) 2,398 ¥3,853 U.S. dollars (Thousands) 2020 $ 35,403 523 174 (4,713) (19,856) $ 11,531 (b) Asset retirement obligations not recorded on the consolidated balance sheet The Company and its domestic subsidiaries enter into agreements with national government entities that allow for the use of Japanese govern- ment property, and have entered into real estate lease contracts with such entities for land and office at airport facilities, including Tokyo International Airport, Narita International Airport, New Chitose Airport, Chubu Centrair International Airport, Osaka International Airport, Kansai International Airport, Fukuoka Airport, and Naha Airport. The Company and its domestic subsidiaries have restoration obligations when they vacate and clear such facilities. However, as the above airports are considered to be critical infrastructure, it is beyond the control of the Company alone to determine when to vacate and clear such facilities, and it is also impossible to make reasonable estimates as there are currently no relocation plans for the above properties. Therefore, the Company and its domestic subsidiaries do not record asset retirement obligations for the related liabilities. 132 133 Financial / Data Section Notes to Consolidated Financial Statements 10. Income taxes 11. Other comprehensive income The Company and certain of its domestic subsidiaries are subject to Japanese national and local income taxes which, in the aggregate, resulted in a normal effective statutory tax rate of 30.62% for the years ended March 31, 2020 and 2019. The following table presents reclassification and tax effects allocated to each component of other comprehensive income for the years ended March 31, 2020 and 2019: The Group files a tax return under the consolidated corporate-tax system, which allows companies to base tax payments on the combined profits or losses of the parent company and certain of its domestic subsidiaries. The tax effects of significant temporary differences and tax loss carryforwards which resulted in deferred tax assets and liabilities at March 31, 2020 and 2019 are as follows: Deferred tax assets: Liability for retirement benefits Prepaid expenses Deferred loss on hedging instruments Accrued bonuses to employees Other provisions Loss on investment in subsidiaries Long-term unearned revenue Loss on valuation of inventories Unrealized gain on inventories and property and equipment Other Total gross deferred tax assets Less valuation allowance Total net deferred tax assets Deferred tax liabilities: Unrealized gain on securities Deferred gain on hedging instruments Retained earnings of subsidiaries and affiliates Other Total gross deferred tax liabilities Net deferred income taxes Yen (Millions) 2020 2019 ¥ 50,286 9,901 8,723 6,608 6,537 6,091 5,270 4,763 4,673 28,827 131,679 (14,268) 117,411 (10,981) (2,681) (2,388) (1,649) (17,699) ¥ 48,750 8,356 – 13,105 4,898 5,305 6,309 3,687 4,597 26,173 121,180 (11,373) 109,807 (16,134) (4,735) (2,283) (1,458) (24,610) U.S. dollars (Thousands) 2020 $ 462,060 90,976 80,152 60,718 60,066 55,968 48,424 43,765 42,938 264,881 1,209,951 (131,103) 1,078,847 (100,900) (24,634) (21,942) (15,152) (162,629) ¥ 99,712 ¥ 85,197 $ 916,217 A reconciliation of the difference between the normal effective statutory tax rate and the actual effective income tax rate for the years ended March 31, 2020 and 2019 is as follows: Normal effective statutory tax rate Reconciliation: Impairment loss Amortization of goodwill Expenses not deductible for income tax purposes Inhabitants tax per capita levy Loss on investment in subsidiaries Income taxes for prior periods Changes in valuation allowance Other, net Actual effective income tax rate 2020 30.62% 2019 30.62% 13.49 2.38 1.30 0.39 – (0.81) 3.54 (1.24) – 0.80 0.46 0.14 (5.57) (1.78) 2.81 (0.09) 49.67% 27.39% 134 Unrealized gain (loss) on securities: Amount arising during the fiscal year Reclassification adjustments to profit or loss Amount of unrealized gain (loss) on securities before tax effect Tax effect Total Deferred gain (loss) on derivatives under hedge accounting: Amount arising during the fiscal year Reclassification adjustments to profit or loss Amount of deferred gain (loss) on derivatives under hedge accounting before tax effect Tax effect Total Foreign currency translation adjustments: Amount arising during the fiscal year Total Defined retirement benefit plans: Amount arising during the fiscal year Reclassification adjustments to profit or loss Amount of defined retirement benefit plans before tax effect Tax effect Total Share of other comprehensive income (loss) in affiliates: Amount arising during the fiscal year Reclassification adjustments to profit or loss Total Yen (Millions) 2020 2019 ¥(19,764) (764) (20,528) 5,159 (15,369) (41,013) 4,424 (36,589) 11,362 (25,227) (221) (221) (3,629) 4,416 787 (248) 539 (381) (2) (383) ¥19,155 (221) 18,934 (5,819) 13,115 9,585 10,671 20,256 (6,141) 14,115 (382) (382) (345) 4,561 4,216 (1,286) 2,930 102 (87) 15 U.S. dollars (Thousands) 2020 $(181,604) (7,020) (188,624) 47,404 (141,220) (376,853) 40,650 (336,203) 104,401 (231,801) (2,030) (2,030) (33,345) 40,577 7,231 (2,278) 4,952 (3,500) (18) (3,519) Total other comprehensive income (loss) ¥(40,661) ¥29,793 $(373,619) 12. Leases As lessee (a) Finance leases Finance lease transactions are capitalized by recognizing lease assets and lease obligations in the consolidated balance sheet. Tangible fixed lease assets include mainly aircraft, flight equipment, host computers and peripheral equipment. Intangible lease assets include software. The depreciation method for leased assets is described in Note 3 (j) “Leases.” (b) Operating leases The amount of outstanding future lease payments under non-cancelable operating leases are as follows: Current portion of operating lease obligations Long-term operating lease obligations Total As lessor (a) Operating leases Yen (Millions) 2020 ¥ 62,649 318,817 ¥381,466 2019 ¥ 54,866 265,832 ¥320,698 U.S. dollars (Thousands) 2020 $ 575,659 2,929,495 $3,505,154 The amount of outstanding future lease receivables under non-cancelable operating leases are as follows: Current portion of operating lease receivables Long-term operating lease receivables Total Yen (Millions) 2020 ¥ 2,170 15,373 ¥17,543 2019 ¥ 949 6,983 ¥7,932 U.S. dollars (Thousands) 2020 $ 19,939 141,257 $161,196 135 Financial / Data Section Notes to Consolidated Financial Statements 13. Supplementary information for the consolidated statement of changes in net assets 14. Contingencies Supplementary information for the consolidated statement of changes in net assets for the year ended March 31, 2020 consisted of the following: The Group was contingently liable as a guarantor of loans, principally to affiliates, totaling ¥2,080 million ($19,112 thousand) at March 31, 2020. (a) Dividends Under the Companies Act of Japan (the “Companies Act”), the appropriation of unappropriated retained earnings of the Company with respect to a financial period is made by resolution of the Company’s shareholders at a general meeting to be held subsequent to the close of the financial period and the accounts for that period do not therefore reflect such appropriation. (1) Dividends paid to shareholders Date of approval June 21, 2019 Resolution approved by Ordinary General Meeting of Shareholders Type of shares C ommon stock (*1) Yen (Millions) U.S. dollars (Thousands) Amount Amount Paid from Retained earnings Yen U.S. dollars Dividends per share Dividends per share Shareholders’ cut-off date Effective date ¥25,105 $230,680 ¥75.00 $0.68 March 31, 2019 June 24, 2019 (*1) The total amount of dividends does not include ¥9 million ($81 thousand) in dividends to be paid to the subsidiaries and affiliates. This is because the shares held by subsidiaries and affiliates are recognized as treasury stock. (2) Dividends with a shareholders’ cut-off date within the current fiscal year but an effective date within the subsequent fiscal year There are no applicable items. The Companies Act requires that an amount equal to 10% of dividends must be appropriated as a legal reserve (a component of retained earnings) or as additional paid-in capital (a component of capital surplus), depending on the equity account charged upon the payment of such dividends, until the aggregate amount of legal reserve and additional paid-in capital equals 25% of the common stock. Under the Companies Act, the total amount of additional paid-in capital and legal reserve may be reversed without limitation. The Companies Act also provides that common stock, legal reserve, additional paid-in capital, other capital surplus, and retained earnings can be transferred among the accounts within equity under certain conditions upon resolution of the shareholders. (b) Type and number of outstanding shares As of March 31, 2020 Type of shares Issued stock: Common stock Total Treasury stock: Common stock (*1, *2, *3) Total Number of shares (Thousands) Balance at beginning of year Increase in shares during the year Decrease in shares during the year Balance at end of year 348,498 348,498 13,868 13,868 – – 125 125 – – 15 15 348,498 348,498 13,978 13,978 (*1) The increase of 125 thousand shares of treasury stock is the total of 8 thousand shares that the Company purchased from holders of fractional shares; and 116 thousand shares in the Company that were purchased by the Trust for Delivery of Shares to Directors. (*2) The decrease of 15 thousand shares of treasury stock is the total of 0 thousand shares that the Company sold to the holders of fractional shares at their request; and 14 thousand shares in the Company that were sold by the Trust for Delivery of Shares to Directors. (*3) Treasury stock includes 209 thousand shares held by the Trust for Delivery of Shares to Directors. As of March 31, 2019 Type of shares Issued stock: Common stock Total Treasury stock: Common stock (*1, *2, *3) Total Number of shares (Thousands) Balance at beginning of year Increase in shares during the year Decrease in shares during the year Balance at end of year 348,498 348,498 13,866 13,866 – – 10 10 – – 7 7 348,498 348,498 13,868 13,868 (*1) The increase of 10 thousand shares of treasury stock is 10 thousand shares that the Company purchased from holders of fractional shares. (*2) The decrease of 7 thousand shares of treasury stock is the total of 0 thousand shares that the Company sold to the holders of fractional shares at their request; and 6 thousand shares that were sold by the Trust for Delivery of Shares to Directors. (*3) Treasury stock includes 107 thousand shares held by the Trust for Delivery of Shares to Directors. 136 The Group was contingently liable as a guarantor for a stock transfer agreement between third parties, totaling ¥6,111 million ($56,151 thousand) at March 31, 2020. The Group was contingently liable as a guarantor of loans, principally to affiliates, totaling ¥2,685 million at March 31, 2019. The Group was contingently liable as a guarantor for a stock transfer agreement between third parties, totaling ¥6,111 million at March 31, 2019. 15. Financial instruments and related disclosures Overview (a) Group policy for financial instruments The Group limits its fund management to short-term time deposits and raises funds through borrowings from financial institutions, including banks. The Group uses derivatives for the purpose of reducing the risks described below and does not enter into derivatives for speculative or trading purposes. (b) Types of financial instruments and related risk Trade receivables (notes and accounts receivable) are exposed to credit risk in relation to customers. Marketable securities and investment securities are exposed to the risk of market price fluctuations. Those securities are composed mainly of the shares of other companies with which the Group has business relationships. Substantially all trade payables have payment due dates within one year. Borrowings are taken out principally for the purpose of making capital investments, and certain long-term debt with variable interest rates is exposed to interest rate fluctuation risk. However, to reduce such risk for long-term interest-bearing debt at variable rates, the Group utilizes interest rate swap transactions as hedging instruments. Interest rate swaps that qualify for hedge accounting and meet specific matching criteria are not measured at fair value, but the differential paid or received under the swap agreements is recognized and included in interest expenses. For derivatives, in order to reduce the foreign currency exchange rate risk arising from receivables and payables denominated in foreign curren- cies, the Group enters into forward foreign exchange contracts for specific receivables and payables denominated in foreign currencies, mainly for aircraft purchase commitments. In addition, the Group enters into commodity derivative transactions such as swaps and options to mitigate fluctuation risk of the commodity prices of fuel and to stabilize operating profit. 1) Management of credit risks (risks such as breach of contract by customers) The Group manages its credit risk from receivables on the basis of internal guidelines, which include monitoring of payment term and balances of major customers by each business administration department to identify the default risk of customers at an early stage. As for derivatives, the Group believes that the credit risks are extremely low, as it enters into derivative transactions only with reputable financial institutions with sound credit profiles. 2) Management of market risks (fluctuation risks of foreign currency exchange rates and interest rates) In order to reduce foreign currency exchange rate risks, the Group principally utilizes forward foreign exchange contracts for receivables and payables denominated in foreign currencies. In order to mitigate the interest rate fluctuation risks related to debt, the Group utilizes interest rate swap transactions. In addition, the Group enters into commodity derivative transactions such as swaps and options to mitigate fluctuation risk related to commodity prices for fuel. As for marketable securities and investment securities, the Group periodically reviews the fair values and the financial conditions of the issuers to identify and mitigate risks of impairment. There are internal management regulations for derivative transactions which set forth transaction authority and limits on transaction amounts. The Group enters into derivative transactions in accordance with such policies. Moreover, the Group reports plans and results of methods and ratios for offsetting risks at the quarterly meetings of the Board of Directors. 3) Management of liquidity risks related to financing (risks that the Group cannot meet the due dates of payables) The Group manages liquidity risks by establishing a financial plan in order to procure and invest funds that are necessary for the operation of the Group over a certain period of time, in accordance with the Group’s business operating plan and budget. (c) Supplementary explanation of the estimated fair value of financial instruments The fair value of financial instruments is based on their quoted market price, if available. When there is no quoted market price available, fair value is reasonably estimated. Since various assumptions and factors are reflected in estimating the fair value, different assumptions and factors could result in different fair value estimates. In addition, the notional amounts of derivatives presented in Note 16 “Derivatives and hedging activities” are not necessarily indicative of the actual market risk involved in derivative transactions. 137 Financial / Data Section Notes to Consolidated Financial Statements Estimated fair value of financial instruments (c) Marketable securities and investment securities The carrying values of financial instruments on the consolidated balance sheet at March 31, 2020 and 2019, and their estimated fair values, are shown in the following tables. The following tables do not include financial instruments for which fair value cannot be reliably determined (Please refer to Note 2 below). The fair values of marketable and investment securities are measured at the quoted market price of the stock exchange for the equity instru- ments, and at the quoted price obtained from financial institutions for certain debt instruments. The information on the fair values of marketable and investment securities by classification is included in Note 4 “Marketable securities and investment securities” of the notes to the consoli- dated financial statements. As of March 31, 2020 Assets: Cash and deposits Notes and accounts receivable Marketable securities and investment securities Total assets Liabilities: Accounts payable Short-term loans Bonds Convertible bonds with stock acquisition rights Long-term loans Total liabilities Derivatives* As of March 31, 2019 Assets: Cash and deposits Notes and accounts receivable Marketable securities and investment securities Total assets Liabilities: Accounts payable Short-term loans Bonds Convertible bonds with stock acquisition rights Long-term loans Total liabilities Derivatives* As of March 31, 2020 Assets: Cash and deposits Notes and accounts receivable Marketable securities and investment securities Total assets Liabilities: Accounts payable Short-term loans Bonds Convertible bonds with stock acquisition rights Long-term loans Total liabilities Derivatives* Carrying value Fair value Differences Yen (Millions) ¥ 109,447 98,944 214,279 ¥ 422,670 ¥ 196,391 429 185,000 140,000 500,957 ¥1,022,777 ¥ (20,664) ¥ 109,447 98,944 216,849 ¥ 425,240 ¥ 196,391 429 183,874 135,415 501,213 ¥1,017,322 (20,664) ¥ Yen (Millions) ¥ – – 2,570 ¥2,570 ¥ – – 1,126 4,585 (256) ¥5,455 – ¥ Carrying value Fair value Differences ¥ 68,301 187,529 313,745 ¥ 569,575 ¥ 229,712 336 145,000 140,000 484,713 ¥ 999,761 ¥ 15,639 ¥ 68,301 187,529 313,745 ¥ 569,575 ¥ 229,712 336 148,798 142,625 494,238 ¥ 1,015,709 ¥ 15,639 ¥ – – – ¥ – ¥ – – (3,798) (2,625) (9,525) ¥ (15,948) ¥ – U.S. dollars (Thousands) Carrying value Fair value Differences $1,005,669 909,161 1,968,933 $3,383,763 $1,804,566 3,941 1,699,898 1,286,409 4,603,114 $9,397,932 $ (189,874) $1,005,669 909,161 1,992,548 $3,907,378 $1,804,566 3,941 1,689,552 1,244,280 4,605,467 $9,347,808 $ (189,874) $ – – 23,614 $23,614 $ – – 10,346 42,129 (2,352) $50,124 – $ * The value of assets and liabilities arising from derivatives is shown as a net value, and the amount in parentheses represents a net liability position. Notes: 1. Methods to determine the estimated fair value of financial instruments and other matters related to securities and derivative transactions Assets (a) Cash and deposits The carrying values of cash and deposits approximate fair value because of their short maturities. (b) Notes and accounts receivable The carrying values of notes and accounts receivable approximate fair value because of their short maturities. Liabilities (a) Accounts payable The carrying values of accounts payable approximate fair value because of their short maturities. (b) Short-term loans The carrying values of short-term loans approximate fair value because of their short maturities. (c) Bonds The fair value of bonds issued by the Company is measured at the present value of the total of principal and interest discounted by an interest rate determined by taking into account the remaining period of each bond and current credit risk. (d) Long-term loans The fair values of long-term loans are determined by discounting the cash flows related to the debt at the Group’s assumed corporate borrowing rate. 2. Financial instruments for which it is extremely difficult to determine the fair value As of March 31, 2020 Unlisted stocks Yen (Millions) 2020 ¥23,076 2019 ¥32,234 U.S. dollars (Thousands) 2020 $212,037 Because no quoted market price is available and the fair value cannot be reliably determined, the above financial instruments are not included in the fair value tables above. 3. The redemption schedule for receivables and available-for-sale and held-to-maturity securities with maturities at March 31, 2020 and 2019 is summarized as follows: As of March 31, 2020 Deposits Notes and accounts receivable Held-to-maturity bonds Other securities with maturities Total As of March 31, 2019 Deposits Notes and accounts receivable Held-to-maturity bonds Other securities with maturities Total As of March 31, 2020 Deposits Notes and accounts receivable Held-to-maturity bonds Other securities with maturities Total Due in one year or less ¥108,572 98,944 – 129,200 ¥336,716 Due in one year or less ¥ 67,546 187,529 – 225,360 ¥480,435 Due in one year or less $ 997,629 909,161 – 1,187,172 $3,093,963 Yen (Millions) Due after one year through five years Due after five years through ten years Due after ten years ¥ – – – 5,299 ¥5,299 ¥ – – – 2,025 ¥2,025 ¥– – – – ¥– Yen (Millions) Due after one year through five years Due after five years through ten years Due after ten years ¥– – – – ¥– ¥ – – – 6,389 ¥6,389 ¥– – – – ¥– U.S. dollars (Thousands) Due after one year through five years Due after five years through ten years Due after ten years $ – – – $ – – – 48,690 $48,690 18,607 $18,607 $– – – – $– 138 139 Financial / Data Section Notes to Consolidated Financial Statements 4. The redemption schedule for bonds, loans and other interest-bearing liabilities at March 31, 2020 and 2019 is summarized as follows: As of March 31, 2020 Short-term loans Bonds Convertible bonds with stock acquisition rights Long-term loans Total As of March 31, 2019 Short-term loans Bonds Convertible bonds with stock acquisition rights Long-term loans Total As of March 31, 2020 Short-term loans Bonds Convertible bonds with stock acquisition rights Long-term loans Total 16. Derivatives and hedging activities Yen (Millions) Due in one year or less Due after one year through five years Due after five years through ten years ¥ 429 ¥ – ¥ – 20,000 – 84,057 30,000 140,000 228,056 ¥104,486 ¥398,056 70,000 – 138,900 ¥208,900 Due after ten years – ¥ 65,000 – 49,944 ¥114,944 Yen (Millions) Due in one year or less ¥ 336 Due after one year through five years ¥ – Due after five years through ten years ¥ – 30,000 – 77,883 ¥108,219 50,000 70,000 239,514 ¥359,514 25,000 70,000 126,097 ¥221,097 U.S. dollars (Thousands) Due in one year or less $ 3,941 Due after one year through five years $ – Due after five years through ten years $ – $ 183,772 – 772,369 275,659 1,286,409 2,095,525 643,204 – 1,276,302 Due after ten years ¥ – 40,000 – 41,219 ¥81,219 Due after ten years – 597,261 – 458,917 $960,084 $3,657,594 $1,919,507 $1,056,179 The Group operates internationally and is exposed to the risk of fluctuations in foreign currency exchange rates, interest rates and jet fuel prices. In order to manage these risks, the Group utilizes forward exchange contracts to hedge certain foreign currency transactions related to purchase commitments, principally of flight equipment, and foreign currency receivables and payables. Also, the Group utilizes interest rate swaps to minimize the impact of interest rate fluctuations related to outstanding debt. In addition, the Group also enters into a variety of swaps and options in its management of risk exposure related to jet fuel prices. The Group does not use derivatives for speculative or trading purposes. The Group has developed internal hedging guidelines to control various aspects of derivative transactions, including authorization levels and transaction volumes. The Group enters into derivative transactions in accordance with these internal guidelines. Derivative and hedging transac- tions initiated by respective operational departments have been examined by the accounting department and these transactions, including their measures and ratios, are generally monitored by management on a quarterly basis. Assessment of hedge effectiveness is examined at inception and, on an ongoing basis, periodically. The Group is also exposed to credit-related losses in the event of non-performance by counterparties in regard to derivative financial instruments; however, it is not expected that any counterparties will fail to meet their obligations, as the majority of the counterparties are internationally recognized financial institutions. Summarized below are the notional amounts and estimated fair values of the derivative financial instruments outstanding at March 31, 2020 and 2019 for which hedged accounting has been applied. (a) Derivative transactions to which hedge accounting is not applied (1) Currency-related transactions As of March 31, 2020 Forward foreign exchange contracts: Sell: Buy: Total USD EUR Other USD EUR Other Yen (Millions) Notional amount Total Maturing after one year Fair value ¥ – – – 103 – – ¥103 ¥ – – – 103 – – ¥103 ¥– – – 0 – – ¥0 As of March 31, 2019 Forward foreign exchange contracts: Sell: Buy: Total As of March 31, 2020 Forward foreign exchange contracts: Sell: Buy: Total (2) Commodity-related transactions As of March 31, 2020 C ommodity (crude oil) swap contracts for accounts payable, accounted for by the deferral method: Receive/floating and pay/fixed C ommodity (crude oil) option contracts, accounted for by the deferral method: Sell: Buy: Total USD EUR Other USD EUR Other USD EUR Other USD EUR Other Yen (Millions) Notional amount Total Maturing after one year Fair value ¥ – – 166 5,540 – 355 ¥6,061 ¥– – – – – – ¥– ¥– – 0 2 – 0 ¥2 U.S. dollars (Thousands) Notional amount Total Maturing after one year Fair value $ – – – 946 – – $946 $ – – – 946 – – $946 $– – – 0 – – $0 Yen (Millions) Notional amount Total Maturing after one year Fair value Crude oil (Put) Crude oil (Call) ¥1,002 431 555 ¥1,988 ¥– – – ¥– ¥(423) (99) (54) ¥(576) As of March 31, 2019 C ommodity (crude oil) swap contracts for accounts payable, accounted for by the deferral method: Receive/floating and pay/fixed C ommodity (crude oil) option contracts, accounted for by the deferral method: Sell: Buy: Total Crude oil (Put) Crude oil (Call) Yen (Millions) Notional amount Total Maturing after one year Fair value ¥– – – ¥– ¥– – – ¥– ¥– – – ¥– U.S. dollars (Thousands) Notional amount Total Maturing after one year Fair value As of March 31, 2020 C ommodity (crude oil) swap contracts for accounts payable, accounted for by the deferral method: Receive/floating and pay/fixed C ommodity (crude oil) option contracts, accounted for by the deferral method: Sell: Buy: Total Note: The calculation of fair value is based on the data obtained from financial institutions. Crude oil (Put) Crude oil (Call) $ 9,207 3,960 5,099 $18,267 $– – – $– $(3,886) (909) (496) $(5,292) 140 141 Financial / Data Section Yen (Millions) Notional amount As of March 31, 2020 F orward foreign exchange contracts for accounts receivable, accounted for by the deferral method: Total Maturing after one year Fair value Sell: Notes to Consolidated Financial Statements (b) Derivative transactions to which hedge accounting is applied (1) Currency-related transactions As of March 31, 2020 F orward foreign exchange contracts for accounts receivable, accounted for by the deferral method: Sell: F orward foreign exchange contracts for accounts payable, accounted for by the deferral method: Buy: C urrency option contracts for accounts payable, accounted for by the deferral method: Sell: Buy: F orward foreign exchange contracts, accounted for as part of accounts receivable: Sell: F orward foreign exchange contracts, accounted for as part of accounts payable: Buy: C urrency swap contracts for accounts payable, accounted for as part of accounts payable: Receive/USD and pay/JPY Total As of March 31, 2019 F orward foreign exchange contracts for accounts receivable, accounted for by the deferral method: Sell: F orward foreign exchange contracts for accounts payable, accounted for by the deferral method: Buy: C urrency option contracts for accounts payable, accounted for by the deferral method: Sell: Buy: F orward foreign exchange contracts, accounted for as part of accounts receivable: Sell: F orward foreign exchange contracts, accounted for as part of accounts payable: Buy: C urrency swap contracts for accounts payable, accounted for as part of accounts payable: Receive/USD and pay/JPY Total USD EUR Other USD EUR Other USD (Put) USD (Call) USD EUR Other USD EUR Other USD EUR Other USD EUR Other USD (Put) USD (Call) USD EUR Other USD EUR Other ¥ 418 – – 359,747 500 17 46,403 51,225 218 – 6 9,469 111 1 – ¥468,115 ¥ – – – 143,268 – – 30,696 33,897 – – – – – – – ¥ (1) – – 11,984 (4) (2) (978) 2,163 (*) (*) (*) (*) (*) (*) (*) ¥207,861 ¥13,162 Yen (Millions) Notional amount Total Maturing after one year Fair value ¥ 6,165 0 77 334,460 188 138 45,366 41,012 302 48 39 17,931 999 4 – ¥446,729 ¥ – – – 169,059 – – 32,274 29,221 – – – – – – – ¥ (64) 0 0 7,843 (8) (2) 1,575 (643) (*) (*) (*) (*) (*) (*) (*) ¥230,554 ¥8,701 U.S. dollars (Thousands) Notional amount Total Maturing after one year Fair value USD EUR Other USD EUR Other USD (Put) USD (Call) USD EUR Other USD EUR Other $ 3,840 – – 3,305,586 4,594 156 426,380 470,688 2,003 – 55 87,007 1,019 9 – $ – – – 1,316,429 – – 282,054 311,467 – – – – – – – $ (9) – – 110,106 (36) (18) (8,986) 19,875 (*) (*) (*) (*) (*) (*) (*) $4,301,341 $1,909,960 $120,940 F orward foreign exchange contracts for accounts payable, accounted for by the deferral method: Buy: C urrency option contracts for accounts payable, accounted for by the deferral method: Sell: Buy: F orward foreign exchange contracts, accounted for as part of accounts receivable: Sell: F orward foreign exchange contracts, accounted for as part of accounts payable: Buy: C urrency swap contracts for accounts payable, accounted for as part of accounts payable: Receive/USD and pay/JPY Total Note: Calculation of fair value is based on the data obtained from financial institutions. (*) The estimated fair value of forward foreign exchange contracts is included in the estimated fair value of accounts payable, as the amounts in such derivative contracts accounted for as part of accounts receivable and payable are aggregated with the receivables and payables denominated in foreign currencies that are subject to hedge accounting. See Note 15 “Financial instruments and related disclosures” for additional information. (2) Interest-related transactions As of March 31, 2020 Interest rate swap hedging long-term loans: Receive/floating and pay/fixed As of March 31, 2019 Interest rate swap hedging long-term loans: Receive/floating and pay/fixed As of March 31, 2020 Interest rate swap hedging long-term loans: Receive/floating and pay/fixed Yen (Millions) Notional amount Total Maturing after one year Fair value ¥82,333 ¥53,413 (*) Yen (Millions) Notional amount Total Maturing after one year Fair value ¥111,253 ¥82,333 (*) U.S. dollars (Thousands) Notional amount Total Maturing after one year Fair value $756,528 $490,792 (*) (*) Interest rate swap contracts are used as hedges and meet specific matching criteria, the net amount to be paid or received under the interest rate swap contract is added to or deducted from the interest on the long-term loans. The estimated fair value of interest rate swap contracts is included in the estimated fair value of long-term loans. (3) Commodity-related transactions As of March 31, 2020 Total Maturing after one year Fair value Yen (Millions) Notional amount C ommodity (crude oil) swap contracts for accounts payable, accounted for by the deferral method: Receive/floating and pay/fixed C ommodity (crude oil) option contracts, accounted for by the deferral method: ¥ 69,132 ¥27,453 ¥(24,304) Sell: Buy: Total Crude oil (Put) Crude oil (Call) 33,121 42,798 ¥145,051 15,468 20,104 ¥63,025 (7,229) (1,717) ¥(33,250) 142 143 Financial / Data Section Notes to Consolidated Financial Statements As of March 31, 2019 Total Maturing after one year Fair value Yen (Millions) Notional amount C ommodity (crude oil) swap contracts for accounts payable, accounted for by the deferral method: Receive/floating and pay/fixed C ommodity (crude oil) option contracts, accounted for by the deferral method: ¥ 74,591 ¥29,073 ¥5,234 Sell: Buy: Total Crude oil (Put) Crude oil (Call) 34,350 44,114 ¥153,055 17,211 21,989 ¥68,273 (445) 2,147 ¥6,936 As of March 31, 2020 Total Maturing after one year Fair value U.S. dollars (Thousands) Notional amount C ommodity (crude oil) swap contracts for accounts payable, accounted for by the deferral method: Receive/floating and pay/fixed C ommodity (crude oil) option contracts, accounted for by the deferral method: As of and for the year ended March 31, 2020 Operating revenues: Operating revenues from external customers Intersegment revenues or transfers Total Segment profit Segment assets Other items: Depreciation and amortization Amortization of goodwill Increase in property and equipment and intangible assets Other Total Adjustments Consolidated Yen (Millions) ¥15,621 28,602 ¥44,223 ¥ 3,526 25,276 262 – 141 ¥1,974,216 395,923 ¥2,370,139 ¥ 75,522 2,577,468 175,739 4,006 352,325 ¥ – (395,923) ¥(395,923) ¥ (14,716) (17,315) – – (964) ¥1,974,216 – ¥1,974,216 ¥ 60,806 2,560,153 175,739 4,006 351,361 Notes: 1. “Other” refers to all business segments that are not included in the reportable segments, such as facility management, business support, and other operations. 2. Adjustments are as follows: (a) Adjustments to segment profit consist of the elimination of intersegment transactions of ¥(9,979) million and corporate expenses of ¥(4,734) million. (b) Adjustments to segment assets consist of long-term investments (investment securities and stocks of subsidiaries and affiliates) in consolidated subsidiaries of ¥157,553 $ 635,229 $252,255 $(223,320) million and eliminations of intersegment transactions of ¥(174,868) million. (c) Adjustments to increase in property and equipment and intangible assets mainly consist of the elimination of intersegment transactions. 3. Segment profit is reconciled to operating income on the consolidated statement of income. Sell: Buy: Total Crude oil (Put) Crude oil (Call) 304,337 393,255 $1,332,821 142,129 184,728 $579,114 (66,424) (15,776) $(305,522) Note: The calculation of fair value is based on the data obtained from financial institutions. 17. Segment information (a) Description of reportable segments The reportable segments of the Company and its consolidated subsidiaries are components for which discrete financial information is available and whose operating results are regularly reviewed by the Executive Committee to make decisions about resource allocation and to assess performance. The Group’s reportable segments are categorized under “Air Transportation,” “Airline Related,” “Travel Services,” and “Trade and Retail.” The “Air Transportation” segment conducts domestic and international passenger operations, cargo and mail operations, and other transporta- tion services. The “Airline Related” segment conducts air transportation-related operations, such as airport passenger and ground handling services and maintenance services. The “Travel Services” segment conducts operations centering on the development and sales of travel plans. It also conducts planning and sales of branded travel packages using air transportation. The “Trade and Retail” segment conducts mainly import and export operations of goods related to air transportation and is involved in in-store and non-store retailing. (b) Methods of measurement for the amounts of sales, profit, assets, and other items for each reportable segment The accounting policies of the reportable segments are substantially the same as those described in Note 3 “Summary of significant accounting policies.” Segment performance is evaluated based on operating income or loss. Intersegment sales and transfers are based on current market prices. (c) Information about sales, profit, assets, and other items As of and for the year ended March 31, 2020 Operating revenues: Operating revenues from external customers Intersegment revenues or transfers Total Segment profit Segment assets Other items: Depreciation and amortization Amortization of goodwill Increase in property and equipment and intangible assets Yen (Millions) Reportable Segments Air Transportation ¥1,658,763 78,974 ¥1,737,737 ¥ 49,550 2,305,293 168,296 3,889 343,476 Airline Related Travel Services Trade and Retail Subtotal ¥ 49,804 249,629 ¥299,433 ¥ 18,144 147,275 5,323 3 6,200 ¥134,759 9,237 ¥143,996 ¥ 1,393 42,405 553 – 258 ¥115,269 29,481 ¥144,750 ¥ 2,909 57,219 1,305 114 2,250 ¥1,958,595 367,321 ¥2,325,916 ¥ 71,996 2,552,192 175,477 4,006 352,184 As of and for the year ended March 31, 2019 Operating revenues: Operating revenues from external customers Intersegment revenues or transfers Total Segment profit Segment assets Other items: Depreciation and amortization Amortization of goodwill Increase in property and equipment and intangible assets As of and for the year ended March 31, 2019 Operating revenues: Operating revenues from external customers Intersegment revenues or transfers Total Segment profit Segment assets Other items: Depreciation and amortization Amortization of goodwill Increase in property and equipment and intangible assets Yen (Millions) Reportable Segments Air Transportation ¥1,728,645 85,772 ¥1,814,417 ¥ 160,556 2,409,579 152,948 3,889 370,778 Airline Related Travel Services Trade and Retail Subtotal ¥ 51,783 239,268 ¥291,051 ¥ 13,178 148,288 4,496 28 1,838 ¥140,805 9,941 ¥150,746 ¥ 606 60,163 507 – 241 ¥122,454 28,225 ¥150,679 ¥ 3,706 61,019 1,354 114 1,156 ¥2,043,687 363,206 ¥2,406,893 ¥ 178,046 2,679,049 159,305 4,031 374,013 Other Total Adjustments Consolidated Yen (Millions) ¥14,625 26,333 ¥40,958 ¥ 2,275 23,434 236 – 269 ¥2,058,312 389,539 ¥2,447,851 ¥ 180,321 2,702,483 159,541 4,031 374,282 ¥ – (389,539) ¥(389,539) ¥ (15,302) (15,361) – – 1,582 ¥2,058,312 – ¥2,058,312 ¥ 165,019 2,687,122 159,541 4,031 375,864 Notes: 1. “Other” refers to all business segments that are not included in the reportable segments, such as facility management, business support, and other operations. 2. Adjustments are as follows: (a) Adjustments to segment profit consist of the elimination of intersegment transactions of ¥(8,937) million and corporate expenses of ¥(6,365) million. (b) Adjustments to segment assets consist of long-term investments (investment securities and stocks of subsidiaries and affiliates) in consolidated subsidiaries of ¥171,058 million and eliminations of intersegment transactions of ¥(186,419) million. (c) Adjustments to increase in property and equipment and intangible assets mainly consist of the elimination of intersegment transactions. 3. Segment profit is reconciled to operating income on the consolidated statement of income. As of and for the year ended March 31, 2020 Operating revenues: Operating revenues from external customers Intersegment revenues or transfers Total Segment profit Segment assets Other items: Depreciation and amortization Amortization of goodwill Increase in property and equipment and intangible assets U.S. dollars (Thousands) Reportable Segments Air Transportation $15,241,780 725,663 $15,967,444 $ 455,297 21,182,514 1,546,411 35,734 3,156,078 Airline Related Travel Services Trade and Retail Subtotal $ 457,631 2,293,751 $2,751,382 $ 166,718 1,353,257 48,911 27 56,969 $1,238,252 84,875 $1,323,127 12,799 $ 389,644 $1,059,165 270,890 $1,330,056 26,729 $ 525,764 $17,996,829 3,375,181 $21,372,011 $ 661,545 23,451,180 5,081 – 2,370 11,991 1,047 20,674 1,612,395 36,809 3,236,092 144 145 Financial / Data Section Net sales to third parties by countries or areas grouped according to geographical classification for the years ended March 31, 2020 and 2019 are summarized as follows: 19. Amounts per share Yen (Millions) 2020 ¥1,631,052 343,164 2019 ¥1,676,226 382,086 ¥1,974,216 ¥2,058,312 U.S. dollars (Thousands) 2020 $14,987,154 3,153,211 $18,140,365 Amounts per share at and for the years ended March 31, 2020 and 2019 are as follows: Net assets per share Net income per share Notes to Consolidated Financial Statements As of and for the year ended March 31, 2020 Operating revenues: Operating revenues from external customers Intersegment revenues or transfers Total Segment profit Segment assets Other items: Other Total Adjustments Consolidated U.S. dollars (Thousands) $143,535 262,813 $406,349 $ 32,399 232,252 $18,140,365 3,637,995 $21,778,360 $ 693,944 23,683,432 $ – (3,637,995) $(3,637,995) $ (135,220) (159,101) $18,140,365 – $18,140,365 $ 558,724 23,524,331 Depreciation and amortization Amortization of goodwill Increase in property and equipment and intangible assets 2,407 – 1,295 1,614,802 36,809 3,237,388 – – (8,857) 1,614,802 36,809 3,228,530 (d) Information about geographical areas Japan Overseas Total Notes: 1. “Overseas” consists substantially of the Americas, Europe, China and Asia. 2. Net sales of “Overseas” represents sales made in countries or areas other than Japan. (e) Information about impairment loss on long-lived assets For the year ended March 31, 2020 Impairment loss For the year ended March 31, 2019 Impairment loss For the year ended March 31, 2020 Impairment loss Yen (Millions) Reportable Segments Airline Related ¥2,494 Travel Services ¥– Trade and Retail ¥– Other ¥– Adjustments ¥– Total ¥25,159 Yen (Millions) Reportable Segments Airline Related ¥1,997 Travel Services ¥– Trade and Retail ¥– Other ¥– Adjustments ¥– Total ¥1,997 U.S. dollars (Thousands) Reportable Segments Airline Related $22,916 Travel Services $– Trade and Retail $– Other $– Adjustments $– Total $231,177 Air Transportation ¥22,665 Air Transportation ¥– Air Transportation $208,260 (f) Information about amortization and the remaining balance of goodwill As of and for the year ended March 31, 2020 Amortization of goodwill Balance at the end of the fiscal year As of and for the year ended March 31, 2019 Amortization of goodwill Balance at the end of the fiscal year As of and for the year ended March 31, 2020 Amortization of goodwill Balance at the end of the fiscal year Yen (Millions) Reportable Segments Airline Related ¥3 Travel Services ¥– Trade and Retail ¥114 Other ¥– ¥– ¥458 Yen (Millions) Reportable Segments Airline Related ¥28 Travel Services ¥– Trade and Retail ¥114 Other ¥ 3 ¥– ¥572 U.S. dollars (Thousands) Reportable Segments Airline Related $27 Travel Services $– Trade and Retail $1,047 Other $ – $– $4,208 ¥– ¥– ¥– ¥– $– $– Air Transportation ¥ 3,889 ¥24,003 Air Transportation ¥ 3,889 ¥50,557 Air Transportation $ 35,734 $220,554 Adjustments ¥– ¥– Total ¥ 4,006 ¥24,461 Adjustments ¥– ¥– Total ¥ 4,031 ¥51,132 Adjustments $– Total $ 36,809 $– $224,763 18. Selling, general and administrative expenses The main components of selling, general and administrative expenses for the years ended March 31, 2020 and 2019 are as follows: Commissions Advertising Employees’ salaries and bonuses Provision for accrued bonuses to employees Retirement benefit expenses Depreciation Yen (Millions) 2020 ¥103,495 11,830 39,446 3,879 3,329 27,616 2019 ¥105,678 12,813 39,760 7,913 3,462 24,828 U.S. dollars (Thousands) 2020 $950,978 108,701 362,455 35,642 30,588 253,753 Yen 2020 ¥3,171.80 82.66 2019 ¥3,285.46 331.04 U.S. dollars 2020 $29.14 0.75 Notes: 1. Net income per share assuming full dilution is not disclosed as the Company had no potentially dilutive shares outstanding during the years ended March 31, 2020 and 2019. 2. The basis for calculating net income per share is as follows: Years ended March 31 Net income attributable to common shareholders Amount not attributable to common shareholders Net income attributable to common stock Weighted-average number of shares outstanding during the fiscal year (in thousands) 3. The basis for calculating net assets per share is as follows: As of March 31 Net assets Amounts deducted from total net assets: Non-controlling interests Net assets attributable to common stock at the end of the fiscal year N umber of shares of common stock at the end of the fiscal year used to determine net assets per share (in thousands) Yen (Millions) 2020 ¥ 27,655 – ¥ 27,655 334,559 2019 ¥110,777 – ¥110,777 334,632 Yen (Millions) 2020 ¥1,068,870 2019 ¥1,109,313 U.S. dollars (Thousands) 2020 $ 254.11 – $ 254.11 334,559 U.S. dollars (Thousands) 2020 $9,821.46 (7,842) ¥1,061,028 (9,900) ¥1,099,413 (72.05) $9,749.40 334,519 334,629 334,519 The average number of shares of the Company held by the Trust for Delivery of Shares to Directors for the years ended March 31, 2020 and 2019 were 173 thousand and 108 thousand, respectively. The shares held by the trust were deducted from the weighted-average number of shares outstanding during each of the years ended March 31, 2020 and 2019. The number of shares of the Company held by the Trust for Delivery of Shares to Directors at March 31, 2020 and 2019 were 209 thousand and 107 thousand, respectively. The shares held by the trust were deducted from the number of shares of common stock at the end of each of the fiscal years ended March 31, 2020 and 2019, which were used to determine net assets per share. 20. Supplementary cash flow information A reconciliation of the difference between cash and deposits stated in the consolidated balance sheet at March 31, 2020 and 2019 and cash and cash equivalents in the consolidated statement of cash flows is as follows: Cash and deposits Time deposits with maturities of more than three months Marketable securities Marketable securities with maturities of more than three months Cash and cash equivalents Yen (Millions) 2020 ¥109,447 (31,120) 129,200 (71,590) ¥135,937 2019 ¥ 68,301 (26,103) 225,360 (55,720) ¥211,838 U.S. dollars (Thousands) 2020 $1,005,669 (285,950) 1,187,172 (657,814) $1,249,076 146 147 Financial / Data Section Notes to Consolidated Financial Statements 21. Impairment loss 23. Subsequent events 1. Conclusion of a commitment line contract The Company entered into a short-term commitment line agreement with the terms described below on April 28, 2020. (a) Counterparty Main domestic financial institution (b) Total commitment ¥350,000 million ($3,216,024 thousand) (c) Amount of drawdown None (d) Contract date April 28, 2020 (e) Assets pledged as collateral or guarantees None 2. Borrowing of funds The Company has executed loans from Development Bank of Japan Inc. (a) Use of funds (b) Counterparty (c) Loan amount (d) Interest rate (e) Execution date (f) Repayment date Working capital Development Bank of Japan Inc. ¥350,000 million ($3,216,024 thousand) Floating rates May 28, 2020 and June 29, 2020 Long-term period determined by individual negotiation (g) Assets pledged as collateral or guarantees Existent The Group reviewed its long-lived assets for impairment for the years ended March 31, 2020 and 2019. As a result, the Group recognized impairment losses of ¥25,159 million ($231,177 thousand) and ¥1,997 million, included in other expenses, for the years ended March 31, 2020 and 2019, respectively. The details are as follows: For the year ended March 31, 2020 Application Assets expected to be sold Location Miami, Florida Others Peach Aviation Limited Category Machinery, lease assets, and other assets Goodwill Total Yen (Millions) U.S. dollars (Thousands) Impairment loss ¥ 2,494 $ 22,916 22,665 ¥25,159 208,260 $231,177 Note: The Group grouped its operating assets for impairment testing based on management accounting categories, and also grouped lease assets, assets to be disposed of by sale and idle assets on an individual basis. Business assets in Miami, Florida were written-down to recoverable amounts, based on the updated business plan. As a result, an impairment loss of ¥2,494 million ($22,916 thousand) was recognized. Details are as follows: ¥1,767 million ($16,236 thousand) for machinery, ¥693 million ($6,367 thousand) for lease assets, and ¥32 million ($294 thousand) for other assets. Also, goodwill for Peach Aviation Limited, a consolidated subsidiary of the Company, were written-down to recoverable amounts,based on their value in use. As a result, an impairment loss of ¥22,665 million ($208,260 thousand) was recognized. The recoverable amount of these assets was measured at its net selling price or their value in use. The net selling price is determined by estimates of selling cost and selling price. The value in use is calculated by discounting the future cash flows at discount rates of 11.5%. For the year ended March 31, 2019 Application Assets expected to be sold Location Miami, Florida Category Machinery, lease assets and other assets Total Yen (Millions) ¥1,997 ¥1,997 Note: The Group grouped its operating assets for impairment testing based on management accounting categories, and also grouped lease assets, assets to be disposed of by sale and idle assets on an individual basis. Business assets in Miami, Florida were written-down to recoverable amounts, based on the updated business plan. As a result, an impairment loss of ¥1,997 million ($17,992 thousand) was recognized. Details are as follows: ¥1,433 million ($12,911 thousand) for machinery, ¥410 million ($3,694 thousand) for intangible assets, ¥49 million ($441 thousand) for lease assets, and ¥103 million ($928 thousand) for other assets. The recoverable amount of the above assets was measured at its net selling price as determined by estimates of selling cost and selling price. 22. Supplementary information for the consolidated statement of income (a) Write-downs of inventories Inventories were valued using prices after write-downs of book value due to a decrease in net selling value. Write-downs of inventories included in cost of sales are as follows: Note: Figures in parentheses represent gains from the reversal of write-downs. (b) Other income (expenses), net Gain on sales of investment securities Compensation payments received Valuation loss on investments in securities Litigation settlement fees related to anti-trust law claims Other Other income (expenses), net Yen (Millions) 2020 ¥1,181 2019 ¥5,779 U.S. dollars (Thousands) 2020 $10,851 Yen (Millions) 2020 ¥ 1,122 17,897 (853) – (3,599) ¥14,567 2019 ¥ – 6,810 – (6,423) 1,577 ¥ 1,964 U.S. dollars (Thousands) 2020 $ 10,309 164,449 (7,837) – (33,069) $133,850 148 149 Financial / Data Section Independent Auditor’s Report 150 151 Financial / Data Section Independent Auditor’s Report Glossary Passenger Business Terms Available Seat-Kilometers (ASK) A unit of passenger transport capacity, analogous to “production capacity.” Total number of seats x Transport distance (kilometers). Revenue Passenger-Kilometers (RPK) Total distance flown by revenue-paying passen- gers aboard aircraft. Revenue-paying passengers x Transport distance (kilometers). Load Factor Indicates the seat occupancy ratio (status of seat sales) as the ratio of revenue passenger- kilometers to available seat-kilometers. Revenue passenger-kilometers / Available seat-kilometers. Yield Unit revenues per revenue passenger-kilometer. Revenues / Revenue passenger-kilometers. Unit Revenues Quantitatively measures revenue management performance by showing unit revenues per available seat-kilometer (Revenues / Available seat-kilometers). Calculated as yield (Revenues / Revenue passenger-kilometers) x load factor (Revenue passenger-kilometers / Available seat-kilometers). Unit Cost Indicates cost per unit in the airline industry. Calculated as cost per available seat-kilometer. Revenue Management This management technique maximizes revenues by enabling the best mix of revenue-paying passengers through yield management that involves optimum seat sales in terms of optimum timing and price based on network and fare strategy. Optimizing Supply to Demand Involves flexibly controlling production capacity (available seat-kilometers) according to demand trends in ways such as increasing or decreasing the frequencies on routes and adjusting aircraft size. Cargo Business Terms Available Ton-Kilometers (ATK) A unit of cargo transport capacity expressed as “production capacity.” Total cargo capacity (tons) x Transport distance (kilometers). Revenue Ton-Kilometers (RTK) Total distance carried by each revenue-paying cargo aboard aircraft. Revenue-paying cargo (tons) x Transport distance (kilometers). Freighter Dedicated cargo aircraft. Seats are removed from the cabin space where passengers would normally sit, and the space is filled with contain- ers or palletized cargo. Belly The space below the cabin on passenger aircraft that is used to transport cargo. Okinawa Cargo Hub & Network The ANA Group’s unique cargo network. With Okinawa (Naha) Airport as an international cargo hub, the network uses late-night connecting flights in a hub and spoke system servicing major Asian cities. Airline Industry and Company Terms IATA The International Air Transport Association. Founded in 1945 by airlines operating flights primarily on international routes, functions include managing arrival and departure slots at airports and settling receivables and payables among airline companies. Approximately 290 airlines are IATA members. ICAO The International Civil Aviation Organization. A specialized agency of the United Nations created in 1944 to promote the safe and orderly develop- ment of international civil aviation. More than 190 countries are ICAO members. Star Alliance Established in 1997, Star Alliance was the first and is the world’s largest airline alliance. ANA became a member in October 1999. As of July 2020, 26 airlines from around the world are members. Code-Sharing A system in which airline alliance partners allow each other to add their own flight numbers on other partners’ scheduled flights. The frequent result is that multiple companies sell seats on one flight. Also known as jointly operated flights. Antitrust Immunity (ATI) Granting of advance approval for immunity from competition laws when airlines operating international routes cooperate on planning routes, setting fares, conducting marketing activities, or other areas, so that the airlines are not in violation of the competition laws of such countries. In Japan, the United States, and South Korea, the relevant department of transportation grants ATI based on an application (in countries other than these three, it is common for a bureau such as a fair trade commission to be in charge), but in the European Union the business itself performs a self-assessment based on the law. ATI approval is generally based on the two conditions that the parties do not have the power to control the market and approval will increase user convenience. Joint Venture A joint business in the international airline industry between two or more airlines. Restrictions such as bilateral air agreements between countries and caps on foreign capital investments still exist in the international airline industry. Therefore, airlines form ATI-based joint ventures, instead of the commonly known methods used in other industries such as capital tie-ups and M&As, etc. By forming joint ventures, airlines in the same global alliance are able to offer travelers a broader, more flexible network along with less expensive fares, thus strengthen- ing their competitiveness against other alliances (or joint ventures). Full Service Carrier (FSC) An airline company that serves a wide range of markets based on a route network that includes code-sharing connecting demand. FSCs offer multiple classes of seats and provide in-flight food and beverages that are included in advance in the fare paid. FSCs are also called network carriers or legacy carriers when compared with low cost carriers (LCCs). Low Cost Carrier (LCC) An airline that provides air transportation services at low fares based on a low-cost system that includes using a single type of aircraft, charging for in-flight services, and simplifying sales. Fundamentally, LCCs operate frequent short- and medium-haul point-to-point flights (flights between two locations). Maintenance, Repair, and Overhaul (MRO) Business A business that is contracted to provide aircraft maintenance services using its own maintenance crew and other personnel, along with dedicated facilities. Services include the maintenance, repair, and overhaul of aircraft and other equip- ment owned by airlines. Dual Hub Network Strategy A strategy for using the two largest airports in the Tokyo metropolitan area (Haneda and Narita) for different yet complementary strategic aims and functions. At Haneda, which offers excellent access from central Tokyo, the strategy targets overall air travel demand in the Tokyo metropoli- tan area, including the outskirts of Tokyo, as well as demand for connecting flights from various Japanese cities to international routes that harness ANA’s existing domestic network. Meanwhile, at Narita the strategy aims to capture transit demand for travel between third countries via Narita, focusing on Trans-Pacific travel between North America and Asia / China. This will be accomplished by upgrading and expanding the international network and enhancing connect- ing flights by setting efficient flight schedules. 152 153 Financial / Data Section Market Data International Passenger Market Domestic Passenger Market Global Air Transportation Passenger Volume by Region Foreign Visitor Arrivals / Number of Japanese Overseas Travelers Number of Domestic Passengers and LCC Share Top 10 Airports in Japan by Number of Passengers For further information, Fact Book 2020 can be downloaded from the ANA Group corporate website in PDF format. https://www.ana.co.jp/group/en/investors/irdata/annual/ RPK (Billions) 9,000 6,000 3,000 0 (Left) (Right) 3,011 3,000 8,679 2,320 2,000 1,932 2014 2015 2016 2017 2018 2019 786 442 185 1,000 0 (CY) (Millions) 32 24 16 8 0 27.76 18.13 Number of Passengers (Thousands) 100,000 80,000 60,000 40,000 20,000 0 2014 2015 2016 2017 2018 2019 (FY) 2013 2014 2015 2016 2017 2018 2019 20 16 12 8 4 0 (FY) 1 2 3 4 Tokyo (Haneda) Tokyo (Narita) Osaka (Kansai) Fukuoka 5 Sapporo (New Chitose) 6 Okinawa (Naha) 7 Osaka (Itami) 8 Nagoya (Chubu) 39,541 28,663 23,035 22,814 20,613 15,765 12,590 9 10 Kagoshima 5,769 Sendai 3,718 LCC Share (%) Ranking Airport (Thousands) 81,707 Total Asia-Pacific Europe North America Middle East Latin America Africa Foreign Visitor Arrivals Japanese Overseas Travelers 2014 2015 2016 (Left) Full Service Carriers LCCs (Right) 2017 2018 LCC Share 2019 0 20,000 40,000 60,000 80,000 100,000 Number of Passengers on Domestic Operations Number of Passengers on International Operations Source: International Air Transport Association (IATA), 2020 Source: Japan National Tourism Organization (JNTO), 2020 Source: Ministry of Land, Infrastructure, Transport and Tourism, fiscal 2019 Note: Compilation from reports on Status of Airport Operations, fiscal 2019 Source: Ministry of Land, Infrastructure, Transport and Tourism, fiscal 2019 Foreign Visitor Arrivals by Country / Region ANA Domestic Passenger Business: ASK, RPK, and Number of Passengers ANA’s Top 10 Domestic Scheduled Flights by Number of Passengers FY2019 27.76 million (–12.2% YoY) Malaysia 1 .6% Vietnam 1 .7% Australia 2.1% The Philippines 2.2% Thailand 4.3% U.S.A. 5.6% Hong Kong 7.7% South Korea 14.3% Others 14.2% Composition China 30.4% Taiwan 15.8% (Millions) 80,000 60,000 40,000 20,000 0 (Thousands) 60,000 42,916 58,552 39,502 45,000 30,000 15,000 0 2015 2016 2017 2018 2019 (FY) Source: Japan National Tourism Organization (JNTO), 2020 (Left) RPK ASK (Right) Number of Passengers Ranking (FY2019) Route 1 Haneda–New Chitose 2 3 4 5 Haneda–Fukuoka Haneda–Itami Haneda–Okinawa Haneda–Hiroshima 6 Haneda–Matsuyama 7 8 Haneda–Kansai Haneda–Nagasaki 9 Haneda–Kagoshima 10 Haneda–Kumamoto (Thousands) 3,741 3,543 2,836 2,688 1,165 971 883 783 765 729 1,000 0 2,000 3,000 4,000 5,000 Note: Figures include revenue passengers on ANA flights and code-share flights operated by partner airlines. Shares by Alliance (RPK) Share of Passengers on Domestic Operations by Airline 24.9% 16.0% 42.1% 53.6% 13.3% 46.2% 16.8% 16.2% 17.1% International Domestic 21.7% 15.6% 16.5% Total Star Alliance Oneworld SkyTeam Others Source: International Air Transport Association (IATA), 2020 154 21% 33% 44% Number of Passengers (Total) +6.1% 25% 33% 42% FY2015 96,059 thousand ANA JAL Others FY2019 101,872 thousand Note: Figures for ANA exclude Vanilla Air Inc. and Peach Aviation Limited. Sources: 1. Figures for ANA, JAL: The companies’ annual securities reports (consolidated basis) 2. Figures for total: Ministry of Land, Infrastructure, Transport and Tourism, a preliminary report for fiscal 2019 155 Financial / Data Section ANA-Operated International Routes Stockholm Stockholm Dusseldorf Dusseldorf London London Paris Paris Vienna Vienna Brussels Brussels Frankfurt Frankfurt Munich Munich Milano Milano Moscow Moscow Istanbul Istanbul Chengdu Chengdu Hangzhou Hangzhou Delhi Delhi Hong Kong Hong Kong Mumbai Mumbai Chennai Chennai Phnom Penh Phnom Penh Vladivostok Vladivostok Shenyang Shenyang Dalian Dalian Beijing Beijing Seoul Seoul Shanghai Shanghai Wuhan Wuhan Qingdao Qingdao Shenzhen Shenzhen Xiamen Taipei Xiamen Taipei Guangzhou Guangzhou Hanoi Hanoi Yangon Yangon Bangkok Bangkok Ho Chi Minh City Ho Chi Minh City Kuala Lumpur Kuala Lumpur Manila Manila Singapore Singapore Jakarta Jakarta Osaka (Kansai) Perth Perth Sydney Sydney Haneda routes Narita routes Haneda / Narita routes Osaka routes Dalian Beijing Qingdao Shanghai Hangzhou Hong Kong Note: Including routes suspended due to COVID-19 Compilation by ANA HOLDINGS INC. (As of September 1, 2020) Haneda Narita Haneda Narita Vancouver Vancouver Seattle Seattle San Francisco San Francisco Chicago Chicago New York New York Los Angeles Los Angeles Washington, D.C. Washington, D.C. Honolulu Honolulu San Jose San Jose Houston Houston Mexico City Mexico City Peach Aviation-Operated Routes Sapporo (New Chitose) Niigata Kushiro Sendai Osaka (Kansai) Tokyo (Narita) Tokyo (Haneda) Fukuoka Seoul (Incheon) Nagasaki Miyazaki Kagoshima Shanghai Taipei (Taoyuan) Hong Kong Ishigaki Amami Oshima Kaohsiung Okinawa (Naha) Bangkok セブ セブ 156 157 Financial / Data Section Social Data Environmental Data WEB See the ANA Group corporate website for more: https://www.ana.co.jp/group/en/csr/data/ The following data represents ANA Group environmental performance. Fiscal 2019 data includes performance for Peach Aviation and Vanilla Air. Human Resources Data (ANA) Number of employees (As of March 31 of each year) Number of employees hired overseas (As of March 31 of each year) Average age of employees (As of March 31 of each year) Average years worked (As of March 31 of each year) Ratio of female managers (As of April 1 of each year, excluding individuals 60 years old and over) Ratio of female directors (As of April 1 of each year) Number of employees on pregnancy or childcare leave / Male (As of March 31 of each year) Unit 2016 People People Years Years % % 12,859 1,387 36.0 10.0 12.2 10.5 2017 13,518 2018 13,982 2019 14,242 1,454 1,475 1,442 37.4 13.3 13.3 10.5 37.4 13.8 13.9 10.0 37.5 14.2 14.6 11.9 2020 14,830 1,464 38.0 13.6 15.2 13.3 People 586/5 545/13 587/19 629/20 645/29 Number of employees on nursing care leave (As of March 31 of each year) People Ratio of employees with disabilities*1 (As of June 1 of each year) % Work-related accidents (As of March 31 of each year) Ratio of employees with healthy BMI*2 (As of March 31 of each year) Male Female Ratio of employees that smoke (As of March 31 of each year) Male Female Employee obesity rate*3 (As of March 31 of each year) Male Female % % % % % % 12 2.32 66 63.1 75.2 22.9 4.9 13.4 0.9 14 2.38 109 69.1 69.8 19.4 4.0 14.9 1.2 15 2.49 82 70.2 72.0 19.1 3.9 15.7 1.3 16 2.57 111 72.9 72.6 17.2 3.7 11.1 1.4 10 2.68 69 72.5 73.0 16.7 3.1 12.9 1.0 *1 Total of ANA HOLDINGS INC., ANA, and qualified ANA Group companies (total of 11 companies including 1 special subsidiary) *2 Ratio of employees with BMI of 18.5%–25.0% *3 Changing calculation standards from 2018 Before 2017: Ratio of employees receiving guidance from designated healthcare professionals 2018 and later: Ratio of employees meeting criteria for metabolic syndrome See the following webpage for more about the 37th Yen-Based Bond (Social Bond), issued in May 2019: https://www.anahd.co.jp/group/en/pr/201904/20190417.html Flight-Related Data (All Passenger Flights on ANA International and Domestic Services) (FY) In-service rate On-time departure rate*4 On-time arrival rate*4 *4 Delays of 15 minutes or less, excluding canceled flights Customer-Related Data (FY) Unit % % % 2015 98.9 90.6 88.0 2016 98.9 87.6 85.4 2017 98.8 86.1 84.0 2018 98.2 88.4 86.5 2019 97.4 88.7 87.5 Unit 2015 2016 2017 2018 2019 Number of customer feedback reports 73,688 73,892 114,273 105,723 117,628 [Breakdown by route type] Domestic International Other [Breakdown by report type] Complaint Compliment Comment / Request Other 158 % % % % % % % 46.1 39.5 14.5 35.8 21.2 26.1 16.9 48.3 37.4 14.3 43.4 16.8 21.5 18.3 56.0 40.1 3.9 41.1 18.5 20.8 19.5 62.4 34.8 2.7 45.8 19.8 16.5 17.8 59.5 37.9 2.7 42.3 21.1 16.6 20.1 Climate Change Countermeasures (FY) Carbon dioxide (CO2) emissions Total [Breakdown] Aircraft Passenger Cargo Ground equipment and vehicles [Scope 1/2/3] Scope 1 Scope 2 Scope 3 Unit 2015 2016 2017 2018 2019 10,000 tons 1,074 1,126 1,161 1,156 1,246 1,062 (1,005) (57) 11.5 1,114 (1,058) (56) 11.8 1,148 (1,097) (50) 13.5 1,065 1,118 1,152 8.3 0.1*3 8.3 0.4*3 9.2 0.4*3 1,143 (1,098) (45) 13.2 1,147 8.9 150.4*2 1,233 (1,196) (37) 12.6 1,237.5 8.4 418.1*1 Aircraft CO2 emissions per RTK kg-CO2 1.05 1.00 0.96 0.97 1.01 Total energy consumption Total Crude oil equipment: 10,000 kl Aircraft energy consumption Ground energy consumption Ozone depletion (ANA only) Fluorocarbon (Aircraft) Halon Fuel-efficient aircraft*4 kg kg Number of fuel-efficient aircraft Aircraft Ratio of fuel-efficient aircraft (ANA-brand jet aircraft only) % Ratio of fuel-efficient aircraft (Including Peach Aviation, Vanilla Air) % *1 Scope 3 data for FY2019 is calculated in all categories. *2 Scope 3 data for FY2018 is calculated in categories 2–4, 6, 7, and assured. *3 Scope 3 data for FY2015–2017 is calculated in categories 6, 7, and assured. *4 Boeing 777, 787, 737-700, -800, Airbus A320neo, and A321neo 414 408 5.5 16.4 8.3 148 64.9 — 434 428 5.5 8.8 29.4 155 66.0 — 448 441 6.5 5.3 5.0 162 69.5 — 446 439 6.4 9.4 28.8 183 75.9 — 480 474 6.3 2.7 31.7 199 81.2 70.3 See the following webpage for more about the 36th Yen-Based Bond (Green Bond), issued in October 2018: https://www.anahd.co.jp/group/en/pr/201809/20180928.html Resource Savings (FY) Waste produced Total [Breakdown] Unit 2015 2016 2017 2018 2019 1,000 tons 28.9 36.8 37.5 34.3 32.6 General waste (Cabin waste and sewage included) General waste (Ground waste included) Industrial waste Total paper consumption 1,000 tons Total water consumption Clean water Non-potable water 10,000 kl 10,000 kl 22.4 2.9 3.6 4.7 51.5 6.3 28.7 3.0 5.1 4.6 57.8 7.2 31.5 2.6 3.4 4.0 61.4 9.4 28.4 2.7 3.2 3.2 61.1 8.6 26.9 2.5 3.2 3.1 59.6 9.2 159 Financial / Data Section The ANA Group Profile Corporate Data (As of March 31, 2020) ANA HOLDINGS INC. Organization (As of July 1, 2020) Corporate Profile Corporate Communications and Branding Trade Name ANA HOLDINGS INC. Administrator of Register General Meeting of Shareholders Internal Audit Division Board of Directors Chairman President & Chief Executive Officer Audit & Supervisory Board Members Audit & Supervisory Board Audit & Supervisory Board Members Office Group Management Committee Group ESG Management Promotion Committee General Administration Corporate Sustainability Executive Secretariat Government & Industrial Affairs Legal & Insurance Human Resources Strategy D&I Promotion Group IT Management Digital Design Lab Corporate Planning Business Development Finance, Accounting & Investor Relations Business Management Facilities Planning Corporate Strategy Finance, Accounting Number of Subsidiaries and Affiliates (As of March 31, 2020) Operating segment of which, consolidated of which, equity method of which, equity method Total of subsidiaries Total of affiliates Air Transportation Airline Related Travel Services Trade and Retail Others Total 6 48 5 61 8 128 5 37 5 8 7 62 — — — — 1 1 4 5 3 3 30 45 1 2 1 1 10 15 Major Subsidiaries (As of March 31, 2020) Company name Amount of capital (¥ Millions) Ratio of voting rights holding (%) Principal business Air Transportation ALL NIPPON AIRWAYS CO., LTD. Air Japan Co., Ltd. ANA WINGS CO., LTD. Peach Aviation Limited Airline Related ANA Cargo Inc. Overseas Courier Service Co., Ltd. ANA Systems Co., Ltd. Travel Services ANA Sales Co., Ltd. Trade and Retail ALL NIPPON AIRWAYS TRADING Co., Ltd. 25,000 50 50 7,515 100 100 80 1,000 1,000 Note: No specified wholly owned subsidiaries as of the end of the fiscal year under review. 100.0 100.0 100.0 77.9 100.0 91.5 100.0 100.0 Air transportation Air transportation Air transportation Air transportation Cargo operations Express shipping business Innovation and operation of IT systems Planning and sales of travel packages, etc. 100.0 Trading and retailing Date of Foundation December 27, 1952 of Shareholders Sumitomo Mitsui Trust Bank, Limited Head Office Shiodome City Center, 1-5-2 Higashi-Shimbashi, Minato-ku, (Stock Transfer Agency Department) 1-4-1, Marunouchi, Chiyoda-ku, Tokyo Number of Employees 45,849 (Consolidated) American Depositary Receipts Ratio (ADR:ORD): 5:1 Tokyo 105-7140, Japan Independent Auditor Deloitte Touche Tohmatsu LLC Paid-In Capital Fiscal Year-End Number of Shares of ¥318,789 million March 31 Common Stock Authorized: 510,000,000 shares Issued: 348,498,361 shares Number of Shareholders 519,317 Stock Listing Ticker Code Tokyo 9202 Exchange: OTC (Over-the-Counter) Symbol: ALNPY CUSIP: 032350100 Depositary: The Bank of New York Mellon 240 Greenwich Street New York, NY 10286, U.S.A. Tel: 1-201-680-6825 U.S. Toll Free: 1-888-269-2377 (888-BNY-ADRS) URL: https://www.adrbnymellon.com Scope of This Report High S t a k e h o d e r s l ’ p r i o r i t i e s Reported in this report Annual Report (Hard Copy and PDF) PDF version https://www.ana.co.jp/group/en/investors/irdata/annual/ Reported on the website Management priorities For Further Information (Website) Corporate Profile https://www.ana.co.jp/group/en/about-us/ Investor Relations https://www.ana.co.jp/group/en/investors/ Sustainability https://www.ana.co.jp/group/en/csr/ High Fact Book 2020 Fact Book 2020 can be downloaded from the Company’s corporate website in PDF format. This document contains financial data and information on the domestic and international markets and LCC status. https://www.ana.co.jp/group/en/investors/irdata/annual/ Forward-Looking Statements This report contains statements based on the ANA Group’s current plans, estimates, strategies, and beliefs; all statements that are not statements of historical fact are forward- looking statements. These statements represent the judgments and hypotheses of the Group’s management based on currently available information. Air Transportation Business, the Group’s core business, involves government-mandated costs that are beyond the Company’s control, such as airport utilization fees and fuel taxes. In addition, conditions in the markets served by the ANA Group are subject to significant fluctuations. Factors that could affect actual results include, but are not limited to, economic trends, sharp changes in exchange rates, fluctuations in the price of crude oil, and disasters. Due to these risks and uncertainties, the Group’s future performance may differ significantly from the contents of this report. Accordingly, there is no assurance that the forward-looking statements in this report will prove to be accurate. ANA HOLDINGS INC. Contact Shiodome City Center, 1-5-2 Higashi-Shimbashi, Minato-ku, Tokyo 105-7140, Japan Investor Relations E-mail: ir@anahd.co.jp 160 161 Financial / Data Section 

Continue reading text version or see original annual report in PDF format above