JITI Aviation Seminar 2013 Presentation The Future of the U.S. Japan Market ANA s Perspective Yuji Hirako Senior Vice President, The Americas November 19, 2013 Washington D.C.
ANA Group s business overview Operating revenues JPY 1,484 Billion * Operating income JPY 104 Billion * Net income JPY 43 Billion * Number of employees 32,634 * 57 consolidated subsidiaries and 19 equity-method subsidiaries and affiliates * * As of March 31, 2013 Ranked 14 th globally in number of revenue passengers ** ** IATA World Air Transport Statistics, 2012 Boeing 747 TTL 4 Boeing 787 TTL 20 Airbus A320 TTL 23 Bombardier DHC8 TTL 22 Boeing 777 TTL 54 Boeing 767 TTL 59 Boeing 737 TTL 53 Number of aircraft 235 Including 5 aircraft operated by Vanilla Air (all leased aircraft) As of June 30, 2013 P. 1
International Route Network ANA Long-haul Routes Lufthansa Europe North America London Paris Frankfurt Munich Haneda-Frankfurt (Jan, 2012) Haneda Narita Japan United Airlines Beijing Dalian Shenyang Qingdao Chengdu Shanghai Hangzhou Guangzhou Xiamen China Narita-Chengdu (Jun, 2011) ANA Short-haul Routes Asia Japan Seoul Taipei Hong Kong Yangon Ho Chi Minh City Manila Bangkok Singapore Jakarta Delhi Mumbai Narita-Yangon (Oct, 2012) Narita-Delhi (Oct, 2012) New York Washington DC Chicago Los Angeles San Francisco San Jose Seattle Honolulu Narita-Seattle (Jul, 2012) Narita-New York Double flights (Oct, 2012) Narita-San Jose (Jan, 2013) Narita-Chicago Double Flights (Sep, 2013) P. 2
Codeshare Network Joint Venture ANA Codeshare Network Joint Venture 61 Destinations to Europe, Middle East and Africa 40 Destinations to Asia and Oceania 62 Destinations to North/ Central/ South America As of May, 2013 Philadelphia New York (LGA) Indianapolis Charlotte Cincinnati St. Louis Nashville Pittsburgh Baltimore Minneapolis Washington DC (DCA) Omaha Kansas City Grand Rapids Cleveland Greesboro Columbus Dallas Tampa Dayton Detroit Des Moines Toronto Hartford Jacksonville Charleston (CRW) New Orleans Norfolk Burlington Portland Manchester Memphis Chicago Madison Milwaukee Atlanta Albany Allentown Winnipeg Westchester Orlando Ottawa Columbia San Antonio Syracuse Charleston (CHS) New York (EWR) Knoxville Birmingham Buffalo Harrisburg Houston Providence Miami Montreal Richmond Louisville Lexington Roanoke Raleigh Durham Rochester Washington (IAD) Austin Greenville Orlando Chicago Charlotte Philadelphia Boston Columbus Raleigh Durham Atlanta Albany Ottawa Cleveland Greenville Greensboro Roanoke Rochester Norfolk Miami Columbia Jacksonville Syracuse Tampa Washington DC Los Angeles Las Vegas Phoenix Fresno San Diego Seattle Portland Sacramento Santa Barbara Denver Monterey San Francisco Charleston (CHS) Detroit Toronto New York (EWR) New York (JFK) New York (LGA) Burlington Buffalo Harrisburg Pittsburgh Providence Montreal Richmond Albuquerque San Antonio Santa Ana Salt Lake City Vancouver Houston Boise Baltimore Mexico City Reno Orlando Tucson New York (EWR) Palm Springs Philadelphia Bakersfield Austin P. 3 Boston
Passenger Demand Passengers (Millions) Current Passenger O&D Demand 8 7 6 5 4 U.S. Passengers (Millions) 9 8 7 6 5 4 Japan Passengers (Millions) 30 25 20 15 S.E. Asia 3 3 10 2 2 5 2005 2006 2007 2008 2009 2010 2011 2012 2005 2006 2007 2008 2009 2010 2011 2012 2005 2006 2007 2008 2009 2010 2011 2012 U.S. Japan US Main Japan Japan U.S. Japan US Main S.E. Asia Japan S.E. Asia China U.S. China U.S. S.E. Asia Japan Europe Japan China Intra S.E. Asia U.S. India U.S. Korea Japan S.E. Asia Source: ANA OD Data Source: ANA OD Data Market Outlook Passenger growth from 2012 to 2032 7.5% 4.8% 4.9% 5.0% 3.2% 6.3% 6.1% 7.2% 2.2% 6.5% 4.2% 6.1% 6.7% Source: Boeing P. 4
Marketing Strategy 1. Enhance Narita as I-I connecting hub 2. Enhance Haneda as both I-I and I-D connecting hub 3. Enhance Alliance and JVs 4. Enhance overseas PoS P. 5
Network and Partnership Strategy Build competitive hubs in Tokyo by developing routes which take maximum advantage of the expansion in Narita and Haneda arrival/departure slots 1. Build dual-hub model Convenience for local demand Haneda Narita Incorporate Asia s growth Europe Japan U.S.A. I I and I D connecting hub Asia/China I I hub; emphasis on connection between North America and Asia 2. Deepen alliance partnerships a) Bilateral partnerships b) Star Alliance P. 6
Alliance Progression Merger Degree of Difficulty ANA - UA ANA - LH Joint Venture Capital tie-up Unified Brand Consolidated accounting / dividends Strong governance Unified Operating Code Global Alliance Revenue / profit share Network optimization Interline Ticketing & Baggage Bilateral Alliance Connectivity Code sharing Mutual FFP SPA More connectivity Joint sales Airport products Joint marketing / FFP Joint pricing Metal neutrality Shared marketing budget Shared airport policy Promotion P. 7
Passenger Composition of Airlines in Asia #1 Ratio of Point of Sale Home Country (US - Asia Traffic Only, 2012) NH 53.7% CA 47.4% KE 26.8% SQ 17.8% CX 15.2% 0.0% 10.0% 20.0% 30.0% 40.0% 50.0% 60.0% Source: ANA OD Data P. 8
Passenger Composition of Airlines in Asia #2 Ratio of 6th Freedom Traffic (US - Asia Traffic Only, 2012) NH 23.4% CA 9.8% KE 47.7% SQ 64.5% CX 51.4% 0.0% 10.0% 20.0% 30.0% 40.0% 50.0% 60.0% 70.0% Source: ANA OD Data P. 9
Focus Segments by Ethnicity Asian American Population Growth Group Population 2000 Population 2010 Percent change Chinese 2,564,190 3,535,382 37.9% Indian 1,718,778 2,918,807 69.8% Filipino 1,908,125 2,649,973 38.9% Vietnamese 1,169,672 1,632,717 39.6% Korean 1,099,422 1,463,474 33.1% Japanese 852,237 841,824-1.2% Total 10,242,998 14,674,252 43.3% Source: Census 2010 - United States Census Bureau P. 10
Decline of Connecting Traffic via Narita North America Southeast Asia 100% 80% Connecting Traffic by Hub North America-Southwest Asia Flow Traffic Share 8% 9% 5% 2% 1% 3% 1% 4% 5% 19% 13% 17% Others PVG Passengers (Millions) 13 11 U.S. Japan O&D Demand vs. Total Traffic 60% 40% 13% 16% 15% 18% 16% 23% PEK TPE HKG ICN NRT 9 7 20% 42% 37% 33% 5 0% 200404 200804 201204 3 2005 2006 2007 2008 2009 2010 2011 2012 Total Traffic US JP O&D Mainland U.S. JP O&D Source: ANA OD Data Sources: U.S. Govt. T-100 Data, ANA OD Data P. 11
Decline of Connecting Traffic via the U.S. Connection Hubs Between Latin America and Japan 11% OTHER Overall demand between Latin America and Japan down 11% since 2007 Passengers X 1,000 OTHER EUROPE OTHER N. AMERICA North America has seen a significant decrease in traffic Europe and the Middle East have been growing rapidly Source: ANA OD Data P. 12
Hub Airports Landscape in Asia International Passengers(000) Share(%) 1995 2012 diff 1995 2012 diff HKG 27,424 55,664 + 103% 21.2% 17.6% -3.6% SIN 21,743 49,910 + 130% 16.8% 15.8% -1.0% BKK 15,119 39,358 + 160% 11.7% 12.4% 0.8% SEL 13,367 38,351 + 187% 10.3% 12.1% 1.8% NRT 21,488 29,638 + 38% 16.6% 9.4% -7.2% TYO HND 759 7,900 + 940% 0.6% 2.5% 1.9% Total 22,247 37,538 + 69% 17.2% 11.9% -5.3% KUL 7,304 27,625 + 278% 5.6% 8.7% 3.1% TPE 12,586 23,129 + 84% 9.7% 7.3% -2.4% SHA 1,716 17,393 + 914% 1.3% 5.5% 4.2% PEK 3,241 15,454 + 377% 2.5% 4.9% 2.4% CGK 4,584 11,790 + 157% 3.5% 3.7% 0.2% Source: ACI P. 13
Hub Airports in Asia Narita faces a heavy concentration of competing airports in the region. P. 14
Geographical Position of Hub Airports in Asia US East Coast Southeast Asia US West Coast Southeast Asia P. 15
Connectivity of Hub Airports in East Asia TOKYO NRT HND Total ICN PEK PVG TPE HKG BKK SIN CGK Japan 14 50 52 22 5 19 19 7 6 5 1 China 12 3 12 39 109 72 48 44 27 23 6 Others 23 7 23 36 43 27 22 43 58 63 47 49 60 87 97 157 118 89 94 91 91 54 Mainland USA 17 4 17 10 8 7 5 5 0 2 0 HNL,GUM,SPN 3 1 3 3 1 2 1 1 0 0 0 20 5 20 13 9 9 6 6 0 2 0 Source: IATA JUN 2013 P. 16
Development of Hub Airports in Asia Kuala Lumpur, 1998 Hong Kong (Chek Lap Kok), 1998 Shanghai Pudong, 1999; Terminal 2, 2008 Seoul Incheon, 2001 Narita 2 nd Runway, 2002 Guangzhou, 2004 Bangkok Suvarnabhumi, 2006 Singapore Changi Terminal 3, 2008 Beijing Capital 3 rd Runway, 2007; Terminal 3, 2008 Shanghai Pudong, 3rd Runway, 2015 New Beijing Airport, 2017 Seoul Incheon, 4th/5th Runway, 2022~ Bangkok Suvarnabhumi International Airport 18 P. 17
300000 250000 200000 150000 100000 50000 0 2016 2018 2020 2022 2024 1978 1980 1982 1984 1986 1988 1990 1992 1994 1996 Slots/movement per year 1998 2000 2002 2004 2006 2008 2010 2012 2014 Tokyo Airport Capacity Expansion Narita Slot Limit Haneda Int'l Slot Limit P. 18
Haneda Daytime Slots for International Flights Progress of Bilateral Air Service Agreements for incremental slots at Haneda United Kingdom Japanese Carriers Foreign Carriers Total 2 2 4 Source : MLIT (As of Oct 2, 2013) France 2 2 4 China 2 2 4 Singapore 2 2 4 Thailand 2 1 3 Germany 2 2 4 Vietnam 1 1 2 Indonesia 1 1 2 Philippines 1 1 2 Canada 1 1 2 Sub Total 16 15 31 Slots remains to be allocated 9 Allocation of daytime slots at Haneda to U.S. flights is essential for increasing the traffic between Japan and the U.S. Total slots to be allocated from Apr 2014 40 P. 19
New Development Influencing Airports Prime Minister Shinzo Abe has called 2020 Olympics the fourth arrow of Abenomics. News reports on reinforcing airports in the greater Tokyo The number of takeoff and landing slots at Haneda and Narita airports will be increased and construction of infrastructure will be brought forward. (September 9, Nikkei Shinbum) It is necessary to strengthen the function of airports in the greater Tokyo metropolitan area from the perspective of strengthening Japan s international competitiveness as a business hub (September 10, press conference with the Minister of Land, Infrastructure, Transport and Tourism) Tokyo s Haneda and Narita airports may get more flights(september 10, Japan Times) Increase the number of departure and landing slots at Haneda Airport and Narita Airport Build a new railroad that directly connects Narita and Haneda airports with the center of Tokyo Measures to combat the aging of Shuto Expressway P. 20