Steadily Moving Ahead with Initiatives to Achieve Our Next Phase of Growth

I would like to begin with an explanation of the strategic progress we have made so that readers understand the current status of the ANA Group.

We formulated ANA Group FY2012-2013 Corporate Strategy in February 2012 (years ending March 2013 and March 2014) to prevail in a global environment of intensifying competition. Our theme was renaissance as a competitive ANA Group, and our three pivot points were Group Reorganization, Multi-Brand Strategy and Cost Restructuring. We also obtained capital through a public offering in July 2012 to reinforce our fi nancial position and fund our growth strategy.

During the fi scal year ended March 2013, issues such as the grounding of Boeing 787 aircraft and the disputes over the Senkaku Islands and Takeshima Islands challenged the ANA Group. However, our steady strategic execution supported higher operating revenues and income, and we surpassed ¥100 billion in operating income for the fi rst time.

We achieved a record in operating income for the second consecutive fi scal year, which indicates that we have suffi ciently enhanced our ability to generate earnings. However, we have not yet achieved our medium-term target for value creation, which is operating income of ¥150 billion or above and an operating margin of 10% or above. Ensuring that we have structured our operations to generate suffi cient earnings even if event risks materialize in the future is an ongoing matter.

Our fi nancial position has benefi ted from the capital we obtained through the public offering. We now have a balance sheet that enables us to simultaneously make aircraft and strategic investments while our earnings during the fi scal year increase shareholders’ equity. From the fi scal year ending March 2014 onward, we will appropriately deploy the capital we obtained through the public offering to make strategic investments in growth that will begin generating returns. We will further strengthen our existing businesses with a focus on air transportation operations while expanding business segments as we aim to create an optimal business portfolio with new revenue platforms.

Ensuring the Ability to Withstand Adverse Events and Prevail in an Era of Global Mega Competition

Looking at our operating environment, demand in Japan has recovered to a certain extent in the wake of the Great East Japan Earthquake. Global airline demand is also solid, particularly in emerging countries in Asia and elsewhere. At the same time, demand trends give us little reason for optimism because the global economy is fraught with uncertainties centered on Europe, while demand on China routes has stagnated because of issues such as the disputes over the Senkaku Islands. In Japan, we expect LCCs to stimulate new demand, but at the same time, the competitive environment is getting tough. Meanwhile, deregulation in the airline industry continues apace, with international arrival and departure slots slated to increase at Haneda Airport in the year ending March 2015 and at Narita Airport in the year ending March 2016.

Our experience has shown us that we need to establish strong operating fundamentals that can withstand the various and inevitable event risks to which we are exposed in the course of our business.

At the same time, economic growth in Asia and the further expansion of arrival and departure slots at metropolitan-area airports give the ANA Group outstanding opportunities for growth, so we must prevail in the coming era of mega competition.

Executing a Consistent Management Strategy While Making Further Growth a Reality

Against the background of our strategic progress from the start of the year ended March 2013 and the outlook for our operating environment, we announced ANA Group FY2013-2015 Corporate Strategy (years ending March 2014 to March 2016) as a phase in which we will accelerate our operations and make sustained medium-to-long-term growth a reality.

Under this strategy, we will continue the sustained and consistent implementation of the three pivot points of ANA Group FY2012-2013 Corporate Strategy. We will also implement a new pivot point, Expansion and Diversification of Business Segments, to secure additional growth opportunities.

First, I will explain our initiatives for the existing pivot points.

Group Reorganization involved the April 2013 shift to the holding company structure approved at the General Meeting of Shareholders in June 2012 with the objectives of promoting fl exible, effi cient operations and the optimum allocation of business resources. Given the rapid pace of change in our operating environment, each Group company will develop its business independently, which will include business with companies outside the Group. This will keep us closer to our markets and ensure rapid decision making, thus providing full support for enhancing the Group’s operating capabilities.

The Multi-Brand Strategy covers the strategic positioning of the ANA brand and our LCC brands. We are working to increase Group value through networks tailored to the features of each business and the evolution of products and services. The ANA brand will expand its international route network as a full-service carrier and ensure its operating advantage on domestic routes. We have restructured our LCC brands and revised our business plan for them based on the termination of our joint venture with AirAsia Bhd. We will take a new approach to a low-cost business model adapted to the Japanese market to establish a business that can quickly contribute to earnings.

Cost Restructuring entails raising the productivity of operating units completely and streamlining non-operating units to reduce costs by a cumulative ¥100.0 billion through the fi scal year ending March 2015, which is equivalent to a decrease of ¥1.0 in unit cost. Competition is intensifying in the domestic route market, and there are strong competitors in the international route market. Therefore, our goals are to be competitive at a global level and to ensure powerful resistance to adverse events such as the recent global recession and the Great East Japan Earthquake. To date, we have reduced costs at a faster pace than originally planned, with reductions of ¥11.0 billion in the year ended March 2012 and ¥21.0 billion in the year ended March 2013. Using the original plan in the year ended March 2012 as a standard of comparison, we reduced unit cost by ¥0.59 as of the year ended March 2013. Capacity expansion, primarily on international routes, has caused unit revenue to trend downward. We are making steady progress in reducing unit cost by more than the decrease in unit revenue, but we do not intend to lessen our focus on continuously strengthening our earnings structure. As an example of structural reform, ANA Group management has decided to reform the retirement benefi ts system and has been discussing proposals with the labor unions for some time. We believe this will help reduce balance sheet risk and stabilize results, and intend to conduct serious discussions to implement reforms.