Move to the Strategic Investment Phase to Take Part in Growth in Asia

Demonstrating maturity, economic growth rates in Japan and other developed countries are stable at low levels. At the same time, economic growth remains strong in Asia and is forecast to continue. The ANA Group therefore needs to pursue opportunities to expand business segments in Asia to grow further.

Moreover, stable cash fl ow from record operating income for two consecutive fi scal years and the capital obtained through the public offering enable the ANA Group to maintain and enhance its fi nancial soundness while making strategic investments in Asia. Therefore, our management strategy involves the continued execution of existing policies in parallel with a shift to making strategic investments to diversify revenue domains and expand earnings.

The airline business will be the first focus of strategic investments. We want to link economic growth in Asia directly to the ANA Group’s development, so we will consider investments in full-service carriers and LCCs that can generate synergies with our existing air transportation business while contributing to the progress of our Multi-Brand Strategy. Many countries currently have restrictions on foreign investment, so we may begin with minority investments. However, we also intend to acquire majority stakes if enabled by deregulation and airline liberalization over the near term.

Another investment theme will be airline-related businesses, which draw support from the strong expansion in airline demand in Asia and are expected to grow in the future. We are aiming to effectively leverage our knowledge and human resources related to our airline business in order to expand earnings by providing services and transacting business outside the Group. The fl ight crew training business we already operate in Japan and the aircraft maintenance business we are planning at Naha Airport exemplify this investment theme.

Expansion and Diversifi cation of Business Segments includes studying the feasibility of participating in airline support businesses in which we can deploy the ANA Group’s expertise, even if these businesses do not have a pronounced connection with the airline business. We will look at diversifying into businesses that have synergy with the airline business to create value for the ANA Group, while also considering businesses we can expect to either limit the impact of event risk and volatility on or complement the airline business and airline-related operations.

Multi-Brand and Diversification Strategies to Contribute to Income Growth and Increased Corporate Value

Optimum business portfolio management within the holding company structure is essential to generating further income growth and increasing corporate value with these strategies. Our business portfolio will be as follows.

Domestic passenger operations are positioned as the core business for the Group as a whole, and we will maintain its profi tability. A key to doing so will be building on the powerful competitive position of our 47.8%* share of passengers. We will optimize route and aircraft plans and meticulously set fares to enhance effi ciency and profi tability.

International passenger operations will drive growth. We will take maximum advantage of the expansion of arrival and departure slots at metropolitan-area airports and strategicallyexpand our network to energetically capture global demand. We will structure our network with an emphasis on long-haul international routes and connecting demand to capture non-Japanese passenger demand to Japan, third-country demand and high-end Japanese passenger demand. We will continue to leverage the Transpacifi c Joint Venture with United Airlines on Pacifi c routes and the LH/NH Joint Venture with the Lufthansa Group on Europe–Japan routes to globally expand our catchment area.
* Includes code-share fl ights with our alliance partner airlines as of March 2013

Cargo operations will steadily capture strong cargo distribution demand in Asia, which will enhance the cash fl ow of this business. We will fully leverage the Okinawa Cargo Hub & Network to differentiate our products and increase added value. We will also expand our route network in ways such as adding freighters, using passenger fl ights and chartering the aircraft of Nippon Cargo Airlines Co., Ltd.

Our mission in the LCC business is to structure a new revenue model by creating new demand in segments that the ANA brand does not serve. The keys to fulfi lling this mission are an intense focus on low-cost service and the ability to capture demand from other forms of transportation such as railroads and highway express buses. We dissolved our joint venture with AirAsia Bhd., but we have not changed our view that the LCC business has signifi cant growth potential in Japan. We ourselves will establish a new LCC brand that is appropriate for the Japanese market and make sure it is firmly rooted as a growth business. We will also generate further growth through the strategic investments in Asia, expansion and diversification of business segments I mentioned earlier.

The key point of our strategy is that it will raise the probability that the ANA Group will achieve its medium-term value creation targets by increasing the Group’s revenue domains.