All Nippon Airways Co., Ltd. Annual Report 2 0 0 2 For the Year Ended March 31, 2002 ANA Style: Making the Difference 21 Consolidated Financial Highlights All Nippon Airways Co., Ltd. and its consolidated subsidiaries Years ended March 31, 2002 and 2001 Yen (Millions) U.S. dollars (Thousands) except per share amounts except per share amounts 2002 2001 2002 For the Year: Operating revenues . ¥1,204,514 ¥1,279,635 $9,039,505 Operating expenses . 1,181,546 1,197,392 8,867,137 Operating income . 22,968 82,243 172,368 Income (loss) before income taxes and minority interests . (7,178) 63,289 (53,869) Net income (loss) . (9,456) 40,286 (70,964) At Year-End: Total assets . 1,510,982 1,451,420 11,339,452 Total shareholders’ equity . 138,641 150,500 1,040,458 Per Share Data: Net income (loss) . ¥(6.17) ¥27.75 $(0.046) Net income assuming full dilution . – 24.80 – Number of shares issued (weighted average) . 1,533,744,749 1,451,543,761 Notes: 1. U.S. dollar amounts in this report are translated, for convenience only, at the rate of ¥133.25=US$1, the approximate exchange rate as of March 31, 2002. 2. As of March 31, 2002, there were 118 consolidated subsidiaries and 27 equity-method subsidiaries and affiliates. 3. For further information, see notes to consolidated financial statements. CONTENTS Forward-Looking Statements 1 ANA Style: Making the Difference This annual report contains will change dramatically due to statements based on ANA’s 8 Creating a New ANA Group a number of factors, such as current plans, estimates, trends in technologies, demand, 10 To Our Shareholders strategies, and beliefs; all prices, and economic environ- 12 An Interview with President Ohashi statements that are not state- ments; foreign exchange rate ments of historical fact are fluctuations; and others. Due to 20 Management’s Discussion and Analysis forward-looking statements. these risks and uncertainties, it 36 Consolidated Balance Sheets These statements represent the is possible that the Company’s 38 Consolidated Statements of Operations judgments and hypotheses of the future performance will differ Company’s management based significantly from the contents of 39 Consolidated Statements of Shareholders’ Equity on currently available informa- this annual report. Accordingly, 40 Consolidated Statements of Cash Flows tion. Air transportation, the there is no assurance that the 41 Notes to Consolidated Financial Statements Company’s core business, forward-looking statements in involves government-mandated this annual report will prove to 55 Independent Auditors’ Report costs that are beyond the be accurate. 56 Additional Financial Information (unaudited) Company’s control, such as airport utilization fees and fuel Selected Financial and Operational Data 61 taxes. In addition, conditions in 64 Eleven-Year Comparative Summary the markets served by the 66 The ANA Group Company are subject to significant fluctuations. It is 67 ANA Directory (Parent Company) possible that these conditions 68 ANA Route System 70 Management Members 71 Investor Information 22 ANA Style: Making the Difference Approaching Challenges from the Customer’s Viewpoint his year marks the 50th Tanniversary of ANA’s founding in 1952. Today, we offer international service, including code-share flights, on 100 routes and domestic service on 140 routes. In the fiscal year ended March 2002, we carried 49.3 million passengers. We believe that this growth is the result of our consistent dedication to providing air transportation services that reflect the importance we place on safety, on approaching challenges from the customer’s viewpoint, on creativity, and on friendliness. In the future, we will remain focused on the fundamentals, maintain a constant emphasis on safety and customer convenience, and continue to expand our operations as one of the world’s leading airlines. 1 ANA Style: Making the Difference Establishing the ANA Brand rust in the ANA Group is the result of its Temphasis on safety, product development from the customer’s point of view, and detailed year under review, we continued taking steps to service. enhance safety. We established the Safety and For the ANA Group, safety is an exceedingly Crisis Management Headquarters, and we were important factor, and it is the Group’s highest the first airline in the world to introduce aircraft priority. ANA has built a record of 31 years and 8 equipped with cabin monitoring systems that million hours of flight enable pilots to monitor the passenger cabin from operations without any their seats. The entire Company is dedicated to accidents resulting in ensuring that its flight operations reflect its passenger fatalities. commitment to continually improving safety. Even among the world’s The ANA Group has always taken the major airlines, this is customer’s point of view as it emphasized creativ- an exemplary record, ity, and as a result the Group has always been a and it reflects our leader in the airline industry. Customers are commitment to safety sensitive to price and service, and it is important above all else. In the to respond to their needs quickly. On interna- tional routes, we established our Premium Economy service, which offers seats with ameni- ties similar to those offered in business class, so that economy class passengers can enjoy more 2 comfortable travel. We also established Biji-wari support the ANA Group’s flights in all depart- business class discount fares, which meet cus- ments, from operations and maintenance to in- tomer needs for less expensive business travel flight services, airport handling, reservations and with discounts for advance purchases and round- sales, and administration. The results of such trip tickets. For customers who want greater efforts are recognized by customers, and as a convenience in reserving seats and purchasing consequence a reputation for friendliness has tickets, we initiated E-Ticket Service, which become a part of ANA’s enables travelers to make reservations over the brand image. ANA will telephone or the Internet. On domestic routes, strive to be an airline in addition to expanding Chowari and other that has an exemplary discount fares, we introduced Rakunori, a new safety record, is trusted business model that essentially eliminates time by its customers, and restrictions on ticket purchases and enables has a reputation for customers to check in without obtaining tickets. friendly service. To redefine and enhance “ANA Style,” we are continually making use of leading-edge IT. The ANA Group’s 29,000 employees, who mainly work in air transportation, ensure that we maintain a high level of safety, continually draw on creativity, and work from the customer’s point of view. These employees work each day to 3 ANA Style: Making the Difference Capturing New Opportunities n April 18, 2002, a new era began for the OANA Group with the opening of the second runway at Narita Airport, and in response the Fukuoka. We are also strengthening our relation- Company has increased its flights about 60%, ships with other airlines. In January 2002, we from 90 flights a week to 144. We are giving formed an alliance with Thai Airways Interna- priority to the construction of a network centered tional, becoming the first Japanese airline to on Asia, and we are focusing on increasing our implement a code-share agreement on domestic China routes, on which significant growth in flights in Asia. We also entered code-share demand is expected. We agreements with British Midland Airways and have established ANA Mexicana Airlines and expanded our code-share Connection, a connection agreement with Asiana Airlines. For flights to service for customers resort destinations, we are using Air Japan Co., taking flights from other Ltd. (AJX), a low-cost ANA Group company. To airports in Japan to Narita, augment our ability to meet demand for cargo where they will board traffic between Japan and China, which is ex- international flights. This pected to increase, in September 2002 we will service has raised conve- introduce our first medium-size freighter, the nience by linking Narita with five cities— Boeing 767-300F. By restructuring our interna- Sapporo, Sendai, Nagoya, Osaka (Itami), and tional flights and using Narita Airport as a hub, we will make steady progress with our plans for achieving profitability in the fiscal year ending March 2004. 4 Two of ANA’s competitors, JAL and JAS, will Japan has a large domestic aviation market, merge in October 2002, marking the start of a with a total of 93 million passengers in the year new competitive structure on domestic routes, ended March 2002. The Tokyo–Sapporo route where service will be provided by the ANA has 9.4 million passengers a year and the Tokyo– Group, the post-merger company, and new Fukuoka route 8.3 million passengers a year, market entrants. In this setting, the ANA Group placing these routes among the largest domestic will reduce flights on or withdraw entirely from routes in the world. In general, Haneda routes low-profit routes while increasing flights and offer higher profits, making an increase in the using larger aircraft on high-profit routes. In number of Haneda routes extremely important for addition, our marketing strategy will be based raising our profitability on domestic routes on flexible, strategic fare setting. overall. In July 2002, the take-off and landing capacity at Haneda was expanded, giving us the opportunity to add eight flights, including flights to Sapporo and Fukuoka. In the years ahead, we will take steps to ensure the new competitive environment does not adversely affect our profit foundation on domestic flights. 5 ANA Style: Making the Difference Making the Most of the ANA Group NA is bolstering its competitive strengths Aby continually working to enhance its services and reduce its costs.