Navigating Turbulent Skies: ANA Holdings and the Future of Aviation

### Summary of Topic and Purpose This research report focuses on analyzing the current state and future prospects of All Nippon Airways (ANA) and the broader aviation industry. The primary objectives are to examine ANA's recent financial performance, compare it with other major airlines globally, investigate the industry-wide pilot shortage issue, and explore potential solutions and future strategies. The study aims to provide a comprehensive overview of ANA's position in the market, its strengths, and the challenges it faces, while also considering the broader implications of industry trends on ANA's operations and the aviation sector as a whole. ### Key Findings and Insights ANA Holdings has demonstrated a strong financial recovery in the fiscal year ending March 2024, with significant increases in operating revenues, operating income, and net income. The company's international passenger service revenue reached a record high, surpassing domestic revenue for the first time. ANA has maintained its prestigious 5-Star Airline Rating from SKYTRAX for 11 consecutive years, highlighting its commitment to service excellence. The global aviation industry is facing a critical pilot shortage, with projections indicating a need for approximately 7,000 pilots in Japan alone by 2022. This shortage is attributed to factors such as decreased military pilot training, lengthy training requirements, and early retirements. Airlines, including ANA, are implementing various strategies to address this issue, such as hiring foreign pilots and creating in-house flight schools. The COVID-19 pandemic has accelerated the need for innovation and cross-industry collaboration in the aviation sector. There is a growing emphasis on enhancing hygiene measures, reimagining the travel experience, and developing sustainable practices. ANA is actively pursuing sustainability goals, aiming for carbon neutrality by 2050 and committing to increase its use of Sustainable Aviation Fuel (SAF). ### Summary of Results and Conclusions ANA's strong financial performance and consistent service quality position it well in the competitive aviation market. However, the company faces significant challenges, particularly in addressing the pilot shortage and meeting sustainability targets. The aviation industry as a whole is at a critical juncture, with the need to balance recovery from the pandemic's impact with long-term sustainability goals and operational efficiency. To navigate these challenges, ANA and other airlines must continue to innovate and collaborate across industries. This may include partnerships with the medical sector for enhanced hygiene measures, cooperation with technology companies for operational improvements, and collaboration with energy firms for sustainable fuel development. Additionally, addressing the pilot shortage will require comprehensive strategies, including improved training programs and potentially exploring alternative staffing models. The future of ANA and the aviation industry will likely be shaped by their ability to adapt to changing market conditions, invest in sustainable technologies, and meet evolving customer expectations. As the industry recovers and transforms, companies that can balance financial performance with sustainability and innovation are likely to emerge as leaders in the new aviation landscape.

### Survey Results ANA Holdings has shown significant financial recovery in recent years, with operating revenues reaching ¥2,055.9 billion in FY2023, a 20.4% year-on-year increase. The company's international passenger service revenue hit a record high of ¥728.1 billion, surpassing domestic revenue for the first time. ANA plans to resume dividends and aims for an operating income of ¥170.0 billion in FY2024. Regarding pilot numbers, as of January 2013, Japan's major airlines had 5,686 pilots across 15 companies. The Ministry of Land, Infrastructure, Transport and Tourism forecasts a need for approximately 7,000 pilots by 2022, requiring the hiring of 200-300 new pilots annually. To address the global pilot shortage, airlines are implementing various strategies such as poaching pilots from regional carriers, hiring foreign pilots, and creating in-house flight schools. ANA is actively securing pilots, including foreign nationals, but faces challenges like high training costs and insufficient domestic training institutions. ANA has been recognized for its service quality, achieving the SKYTRAX 5-Star Airline Rating for 11 consecutive years. The airline is known for its commitment to "omotenashi" (Japanese hospitality) and safety, with specialized training programs for flight attendants. ### Estimation The pilot shortage is likely to have significant impacts on the aviation industry and related sectors: 1. Increased operational costs: Airlines may need to offer higher salaries and benefits to attract and retain pilots, potentially leading to higher ticket prices. 2. Reduced flight schedules: Some airlines might be forced to cut routes or reduce flight frequencies due to insufficient pilot staffing. 3. Slower industry growth: The shortage could limit the expansion plans of airlines, potentially slowing overall industry growth. 4. Technological advancements: There may be an accelerated push towards automation and single-pilot operations to mitigate the shortage. 5. Changes in training approaches: Airlines and training institutions might adopt more efficient and cost-effective training methods, such as increased use of simulators and virtual reality. 6. Impact on regional airlines: Smaller carriers may struggle more with pilot retention as larger airlines poach their experienced pilots. 7. Economic ripple effects: Tourism-dependent regions could see reduced visitor numbers if flight capacity is constrained, affecting local economies. ### Analysis The aviation industry, including ANA, faces complex challenges in addressing the pilot shortage while maintaining growth and profitability. The situation requires a multi-faceted approach: 1. Innovative training programs: ANA and other airlines should consider partnering with educational institutions to create more accessible and cost-effective pilot training programs. 2. Cross-industry collaboration: As suggested in the context, partnerships with sectors like healthcare could lead to innovative solutions for cabin hygiene and passenger safety, potentially attracting more people to aviation careers. 3. Technological investment: Continued investment in advanced aircraft and systems could improve efficiency and potentially reduce the number of pilots needed per flight in the long term. 4. Regulatory advocacy: Airlines should work with regulators to explore safe ways to modify pilot requirements or extend retirement ages without compromising safety. 5. Diversity initiatives: Expanding recruitment efforts to underrepresented groups could help broaden the pilot candidate pool. 6. Sustainable practices: ANA's focus on sustainability and decarbonization could attract environmentally conscious talent to the industry. 7. Global perspective: As the pilot shortage is a global issue, international cooperation and standardization of training and certification could help address the problem more effectively. ### Future Research To further understand and address the challenges facing ANA and the aviation industry, the following research topics should be explored: - Impact of emerging technologies on pilot demand and training - Effectiveness of various pilot retention strategies across different airlines - Long-term effects of the COVID-19 pandemic on pilot career perceptions - Comparative analysis of pilot training costs and methods across major aviation markets - Potential for cross-industry partnerships to solve aviation challenges beyond pilot shortages