| Metric | Current Period | Prior Year | YoY |
|---|---|---|---|
| Revenue / Net Sales | ¥25392.3B | ¥22618.6B | +12.3% |
| Operating Income / Operating Profit | ¥2174.4B | ¥1966.4B | +10.6% |
| Ordinary Income | ¥2196.5B | ¥2000.9B | +9.8% |
| Net Income / Net Profit | ¥333.0B | ¥302.0B | +10.3% |
| ROE | 2.2% | 2.6% | - |
For the fiscal year ended March 2026 on a consolidated basis, Revenue was ¥25392.3B (YoY +¥2774B +12.3%), Operating Income was ¥2174.4B (YoY +¥208B +10.6%), Ordinary Income was ¥2196.5B (YoY +¥196B +9.8%), and Net Income attributable to owners of the parent was ¥333.0B (YoY +¥31B +10.3%), achieving both revenue and profit increases. Passenger demand domestically and internationally recovered centered on the airline business, and fare mix improvements contributed, while rising jet fuel prices and higher airport-related expenses weighed on costs. Operating margin was 8.6%, slightly down from 8.7% a year earlier, and gross margin was 18.3% (down 0.2pt from 18.5%), indicating cost inflation mildly compressed profitability. Net income attributable to owners of the parent was ¥1691B (prior ¥1530B, YoY +10.5%) with a net margin of 6.7% and ROE of 11.2%, maintaining favorable levels.
[Revenue] Revenue was ¥25392.3B (+12.3%), driven by the core Aviation Business at ¥23132B (+12.4%). Recovery in passenger demand and higher unit prices contributed, and the Trading Business also posted strong growth at ¥1542B (+18.7%). Conversely, the Travel Business declined to ¥653B (-11.2%), creating divergent results across segments. Gross profit was ¥4645B with a gross margin of 18.3% (down 0.2pt from 18.5% prior year), as higher fuel prices and increased airport-related expenses compressed gross margins.
[P&L] Operating Income was ¥2174.4B (+10.6%) with an operating margin of 8.6% (down 0.1pt from 8.7% prior year). SG&A was ¥2470B (prior ¥2217B, +11.4%), rising roughly in line with revenue growth. Increases in personnel expenses and depreciation were primary drivers, but cost control was generally sound. Ordinary Income was ¥2196.5B (+9.8%). Net non-operating items totaled +¥22B (non-operating income ¥348B less non-operating expenses ¥325B). Interest income ¥75B and foreign exchange gains ¥51B were positive contributors, while interest expense ¥226B was negative; financial cost burden stood at 10.4% of operating income, within acceptable range. Extraordinary items included gain on bargain purchase ¥72B and impairment losses ¥77B which largely offset, resulting in pretax income of ¥2235B (+13.7%). After income taxes ¥525B and net income attributable to non-controlling interests ¥19B, Net Income attributable to owners of the parent was ¥1691B (+10.5%), with a stable net margin of 6.7%. In conclusion, revenue grew double-digits led by the Aviation Business, and the company achieved both operating and final-stage profit growth while absorbing higher costs.
The Aviation Business reported Revenue ¥23132B (+12.4%) and Operating Income ¥2219B (+11.5%), yielding a margin of 9.6%, remaining the main profit contributor as domestic and international demand recovery and price improvements were effective. The Trading Business had Revenue ¥1542B (+18.7%) and Operating Income ¥76B (+65.6%) with a margin of 4.9%, achieving high growth and margin improvement that complemented consolidated profits. Aviation-related Businesses grew Revenue to ¥3616B (+7.2%) but Operating Income fell to ¥15B (-63.9%), reducing margin to 0.4%. The Travel Business posted Revenue ¥653B (-11.2%) and an operating loss of ¥1.5B (from prior operating profit ¥1.9B), margin -0.2%, impacted by weaker demand. Other segments had Revenue ¥497B (+9.3%) and Operating Income ¥23B (+97.7%) with a margin of 4.6%, improving. Segment composition remains highly dependent on the Aviation Business (Revenue share 78.6%, earnings even more concentrated), leaving scope for earnings improvement in peripheral businesses.
[Profitability] Operating margin 8.6%, Net margin 6.7%, ROE 11.2%—maintaining favorable levels. Gross margin was 18.3%, down 0.2pt year-on-year, reflecting cost increases such as fuel and airport-related expenses. EBITDA (Operating Income + Depreciation & Amortization) was approximately ¥3864B, with an EBITDA margin of 15.2%. Considering Depreciation & Amortization ¥1690B, cash generation as a capital-intensive business is strong. [Cash Quality] Operating Cash Flow (OCF) was ¥4435B, 2.62x Net Income attributable to owners of the parent ¥1691B, and OCF/EBITDA was 1.15x—indicating accrual-based profits are well-backed by cash. Free Cash Flow (OCF + Investing CF) was positive at ¥282B, indicating cash generation while investing. [Investment Efficiency] Capital expenditures were ¥2150B, 1.27x Depreciation & Amortization ¥1690B, reflecting continued investment for fleet renewal and capacity enhancement. Construction in progress (capital work in progress) increased to ¥2811B (prior ¥2510B), evidence of growth investments. Total asset turnover was 0.64x, financial leverage 2.63x, supporting ROE. [Financial Soundness] Equity Ratio was 38.0%, Current Ratio 153.5%, Quick Ratio 152.0%—short-term liquidity is healthy. Interest-bearing debt was ¥8123B (short-term borrowings ¥689B + long-term borrowings due within 1 year ¥774B + long-term borrowings ¥7433B + bonds, etc. ¥125B), Debt/EBITDA ratio 2.10x, Interest Coverage (Operating Income ÷ Interest Expense) 9.6x—investment-grade level and good financial resilience. Cash and deposits ¥5528B and short-term investment securities ¥7042B give on-hand liquidity of approximately ¥1.26T, and contract liabilities ¥5968B provide backlog support for future revenues.
Operating CF was ¥4435B (YoY +18.9%), with subtotal before working capital changes at ¥4653B, a high level. Changes included increases in trade receivables -¥363B, increases in trade payables +¥209B, and corporate taxes paid -¥83B, supporting strong cash generation. OCF/Net Income ratio was 2.62x and OCF/EBITDA was 1.15x, both indicating high cash quality. Investing CF was -¥4152B, primarily capital expenditures -¥2150B and acquisition of intangible assets -¥473B. Net purchases of short-term investment securities amounted to -¥1.50T with redemptions +¥1.33T resulting in a net cash outflow of -¥1674B. Proceeds from sale of tangible fixed assets +¥131B contributed cash inflows. Financing CF was -¥1594B, with cash outflows including repayment of long-term borrowings -¥3497B, bond redemptions -¥300B, net decrease in short-term borrowings -¥162B, share repurchases -¥631B, and dividends paid -¥282B; cash inflows included long-term borrowings raised +¥1385B and issuance of quasi-equity +¥1939B, optimizing capital structure. Free Cash Flow was +¥282B; coverage of dividends paid ¥282B was 1.00x, roughly balanced, allowing both internal reserves accumulation and shareholder returns.
Operating Income ¥2174.4B is the core of earnings; net non-operating items were +¥22B and thus neutral, with interest income ¥75B and FX gains ¥51B positive, and interest expense ¥226B negative. Non-operating income represented 1.4% of Revenue, indicating high reliance on core operations. Extraordinary items nearly offset (gain on bargain purchase ¥72B vs impairment losses ¥77B), so one-time items had minimal net effect. Gain on sale of investment securities ¥47B was recorded but represented about 2.2% of Ordinary Income, a small distortion. Comprehensive income was ¥2453B; the divergence from Net Income ¥333B of +¥2120B was mainly due to Other Comprehensive Income ¥743B (foreign currency translation adjustments ¥9B, valuation differences on available-for-sale securities ¥31B, deferred hedge gains/losses ¥632B, adjustments related to retirement benefits ¥68B, etc.), widening the buffer for future volatility via derivative valuation gains. OCF/Net Income ratio 2.62x, well above 0.8x, supports strong cash backing of earnings and reduces concerns over accrual manipulation. Discrepancies between Ordinary Income and Net Income are explainable by tax burden and non-controlling interests, and overall earnings quality is assessed as good.
The FY2027 consolidated forecast anticipates Revenue ¥27700B (+9.1%), Operating Income ¥1500B (-31.0%), Ordinary Income ¥1370B (-37.6%), Net Income attributable to owners of the parent ¥960B, EPS ¥209, and year-end dividend ¥30. The plan assumes an Operating Margin of 5.4%, a 3.2pt decline from the current 8.6%, conservatively factoring in higher fuel prices, FX, airport-related fees, environmental regulation costs, and wage increases. Progress rate relative to current period on a Revenue basis equates to 91.7% of this period’s actuals, implying next fiscal year is expected to see revenue growth but a significant profit decline. The dividend is planned to be reduced from ¥65 to ¥30, implying a Payout Ratio of 14.4% against projected EPS ¥209, kept low to prioritize internal reserves and maintain investment capacity. Contract liabilities of ¥5968B provide some downside support for demand, but maintaining unit prices, optimizing load factors, and effective cost absorption will be key to achieving the plan.
The year-end dividend is ¥65 per share, with a Payout Ratio of 18.1% against basic EPS ¥358.37 and 17.3% against Net Income attributable to owners of the parent ¥1691B, remaining at a low level and indicating high sustainability. Total dividends paid amounted to ¥282B, matching Free Cash Flow ¥282B and giving dividend cash coverage of 1.00x—generally acceptable. Share repurchases totaled ¥631B, increasing treasury stock balance at year-end to ¥1016B (prior ¥565B), so total capital returns (dividends + buybacks) totaled ¥913B, with a Total Return Ratio of 54.0% relative to Net Income attributable to owners of the parent. Next fiscal year assumes year-end dividend ¥30; versus projected Net Income ¥960B and EPS ¥209, the Payout Ratio would be approximately 14.4%, further constrained to prioritize internal reserves. Dividend policy is described as flexible and responsive to profit levels.
Jet fuel price and FX volatility risk: Fuel costs constitute the bulk of Cost of Goods Sold ¥20747B, and movements in crude oil prices (USD-denominated) and USD/JPY exchange rate directly impact gross margins. Given a low gross margin structure (18.3%), sensitivity is high—1% fuel price increase could compress Operating Income by several percent. Deferred hedge gains/losses accumulation ¥896B provides short-term buffer, but medium- to long-term hedging strategy and ability to pass through costs are key to risk management.
Segment concentration and peripheral business profitability: Aviation Business accounts for 78.6% of Revenue and the majority of Operating Income; aviation-related Businesses have margin 0.4% and Travel Business has turned to loss, limiting contribution from peripheral businesses. If Aviation demand fluctuates or competition intensifies, consolidated profits could be materially affected. Strengthening peripheral businesses and diversifying earnings remain structural challenges.
Cost assumptions in next-year guidance: The conservative plan (Operating Income ¥1500B, -31.0%; Operating Margin 5.4%, -3.2pt) incorporates airport fees, environmental costs (e.g., ETS), wage inflation, and rising interest burden. Upside to these cost assumptions would increase downside profit risk, while favorable external changes could allow upward revisions; however, low gross margin limits resilience to external shocks. Cost control and fare mix maintenance are focal points.
Profitability & Returns
| Metric | Company | Median (IQR) | Delta |
|---|---|---|---|
| Operating Margin | 8.6% | 6.3% (3.7%–8.5%) | +2.3pt |
| Net Margin | 1.3% | 2.7% (1.6%–4.7%) | -1.4pt |
Operating margin outperforms the industry median by 2.3pt indicating relatively strong profitability, but Net margin at 1.3% is 1.4pt below the median 2.7%.
Growth & Capital Efficiency
| Metric | Company | Median (IQR) | Delta |
|---|---|---|---|
| Revenue Growth Rate (YoY) | 12.3% | 5.0% (-0.4%–9.4%) | +7.3pt |
Revenue growth of 12.3% exceeds the industry median 5.0% by 7.3pt, placing the company among industry leaders during the passenger demand recovery phase.
※Source: Company compilation
Revenue and profit growth in the Aviation Business with strong cash generation: OCF ¥4435B is 2.62x Net Income, OCF/EBITDA 1.15x indicates high quality; ROE 11.2%, Debt/EBITDA 2.10x, Interest Coverage 9.6x signals investment-grade financial resilience. Contract liabilities ¥5968B act as a leading indicator supporting future revenue, and combined with on-hand liquidity ¥1.26T, short-term funding risk is low. Operating margin 8.6% is above the industry median 6.3% indicating relatively high profitability, but management’s conservative guidance to 5.4% next fiscal year makes upside risk around cost assumptions an important point.
Need to revitalize peripheral businesses and improve gross margins: Aviation-related Businesses posted large profit declines (margin 0.4%), and Travel Business turned to loss, showing weak profit contribution from peripheral segments. Trading Business growth partially complements this, but high dependence on the Aviation Business poses diversification challenges. With a low gross margin of 18.3%, resilience to fuel and airport cost inflation is limited, so strengthening pass-through ability and strict cost control are key structural improvement levers. Improving margins in peripheral businesses and gross margin enhancement in Aviation Business are important for medium-term earnings stabilization.
This report was automatically generated by AI analyzing XBRL financial statement data and is a financial analysis document. It does not constitute a recommendation to invest in any specific security. Industry benchmarks are reference information compiled by the Company based on publicly disclosed financial statements. Investment decisions are your responsibility; please consult a professional advisor as needed before making any investment decisions.