Skymark Airlines Inc.

Supplementary Material for Financial Results for the Fiscal Year ended March 2024 (FY2023)

May 15, 2024

  1. Financial Results for FY2023 (FY2024/3)
  2. Earnings Forecast for FY2024 (FY2025/3)
  3. Mid-TermBusiness Targets FY2024-FY2028
  4. Appendix

1. Financial Results for FY2023 (FY2024/3)

Highlights for FY2023

*Definitions are, FY: fiscal year (from April 1 to March 31 of the next year), Q1: from April to June, Q2: from July to September, Q3: from October to December, Q4: from January to March

1

2

3

4

Increased Revenue and Income due to Strong Passenger Demand and Yield Management

  • Passenger demand exceeded pre-pandemic(108% compared to FY2018) and operating revenues hit a record high, reaching JPY104 billion (+22.9% YoY)
  • Operating income increased to JPY4.6 billion (+35.2% YoY) despite larger allowance for maintenance

(approximately JPY2.0 billion) at the end of fiscal year

Addressed Higher-than-expected Cost Increases by Significantly Increasing Average Price per Passenger

  • Load factor normalized to pre-pandemic levels at 83% along with significantly higher average price per passenger
  • Average price per passenger (JPY12,756) increased by JPY435 compared to target and by JPY1,072 YoY

(approximately JPY8.5 billion increase in revenue due to higher average price per passenger1)

Higher Quality Services through Continuous Pursuit of Customer Satisfaction

  • No.1 On-time Departure Performance for 6 Consecutive Years (FY2017-2022) 2
  • Won Best Customer-Satisfaction award in JCSI 2023 as "Domestic Long-Distance Transportation" 3

Propulsion of the Employee Engagement for the long-term business development

  • Introduction of the Restricted Stock Unit for the employees and the establishment of the organization which specializes in improving the employee engagement

5 Dividend Forecast for FY2023 end Revised Upward with Dividend Increase

• Year-end dividend forecast revised upward to 29 yen per share (up 24 yen YoY, up 8 yen compared to forecast)

Notes：

  1. Estimated effect of higher average price per passenger: YoY increase in FY2023 of JPY1,072 x 7,948,000 revenue passengers in FY2023 = Approx. JPY8.5Bn
  2. Based on the on-time performance rate (a rate of flights departing within 15 minutes from the scheduled departure time to all fl ights) among "Specified Japanese Air Transport Service Providers" (12, 11, and 10 providers for FY2017-19, FY2020 and FY2021-22, respectively) as defined in MLIT, "Information Disclosure on Air Transport Services"
  3. Ranking of customer satisfaction level among domestic long-distance transportation: Includes all domestic airlines and most bullet train services. As of FY2023, the following 13 companies (Skymark, AIR DO, ANA, Jetstar, JAL, Starflyer, Solaseed Air, Peach, Kyushu Shinkansen, Sanyo Shinkansen, Tokaido Shinkansen, Tohoku Shinkansen, and Hokuriku Shinkansen)

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4

Overview of Financial Results for FY2023

Operating revenues reached a record high, and although operating income fell short of forecasts, revenue and income increased thanks to higher revenues that outweighed cost increases

vs.

vs.

FY2023

vs.

FY2018

FY2022

FY2023

Financial

Financial

FY2022

FY2018

Unit: JPY MM

Forecast

Forecast

Operating

88,207

84,661

104,075

+22.9%

+18.0%

102,300

+1.7%

Revenues

Passenger

85,623

82,044

101,395

+23.6%

+18.4%

99,300

+2.1%

Revenues

Other

2,583

2,616

2,680

+2.4%

+3.7%

3,000

▲10.7%

Revenues

Operating

81,002

81,207

99,406

+22.4%

+22.7%

96,700

+2.8%

Expenses

Operating

74,200

75,718

93,377

+23.3%

+25.8%

－

－

Costs

SG&A

6,801

5,488

6,029

+9.8%

▲11.3%

－

－

Operating Income

7,205

3,453

4,668

+35.2%

▲35.2%

5,600

▲16.6%

Operating Income

8.2

4.1

4.5

+0.4pt

▲3.7pt

5.5

▲1.0pt

Margin (%)

Ordinary

8,832

3,713

7,463

+101.0%

▲15.5%

5,600

+33.3%

Income before

8,820

2,500

7,463

+198.5%

▲15.4%

5,600

+33.3%

Income Taxes

Net Income

9,122

5,726

2,997

▲47.7%

▲67.1%

5,800

▲48.3%

Adjusted Net

5,769

1,635

4,882

+198.5%

▲15.4%

3,662

+33.3%

Income1

Dubai Crude Oil Price

64.8

68.5

74.2

+8.4%

+14.5%

79.6

▲6.8%

(After Hedging)(US$/Barrel)

Exchange Rate Used for

111.3

133.7

142.9

+6.9%

+28.4%

-

-

Fuel Cost (After

Hedging)(JPY/US$)

Exchange Rate Used for

Foreign Currency

110.7

118.5

129.4

+9.2%

+16.9%

121.5

+6.5%

Transactions

(After Hedging)(JPY/US$)

Dividend per Share

－

5.0

29.0

+480.0%

－

21.0

+38.1%

(JPY)

Operating Revenues

(JPY Bn)

Broke the record

120.0

104.0

88.2

90.3

84.6

90.0

60.0

47.1

34.0

30.0

0.0

FY2018 FY2019 FY2020 FY2021 FY2022 FY2023

Operating Income (Loss)

(JPY Bn)

10.0

7.2

3.4

4.6

2.2

▲5.0

▲20.0

▲ 16.6

▲35.0

▲ 31.6

FY2018 FY2019 FY2020 FY2021 FY2022 FY2023

Note：

1. Income Before Income Taxes ×(1－effective tax rate 34.59%)

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5

Trend of Travel Demand

Strong passenger demand continues, with FY2023 at 108% compared to pre-pandemic(FY2018) and 113% compared to FY2022

Passenger Demand

Revenue passengers (in thousands),

Revenue passengers vs. FY2018 (%)

Number of seats (in thousands)

3,000

2,500

2,000

1,500

1,000

500

0

COVID-19

108% 107%

106%

107%

110%

108%

104%

106%

102%

100% 100% 100% 100%

2,457

2,472

2,396

2,451

2,

405 2,435 2,441 2,453 2,419

2,316

95%

2,268 2,271

2,287

2,210

2,189

2,264

2,151

2,127

90%

2,048

2,006

2,082 2,024

1,969

1,982

77%

1,954

77%

1,961

1,951

1,874

1,866

1,890

1,848

1,840

1,808 1,832

1,758

1,626

1,684

60%

1,545

51%

1,415

1,353

43%

48%

1,114

51%

40%

996

919

836

806 780

779

16%

28

7

Q1

Q2

Q3

Q4

Q1

Q2

Q3

Q4

Q1

Q2

Q3

Q4

Q1

Q2

Q3

Q4

Q1

Q2

Q3

Q4

Q1

Q2

Q3

Q4

120%

100%

80%

60%

40%

20%

0%

FY2018

FY2019

FY2020

FY2021

FY2022

FY2023

Revenue passengers

Number of seats

Revenue passengers vs. FY2018

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6

Continuous Increase in Average Price per Passenger in Q4 FY2023, Successfully Offsetting Cost Increase

Increased by JPY1,293 (+11.1%) compared to Q4 FY2022 while maintaining high load factor

Trend in Average Price per Passenger / Load Factor (Each Year's Q4 Results)

(JPY)

Average Price per Passenger

12,916

13,000

Load Factor

11,957

11,507

11,622

11,312

11,004

11,133

11,000

10,579

100%

84%

83%

82%

82%

9,000

78%

71%

80%

7,000

60%

50%

5,000

47%

40%

Q4

Q4

Q4

Q4

Q4

Q4

Q4

Q4

FY2016

FY2017

FY2018

FY2019

FY2020

FY2021

FY2022

FY2023

Results of Q4 Average Price per Passenger Increase

and the Estimated Effect of that Increase

Q4 FY2023

Q4 FY2023

Increase in

Increase in

# of Revenue

Average Price

Revenue

Passengers

per Passenger

vs. Q4 Target

JPY454

1,951k

c.JPY

bn

0.8

vs. Q4 FY2022

JPY1,293

1,951k

c.JPY

bn

2.5

vs. Q4 FY2018

JPY1,408

1,951k

c.JPY

bn

2.7

Factors of Average Price per Passenger Increase

  • Strong passenger demand
  • Continuously improving service quality, including high on- time performance and improved customer satisfaction
  • Thorough yield management
  • Price revision for winter schedule (from October 29, 2023)

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7

Load Factor and Yield Performance(Q1-Q4)

While the load factor1 reached almost same level as FY2023 target, average price per passenger (JPY12,756) was +JPY1,072 YoY and +JPY435 compared to target with a significantly higher yield2

Load Factor

Yield

100%

COVID-19

90%

84%

84%

83%

83%

80%

Target

80%

(Unit: JPY) 12.5

12.0

11.5

COVID-19

FY2023 Average Price

per Passenger : JPY12,756

vs. Target: +JPY435

vs. FY2022: +JPY1,072

vs. FY2019: +JPY1,227

12.0

Target

70%

60%

50%

74%

11.0

11.0

11.0

11.0

10.5

10.5 10.3

10.5

52%

49%

40%

0%

FY2016 FY2017 FY2018 FY2019 FY2020 FY2021 FY2022 FY2023

10.4

10.0

0

FY2016 FY2017 FY2018 FY2019 FY2020 FY2021 FY2022 FY2023

Notes：

  1. Load Factor is calculated as follows: RPK (revenue passenger kilometers) / ASK (available seat kilometers)
  2. Yield is calculated as follows: Passenger Revenue / RPK

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8

Changes in Operating Income (vs. FY2022)

Although costs increased due to weak yen and high crude oil prices, profits recovered significantly by increased sales with the demand recovery and yield management

Allowances increased by approximately JPY2.0 billion due to a review of allowance for maintenance carried out at the end of each fiscal year

(Unit: JPY Bn)

3.4

FY2022

after hedging

FY2022

FY2023

Crude oil price

68.5$/BBL

74.2$/BBL

FX rate

118.5JPY/$

129.4JPY/$

+1.2

Revenue

Market

increase

fluctuations1

+19.41

▲8.10

Fuel costs

Aircraft

and tax

lease

▲1.23

payment

+0.04

+ : Profit increase (revenue increase, cost decrease) ▲: Profit decrease (revenue decrease, cost increase)

4.6

FY2023

▲1.50: Changes in expenses due to review of allowance

(▲2.07 in expenses incurred due to review of allowance at the end of FY2023 minus ▲0.57 in expenses incurred due to review of allowance at the end of FY2022)

Maintenance

expenses

▲5.44

Personnel

expenses Other expenses2

1 Details of changes in market fluctuations Cost incurred from changes in difference between exchange rate after hedging and oil price after hedging

▲0.81

▲2.64

▲5.69:Fuel cost

▲0.94:Aircraft lease payment ▲1.38:Maintenance expense ▲0.08:Others

2 Details of changes in other expenses ▲1.61:Increase in airport usage fees ▲1.03:Other costs incurred from demand recovery (Increase in commission fees, and travel expenses, etc.)

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9

Details of Operating Expenses for FY2023

Rising maintenance expenses due to weaker yen and higher cost of maintenance parts

Expenses increased more than expected despite efforts to reduce costs, primarily other costs such as manageable expenses

vs. FY2022

FY2018

FY2022

FY2023

Unit: JPY MM

Change

From Market

From Other

Fluctuations

Factors

Number of Aircraft

26.6

29.0

29.0

-

-

-

(Average for each fiscal year)

Available Seat-km

9,317

10,025

10,186

+161

-

-

(ASK) (MM seats km)

Fuel Cost and Tax

20,706

21,392

28,318

+6,925

+5,694

+1,231

Airport Usage Fees

7,844

4,780

6,389

+1,608

-

+1,608

Aircraft Lease Payment

10,120

11,036

11,929

+893

+940

▲46

Maintenance Expenses

7,060

11,053

17,890

+6,836

+1,388

+5,448

Personnel Expenses

14,697

15,600

16,200

+600

-

+600

(Excluding Bonuses)

Bonuses

2,865

1,594

1,808

+213

-

+213

Depreciation and

2,433

2,413

2,480

+66

-

+66

Amortization

Others

15,273

13,335

14,390

+1,054

+86

+967

Total Operating

81,002

81,207

99,406

+18,199

+8,109

+10,089

Expenses

Dubai Crude Oil Price

64.8

68.5

74.2

+5.7

-

-

(After Hedging)(US$/Barrel)

Exchange Rate Used for

111.3

133.7

142.9

+9.2

-

-

Fuel Cost

(After Hedging)(JPY/US$)

Exchange Rate Used for Foreign

110.7

118.5

129.4

+10.9

-

-

Currency Transactions

(After Hedging)(JPY/US$)

Major Changes from Previous Period (FY2022)

(Unit: JPY MM)

Increase in Fuel Cost and Tax

＋6,925

• Market fluctuations

+5,694

  • Increases due to FX rate (weaker yen), increases in crude oil prices and aircraft jet fuel prices that remain high

• Impact of removal of interim measures

+862

during COVID-19

• Increase by recovery of # of flights etc.

+368

Increase in Airport Usage Fees

＋1,608

• Impact of removal of interim measures

+1,381

during COVID-19

• Increase by recovery of # of flights etc.

+227

Increase in Aircraft Lease Payment

+893

• Increases due to FX rate (weaker yen)

Increase in Maintenance Expenses

+6,836

  • Increase due to the concentration of engine

maintenance timing, increased

+3,378

parts/components prices

• Increase due to review of allowance at the

+2,070

end of fiscal year

• Increases due to FX rate (weaker yen)

+1,388

Other

+1,054

  • Respective increase in cost due to recovery in number of passengers (commission fees, outsourcing expenses, etc.)

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10

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Skymark Airlines Inc. published this content on 15 May 2024 and is solely responsible for the information contained therein. Distributed by Public, unedited and unaltered, on 15 May 2024 06:44:04 UTC.