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ANA quarterly profit drops on higher fuel costs

Impact expected to fade as airline passes increase on to travelers

ANA is predicting only limited losses from flight cancellations caused by Boeing 787 engine problems.

TOKYO -- ANA Holdings' first-quarter operating profit likely fell nearly a fifth on the year to around 20 billion yen ($180 million) as higher fuel and maintenance costs undercut growth in travel for one of Japan's two big carriers.

Revenue likely grew 6% to around 480 billion yen. The company is expected to maintain its full-year forecast when it reports April-June results on Tuesday.

Passenger loads remained high on international routes as more people traveled for business and leisure. The company increased service between Bangkok and Tokyo's Haneda airport and used larger aircraft to boost capacity on some routes.

Commercial airline revenue also rose on service within Japan, helped by robust travel during spring holidays. ANA's air cargo business benefited from higher freight rates amid a global rise in demand for transporting such high-value-added goods as semiconductors and autoparts.

But higher fuel costs squeezed profit. Jet kerosene averaged around $87 a barrel on the Singapore market, rising about 40% from a year earlier. 

ANA offset much of the effect with hedge transactions, and the worst of the impact probably hit first-quarter earnings. Airlines can pass higher fuel costs on to international travelers through surcharges. ANA is expected to do so as travel demand remains strong.

Meanwhile, the company will continue to spend on fleet maintenance and other improvements.

Problems found with Boeing 787 aircraft engines have forced some flight cancellations in Japan in July, but the number of such disruptions is expected to fall. Engine supplier Rolls-Royce will cover any repair and other related costs. The cancellations are likely to dent revenue by just a few billion yen.

For the full fiscal year, ANA forecasts operating profit to edge up 0.3% to 165 billion yen on revenue of 2.04 trillion yen, a 3% increase.

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