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ANA heads for 20% profit drop, struggling to fill business class

Japanese airline also suffers fall in cargo demand for first half

ANA has made investments in new business-class seats, betting on steady demand. (Photo courtesy of ANA Holdings)

TOKYO -- Japanese airline group ANA Holdings is expected to report a year-on-year decline of more than 20% in operating income for the April-September half, suffering a fall in business passengers as corporations tightened their travel budgets.

The U.S.-China trade war also took a toll, causing a slump in air cargo including semiconductors and auto parts.

More manufacturers and other corporate customers have shifted to economy class for business travel to the U.S., Europe and other long-haul destinations. For travel within Asia, many manufacturers appear to have refrained from business trips.

Just this August, ANA introduced wider business-class seats on flights to London in hopes of capturing more demand for such travel.

The parent of All Nippon Airways announces its first-half results Tuesday.

Operating income likely will come in around 80 billion yen ($736 million), below the 98.7 billion yen average of analyst forecasts tallied by QUICK Consensus.

ANA faces declines in air cargo volume as well as in international business travel. (Photo by Ken Kobayashi)

Revenue looks to rise about 1% to 1.05 trillion yen, driven mainly by the launch of new routes, but still fall short of the market forecast of 1.07 trillion yen. ANA does not disclose its estimates for fiscal first-half earnings.

Demand for international cargo service missed ANA's targets.

Shipments leaving Japan fell 20% to 30% on the year for each of the six months through September, according to the Japan Aircargo Forwarders Association. This decline follows strong demand a year earlier led by semiconductor products.

Demand from general passengers fell less sharply, with ANA's volume in the April-September period likely remaining flat from a year ago.

Soured political relations between Japan and South Korea caused little harm to ANA's earnings, as much of the travel between the two countries is on budget airlines. Travel on domestic routes remained solid.

ANA is expected to downgrade its earnings forecasts for the full year ending in March. The company forecasts revenue of 2.15 trillion yen and 165 billion yen in operating income.

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