TOKYO All Nippon Airways Co (9202.T), the launch airline for Boeing Co's (BA.N) 787 Dreamliner jet that has been grounded with undiagnosed battery problems, said it lost more than $15 million in revenue from having to cancel Dreamliner flights this month.
Asia's top airline by revenue said it was unclear as to when Boeing's sophisticated new plane would resume commercial flights, making it harder to predict the longer-term financial impact of having the plane idle.
ANA, valued at close to $7 billion, said it had not yet decided whether to claim compensation from Boeing, and it had no plans, for now, to change a growth strategy that has the technologically advanced 787 at its core. But it conceded that a prolonged grounding of the plane would impact that strategy, and will delay issuing its mid-term business plan for several weeks.
"We have not decided on our right to demand damages, but naturally going ahead, if a damage amount is decided for the incident, we will negotiate," Chief Financial Officer Kiyoshi Tonomoto said at a briefing on ANA's quarterly results.
The Dreamliner, which Boeing says uses a fifth less fuel than traditional planes, opens up new international routes that ANA's existing fleet can't handle.
All 50 of the 787s Boeing has delivered to airlines to date are out of action as investigators in Japan and the United States try to find the cause of two recent incidents with the 787's lithium-ion batteries - a battery fire on a Japan Airlines Co (9201.T) 787 at a U.S. airport and an emergency landing by another plane on a domestic ANA flight after battery problems triggered a smoke alarm.
The grounding of the global Dreamliner fleet - ANA operates 17 of the lightweight, carbon-composite planes - has forced airlines to cancel flights and reschedule passengers on to alternative planes.
ANA has cancelled close to 850 flights until February 18, affecting over 82,000 passengers. The Dreamliner makes up around 7 percent of ANA's fleet, and the airline normally operates around 1,000 flights a day and carries 3.7 million passengers each month. ANA has around 150 trained 787 pilots staying at home. As flights are rescheduled, the carrier's Boeing 777 pilots are having to take the strain, with the extra workload.
"Obviously (the grounding) is a cost increase, but it's not a massive change of fleets," said a foreign hedge fund manager.
Despite the plane's battery problems, which follow years of development and production delays, investors have kept faith with ANA. Shares in the airline are down just 3.2 percent since before the emergency landing of one of its planes on January 16 - shrinking its market value by around $200 million, the list price of a single Dreamliner.
Few analysts have revised down the carrier's full-year earnings outlook, and the cost of insuring ANA's debt against default for 5 years has halved since November.
"When you're the launch customer there's going to be problems, and when you add the previous Dreamliner delays into the mix, the reaction from ANA investors is just 'Here we go again'," said Shashank Nigam, CEO of industry consultancy SimpliFlying ahead of the earnings report on Thursday.
Underscoring that, ANA is sticking to its full-year operating profit forecast of 110 billion yen, a touch above an average estimate of 107.4 billion yen in a poll of 16 analysts by Thomson Reuters I/B/E/S.
"There is not yet a plan to restart 787 flights, and amid this uncertainty it's hard to state (the impact). So, at this time, we are maintaining our forecast for the year," Tonomoto said.
Q3 PROFIT FALLS
ANA's October-December operating profit fell by more than a fifth to 32.2 billion yen ($353.6 million) as passenger travel was hit by a row between Japan and China over ownership of islets in the East China Sea. Revenue increased nearly 4 percent to 379 billion yen.
JAL, which has said it so far sees a limited impact on its profits from the 787 problems, reports its earnings on Monday. Analysts see annual operating profit of 179.5 billion yen, while JAL has predicted 165 billion yen.
Neither ANA nor JAL, which has seven 787s, have said they have considered changing orders for 87 more of the Dreamliners.
Boeing CEO Jim McNerney said on Wednesday the airplane maker stood by the troubled lithium-ion battery technology that has halted deliveries of new Dreamliners, which are still being made.
"We feel good about the battery technology and its fit for the airplane. We have just got to get to the root cause of these incidents and we will take a look at the data as it evolves, but there is nothing that we have learned that causes us to question it at this stage," he said as Boeing reported market-beating fourth-quarter profits.
($1 = 91.0650 Japanese yen)
(Additional reporting by Sophie Knight, Yoko Kubota, Ayai Tomisawa and Alwyn Scott; Editing by Ian Geoghegan)