9206.T

• Core Brand & Differentiation Strategy

  • Maintains a brand centered on high-quality hospitality and the corporate mission of becoming an airline that delivers customer感动 (emotional memorable experiences)
  • Differentiates via spacious seating: configures its Airbus A320 fleet with fewer seats than maximum capacity (150 seats on older CEO variants, 162 on new NEO variants, vs 180 maximum) to deliver wider seat pitch, offers complimentary original coffee and chocolate, and invests in cross-role employee training to strengthen service quality
  • Operates 11 Airbus A320 aircraft total: 8 older CEO variants, 3 new fuel-efficient NEO variants, with one additional NEO expected for delivery in the second half of the fiscal year

• First Half Operational Performance

  • Achieved an all-time high first half operating revenue, but the net loss stemmed from two non-cash/one-time items: increased provisions for future scheduled heavy maintenance and engine overhauls, and foreign exchange valuation losses on dollar-denominated lease liabilities for the new NEO acquired via finance lease (lease assets are yen-denominated while liabilities are dollar-denominated)
  • Passenger demand and overall top-line performance remained solid, with steady growth in paid passenger numbers and seat utilization

• Second Half Key Initiatives

  • Launched the new Fukuoka-Sendai route on October 3, 2025, scaled to 2 daily round trips by October 26, and the route has outperformed initial forecasts for both passenger volume and unit revenue, with solid early results
  • Restarted suspended in-flight sales in July 2025, added new products in October, and launched a special livery collaboration with TOMORROW X TOGETHER to attract new customer groups
  • Plans to operate charter flights between Kitakyushu and Taipei for the 2026 Lunar New Year / Spring Festival period, to build operational experience ahead of the planned resumption of scheduled international service
  • Adjusted flight schedules and reallocated capacity: cut Fukuoka-Nagoya from 6 to 3 daily round trips to free resources for the new Fukuoka-Sendai route, aligned with a strategy of shifting to longer haul routes to improve unit profitability

• Long-Term Growth Strategy

  • Prioritizes strengthening the domestic business foundation first, with a long-term goal of resuming scheduled international service by the 2027 March fiscal year
  • Plans to restart international service as late-night/early-morning flights utilizing existing idle aircraft (no new fleet required), keeping the break-even point low and reducing risk, leveraging the company's pre-COVID experience operating scheduled Kitakyushu-Taipei service and Kitakyushu Airport's geographic proximity to East Asia

• Management maintained the original full-year 2026 March fiscal year guidance, leaving the full-year net profit forecast unchanged at 1.76 billion yen
  • The decision to hold guidance steady reflects solid top-line and passenger demand performance through the first half and into October, with manageable cost control for controllable expenses, and Dubai crude prices trading ~10% lower than the initial plan of $75 per barrel (current price ~$65 per barrel), which offsets other headwinds
  • Management assumes an average year-end foreign exchange rate of 145 yen per 1 US dollar, consistent with the original plan, and believes this assumption supports achievement of the full-year target despite current foreign exchange volatility
  • No upward or downward revisions were made to the original full-year financial plan

Starflyer operates a single passenger airline business with domestic operations as its core. For the 2026 March fiscal year first half, the company achieved 21.451 billion yen in operating revenue (a 2.8% increase year-over-year), equal to an all-time record for the first half period. It reported a net loss of 0.1 billion yen, resulting in a higher revenue but lower profit outcome compared to the prior year. Operating costs increased 4.8% year-over-year to 21.447 billion yen. Key operational metrics: Available Seat Kilometers (ASK) rose 0.8% year-over-year, Revenue Passenger Kilometers (RPK) rose 1.8% year-over-year, and seat load factor (L/F) reached 80.2%, exceeding 80% and indicating solid passenger demand. Cash and cash equivalents remained above 10 billion yen, with positive operating cash flow of 0.584 billion yen, despite the reported net loss.

• Foreign exchange volatility creates valuation risk for the company's dollar-denominated regular maintenance provisions and lease liabilities, which creates unpredictable swings in reported earnings that are difficult to fully manage
  • Geopolitical and international event risks are large and inherently unpredictable, and can significantly disrupt air travel demand and operating costs
  • International expansion faces intense competition from larger incumbent carriers in the strong inbound East Asian demand market
  • Longer-term international expansion that adds daytime scheduled service will likely require additional aircraft investment, increasing capital requirements and financial leverage

Q: What was the strategic reasoning for launching the new Fukuoka-Sendai route? / A: Starflyer has faced profitability pressure over the past 2-3 years from cost increases including yen depreciation and higher labor costs, so improving domestic profitability via shifting to longer haul routes is a top priority. Longer routes have lower unit costs that improve profitability even with lower unit revenue, so the company reallocated capacity from the Fukuoka-Nagoya route to open a new longer route. Competing longer haul options like Fukuoka-Sapporo and Fukuoka-Okinawa had excessive supply and fierce competition, while Fukuoka-Sendai had only small competing aircraft, allowing Starflyer's spacious seat value proposition to compete effectively, and the route has already outperformed initial expectations.

Q: What hedging and cost management practices does Starflyer use for foreign exchange and fuel price volatility? / A: Starflyer conducts standard mechanical hedging within a 3-year horizon, targeting 100% hedging coverage for foreign exchange exposure on aircraft and 90% coverage for fuel costs, following standard hedge accounting rules. Beyond dedicated hedging, the company enforces strict department and account-level cost management across all expense categories to control controllable costs.

Q: How do you balance maintaining your high quality service differentiation with cost efficiency and profit growth? / A: Management believes high quality service does not inherently require higher costs, and the two goals can coexist via the company's strategy. The core approach to balancing both is to continue reconfiguring the network to shift to longer haul routes (including eventual international expansion), which improves profitability by lowering unit costs while allowing the company to maintain its premium service value proposition.

Q: What benefits do you expect from the A320neo fleet introduction? / A: The neo increases seating capacity from 150 to 162 seats per aircraft, and the company prioritizes deploying neo aircraft to high-demand Fukuoka routes to grow passenger volume and top-line revenue. The neo also delivers over 10% better fuel efficiency than the older CEO models, and the fuel cost savings have already been clearly visible after nearly two years of operating the new aircraft.