AirTrip 6191

エアトリ

Recent Updates

2021-11-15

Full-year FY09/21 flash update

2021-09-15

Q3 FY09/21 report update

2021-09-06

Revision to full-year forecast for FY09/21

Get in touch

Atago Green Hills MORI Tower 19F 2-5-1 Atago, Minato-ku, Tokyo

http://www.evolableasia.com/

03-3431-6191

Summary

AirTrip is an online travel agency (OTA) providing travel-related content centered on its comprehensive travel platform called “AirTrip.” In FY09/20, the company had three business segments: Online Travel Agency (AirTrip Travel Agency, Inbound Travel, and Life Innovation), IT Offshore Development, and Investment. The Online Travel Agency business was the core business (with 88.5% of sales and 72.5% of operating profit in FY09/19). With handling volume of PY146.0bn (+75.5% YoY) in FY09/19, it was the top domestic OTA.

Hotels, Restaurants & Leisure

Key dates

2018-07-10

Coverage initiation

Full Report

2021-11-15

Full-year FY09/21 flash update

2021-11-15

Q3 FY09/21 flash update

2021-08-13

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Executive summary

Business overview

Core businesses: AirTrip is an online travel agency (OTA) providing travel-related content centered on its comprehensive travel platform called “AirTrip.” In FY09/20, the company had three business segments: Online Travel Agency (AirTrip Travel Agency, Healthcare, Inbound Travel/Wi-Fi Rental, and Media), IT Offshore Development, and Investment. The Online Travel Agency business has been the company’s mainstay business in which AirTrip boasts its position as the top domestic OTA. Impacted by the effects from the COVID-19 pandemic, handling volume, including for discontinued operations, was JPY74.7bn in FY09/20, down sharply from JPY146.0bn in FY09/19.

AirTrip Travel Agency (part of the Online Travel Agency business): In the AirTrip Travel Agency business, the company sells airline tickets and hotel bookings either individually or as sets (AirTrip Plus). Its three key sales channels are B2C (selling directly to consumers under its own brand), B2B2C (selling under the brands of other companies, including travel agencies), and business travel management (BTM, providing companies with a dedicated search system for business travel arrangements). Handling volume in this business declined sharply since February 2020, as the spread of COVID-19 caused a significant drop in travel demand including for business trips. As a result, in FY09/20, the company booked impairment losses (included in operating losses) of JPY7.0bn. Handling volume in domestic travel has started to recover since the state of emergency (issued in April 2020) was lifted in June 2020, but handling volume in overseas travel continues to hover at a mere few percent of its year-ago level.

Go To Travel campaign: The Japanese government allocated a budget of around JPY1.7tn as part of the first supplementary budget for FY2020 for economic stimulus measures for the domestic tourism industry (Go To Travel campaign), which had been severely impacted by COVID-19. The campaign was planned to run from July 22, 2020 until spring 2021. However, it was suspended temporarily on December 28, 2020, due to a renewed outbreak of the pandemic, and remained suspended as of September 7, 2021. The government is considering reinstating the program once the state of emergency is lifted, but has not decided on timing or methodology yet.

Revenue structure: When considering revenue structure, it is useful to consider handling volume as the basis, since net operating revenue and total operating revenue differ depending on whether airline tickets and hotel bookings are sold individually or as a set. Since AirTrip’s main business is as an OTA, the company essentially has no stores or store staff. Its main fixed costs are personnel expenses (SG&A expenses) and advertising expenses. Expansion in handling volume leads to improved profitability and competitiveness, making the company’s business model a typical breakeven point model. On June 24, 2020, the company announced a further business and capital alliance with unlisted company Upsell-Technologies Inc., in which it had already invested. Based on the new alliance, AirTrip will transfer its internal travel operations to Upsell under a business outsourcing agreement. As a result, operational costs are expected to convert to variable costs in stages from July 2020 to September 2021. The company showed profitability on a single-month basis in October 2020, with handling volume for the month at approximately JPY3.7bn, a level at which management believes earnings can exceed the current break-even point.

Financing: On August 27, 2020, the company announced that it would issue No. 1 Series unsecured convertible bonds with warrants attached (CBs) and a separate issue of No. 14 Series warrants. Both the convertible bond issue and separate issue of new stock warrants will be placed via a third-party allocation. The company commented that this would enable fast fund procurement as well as financing in preparation for a future share price recovery (i.e., curtail rapid dilution). The convertible bonds are designed to encourage conversion before maturity, i.e., based on the assumption that they will be converted to shares. The main purpose of the warrants is to enable nimble financing at a time of earnings recovery. The company decided to raise JPY6.1bn (approximate net amount) to reduce interest-bearing debt by JPY2.0bn and cover the estimated investment for growth required in an earnings recovery phase (JPY4.1bn). The CBs had all been exercised by February 19, 2021. In regard to No. 14 Series warrants, the company has the right to approve exercise, and said it would grant this depending on the share price and funding needs.

Trends and outlook

FY09/21 results: In FY09/21, the company logged total handling volume of JPY33.6bn. On a continuing business basis, the company booked revenue of JPY17.7bn (-16.8% YoY), operating profit of JPY3.2bn (versus a loss of JPY9.0bn in FY09/20), pre-tax profit of JPY3.1bn (versus a loss of JPY9.2bn) and profit attributable to owners of the parent of JPY2.4bn (versus a loss of JPY8.7bn).
The company revised its full-year forecasts on September 6, 2021. Against these revised forecasts, progress rates were 100.9% for revenue, 79.0% for operating profit, 77.4% for pre-tax revenue, and 98.2% for profit attributable to owners of the parent. The booking of impairment losses of approximately JPY900mn was the primary reason for operating profit falling short of the company's forecast. This was due to the uncertain outlook for demand due to the COVID-19 pandemic.

FY09/22 forecast: Airtrip forecasts FY09/22 revenue of JPY13.0bn (-26.4% YoY), operating profit of JPY1.0bn (-68.3% YoY), pre-tax profit of JPY940mn (-69.3% YoY), profit attributable to owners of the parent of JPY700mn (-70.4% YoY), and basic EPS of JPY31.66. The company did not disclose an annual dividend forecast. In light of ongoing uncertainty in regard to socioeconomic conditions, the company stated that it was issuing conservative forecasts that did not take into account potential upside factors, including an earnings contribution from a recovery in domestic travel owing to the Go To Travel campaign, a recovery in overseas travel, a recovery in the number of tourists visiting Japan, and a contribution from the Investment business.

Medium-term growth strategy: On November 14, 2019, the company announced its medium-term growth strategy “AirTrip 5,000.” It is aiming for FY09/24 handling volume of JPY500bn (with FY09/19 as the base year, this is a CAGR of about 28%) with comprehensive strengthening of the AirTrip Travel Agency business and add-on growth areas through M&A. The company announced its medium-term growth strategy before the COVID-19 outbreak, but at the briefing to discuss FY09/20 results indicated that it would continue to work to achieve the targets in the “AirTrip 5000” medium-term growth strategy. Given the sharp decline in handling volume in FY09/20 as a result of the spread of COVID-19, the company in order to achieve its targets will need to post average annual growth in handling volume from that shown in FY09/20 (including discontinued operations) of 61% through FY09/24.

Strengths and weaknesses

Shared Research views AirTrip’s strengths include: 1) limited impact from the COVID-19 pandemic by reducing fixed costs in the AirTrip Travel Agency business; 2) cross-selling via dynamic package services (AirTrip Plus); and 3) a certain amount of natural customer inflow on improved awareness of the AirTrip brand and higher repeat customer rate.

Its weaknesses include: 1) sensitivity of its business portfolio to the external environment, since its core is the Online Travel Agency business; 2) a high direct-to-consumer sales ratio by airlines for domestic airline tickets; and 3) weaker global brand awareness and capital strength than overseas OTAs. (See details in Strengths and weaknesses section.)

Key financial data

Income statement		FY09/13	FY09/14	FY09/15	FY09/16	FY09/17	FY09/17	FY09/18	FY09/19	FY09/20	FY09/21	FY09/22
(JPYmn)		Par.	Cons.	Cons.	Cons.	Cons.	IFRS	IFRS	IFRS	IFRS	IFRS	IFRS Est.
Handling volume		14,000	15,370	20,655	27,782	40,116	40,016	83,166	145,981	72,700	33,622
	YoY	30.6%	9.8%	34.4%	34.5%	44.4%	-	107.8%	75.5%	-50.2%	-53.8%
Operating revenue		961	1,451	2,755	4,001	5,534	5,533	12,451	24,306	21,241	17,662	13,000
	YoY	24.8%	51.0%	89.8%	45.2%	38.3%	-	125.0%	95.2%	-12.6%	-16.8%	-26.4%
Gross profit		-	1,102	2,025	3,322	4,597	4,596	6,861	12,920	7,504	7,612
	Gross profit margin	-	76.0%	73.5%	83.0%	83.1%	83.1%	55.1%	53.2%	35.3%	43.1%
SG&A expenses		-	1,003	1,712	2,703	3,866	3,848	7,234	12,868	9,121	5,248
	YoY	-	-	70.7%	57.9%	43.0%	-	88.0%	77.9%	-29.1%	-42.5%
	SG&A ratio	-	69.1%	62.2%	67.6%	69.9%	69.5%	58.1%	52.9%	42.9%	29.7%
Gain on investments		-	-	-	-	-	370	1,288	150	-412	240
Other operating revenue		-	-	-	-	-	2	371	546	330	365
Other operating expenses		-	-	-	-	-	-40	-47	-71	-7,296	-431
Operating profit		25	99	313	618	731	1,088	1,239	676	-8,994	3,158	1,000
	YoY	-68.8%	297.0%	215.2%	97.7%	18.2%	-	13.9%	-45.4%	-	-	-68.3%
	Operating profit margin	2.6%	6.8%	11.4%	15.5%	13.2%	19.7%	10.0%	2.8%	-	17.9%	7.7%
Pre-tax profit		23	93	306	571	696	1,095	1,226	588	-9,190	3,059	940
	YoY	-	311.7%	227.2%	87.0%	21.8%	-	12.0%	-52.0%	-	-	-69.3%
	Pre-tax profit margin	2.4%	6.4%	11.1%	14.3%	12.6%	19.8%	9.8%	2.4%	-	17.3%	7.2%
Profit							814	1,080	751	-8,825	2,555
	YoY						-	32.7%	-30.5%	-	-
	Profit margin						14.7%	8.7%	3.1%	-	14.5%
Profit attributable to owners of the parent		15	45	172	340	420	702	942	731	-8,692	2,361	700
	YoY	-	209.0%	283.3%	97.3%	23.5%	-	34.2%	-22.4%	-	-	-70.4%
	Profit margin	1.5%	3.1%	6.3%	8.5%	7.6%	12.7%	7.6%	3.0%	-	13.4%	5.4%
Per-share data (split-adjusted; JPY)
Shares issued (year-end; '000)		13,725	13,725	13,725	16,682	16,919	16,919	17,708	19,801	20,420	22,108
EPS (JPY)		1.1	3.3	12.6	22.2	29.1	42.3	48.5	39.0	-433.8	111.6	31.7
EPS (fully diluted; JPY)		-	-	-	21.1	27.7	40.1	46.7	37.9	-433.8	109.0
Dividend per share (JPY)		-	-	-	-	7.0	7.0	10.0	10.0	10.0	10.0	TBD
Book value per share (JPY)		9.1	12.3	24.9	136.4	168.0	177.5	289.8	490.7	92.2	335.6
Balance sheet (JPYmn)
Current assets		-	892	1,521	4,025	5,158	5,395	15,202	20,140	15,023	15,653
	Cash and cash equivalents	-	229	639	2,356	2,139	2,054	5,320	8,997	7,042	8,771
	Trade receivables	-	397	610	1,104	1,386	1,567	4,442	5,239	2,364	1,357
	Operational investment securities	-	-	-	-	1,100	1,520	3,889	4,606	4,359	4,869
	Inventories	-	13	75	274	45	45	87	428	435	166
	Other current assets	-	254	197	290	487	208	1,463	868	821	488
Fixed assets		-	381	543	817	2,321	2,491	9,736	11,112	6,916	5,723
	Tangible fixed assets	-	59	61	41	367	393	1,111	1,324	480	362
	Intangible assets	-	99	155	306	1,335	1,393	7,403	8,398	5,419	4,122
	Investments and other assets	-	222	328	471	619	705	1,222	1,390	1,017	1,239
Total assets		-	1,273	2,064	4,842	7,479	7,888	24,939	31,253	21,940	21,377
Current liabilities		-	1,022	1,487	2,281	3,519	3,584	15,014	15,717	11,490	8,879
	Trade payables	-	514	669	1,293	1,558	2,045	4,333	4,414	2,646	1,229
	Short-term debt	-	227	325	225	655	782	6,802	7,519	6,185	5,292
	Other current liabilities	-	281	493	762	1,306	757	3,879	3,784	2,659	2,358
Fixed liabilities		-	49	180	190	733	903	4,444	5,436	7,911	4,286
	Long-term debt	-	-	100	87	623	622	4,009	5,111	4,842	2,150
	Other	-	49	80	102	110	281	435	325	3,069	2,136
Net assets		-	202	397	2,371	3,226	3,400	5,567	10,099	2,538	8,211
	Capital stock	-	215	215	1,020	1,031	1,031	1,100	2,922	3,138	1,529
	Capital surplus	-	20	20	825	837	815	2,117	4,175	4,887	2,013
	Retained earnings	-	-68	105	445	865	1,145	1,876	2,598	-6,135	3,887
	Treasury stock	-	-	-	-	-	-	-	0	0	0
	Accumulated other comprehensive income	-	2	2	-13	40	10	5	19	92	68
	Non-controlling interests	-	32	56	95	404	397	380	382	555	712
Total liabilities and equity		-	1,273	2,064	4,841	7,479	7,888	24,939	31,253	21,940	21,377
Statement of cash flows (JPYmn)
Cash flows from operating activities		-	160	331	605	217	218	527	-76	-559	4,190
Cash flows from investing activities		-	-139	-167	-456	-1,312	-1,437	-1,010	-678	256	-804
Cash flows from financing activities		-	112	216	1,477	943	941	3,662	4,459	-1,643	-1,760
Financial ratios
Interest-bearing debt		-	227	425	312	1,278	1,404	10,811	12,630	11,027	7,442
Net cash		-	2	214	2,044	861	650	-5,491	-3,633	-3,985	1,329
ROA (RP-based)		-	-	18.3%	16.5%	11.3%	17.2%	7.5%	2.1%	-34.6%	14.1%
ROE		-	53.1%	67.5%	26.0%	19.1%	26.9%	23.0%	7.5%	-148.5%	49.8%
Current ratio		-	87%	102%	176%	147%	151%	101%	128%	131%	176%
Fixed ratio		-	188.6%	136.8%	34.5%	71.9%	73.3%	174.9%	110.0%	272.5%	69.7%
Equity ratio		-	13.3%	16.5%	47.0%	37.1%	38.0%	20.4%	31.1%	9.0%	35.1%

Source: Shared Research based on company data. FY09/20 handling volume includes handling volume from discontinued operations.
Note: Figures may differ from company data owing to differences in rounding methods.

Performance by segment		FY09/13	FY09/14	FY09/15	FY09/16	FY09/17	FY09/17	FY09/18	FY09/19	FY09/20	FY09/21
(JPYmn)		Par.	Cons.	Cons.	Cons.	Cons.	IFRS	IFRS	IFRS	IFRS	IFRS
Operating revenue		-	1,451	2,755	4,001	5,534	5,533	12,451	24,306	21,241	17,662
	Online Travel Agency	-	997	1,718	2,897	3,895	3,893	10,112	21,505	18,794	15,570
	IT Offshore Development	-	343	879	1,099	1,534	1,534	2,153	2,455	1,888	1,348
	Investment	-	-	-	-	103	103	161	345	558	738
	Other	-	112	158	4	2	1	-	-	-	4
YoY		-	-	89.8%	45.2%	38.3%	-	125.0%	95.2%	-12.6%	-16.8%
	Online Travel Agency	-	-	72.3%	68.7%	34.4%	-	159.7%	112.7%	-12.6%	-17.2%
	IT Offshore Development	-	-	156.4%	25.1%	39.5%	-	40.4%	14.0%	-23.1%	-28.6%
	Investment	-	-	-	-	-	-	56.3%	114.3%	61.7%	32.3%
	Other	-	-	41.9%	-97.5%	-49.4%	-	-	-	-	-
% of operating revenue (sales)		-	100.0%	100.0%	100.0%	100.0%	100.0%	99.8%	100.0%	100.0%	100.0%
	Online Travel Agency	-	68.7%	62.4%	72.4%	70.4%	70.4%	81.2%	88.5%	88.5%	88.2%
	IT Offshore Development	-	23.6%	31.9%	27.5%	27.7%	27.7%	17.3%	10.1%	8.9%	7.6%
	Investment	-	-	-	-	1.9%	1.9%	1.3%	1.4%	2.6%	4.2%
	Other	-	7.7%	5.8%	0.1%	0.0%	0.0%	0.0%	0.0%	0.0%	0.0%
Operating profit		-	99	313	618	731	1,088	1,239	676	-8,994	3,158
	Online Travel Agency	-	346	562	944	965	824	269	1,110	-7,544	2,561
	IT Offshore Development	-	32	19	83	163	168	148	172	0	519
	Investment	-	-	-	-	68	438	1,305	332	-247	820
	Other	-	-72	3	0	0	0	0	0	0	-
	Adjustments	-	-207	-271	-408	-466	-342	-571	-938	-1,204	-743
YoY		-	-	215.2%	97.7%	18.2%	-	13.9%	-45.4%	-	-
	Online Travel Agency	-	-	62.3%	68.0%	2.2%	-	-67.4%	312.6%	-	-
	IT Offshore Development	-	-	-41.0%	342.1%	97.2%	-	-11.9%	16.2%	-	-
	Investment	-	-	-	-	-	-	197.9%	-74.6%	-	-
	Other	-	-	-	-	-51.5%	-	-	-	-	-
OPM (excluding adjustments)		-	6.8%	11.4%	15.5%	13.2%	19.7%	10.0%	2.8%	-42.3%	17.9%
	Online Travel Agency	-	34.7%	32.7%	32.6%	24.8%	21.2%	2.7%	5.2%	-40.1%	16.4%
	IT Offshore Development	-	9.3%	2.1%	7.5%	10.7%	11.0%	6.9%	7.0%	0.0%	38.5%
	Investment	-	-	-	-	66.1%	425.2%	810.6%	96.2%	-44.3%	111.1%
	Other	-	-64.2%	1.9%	-0.8%	-0.8%	-	-	-	-	-
% of operating profit (including adjustments)		-	100.0%	100.0%	100.0%	100.0%	100.0%	95.1%	100.0%	100.0%	100.0%
	Online Travel Agency	-	113.0%	96.3%	91.9%	80.6%	57.6%	14.9%	68.8%	96.8%	65.6%
	IT Offshore Development	-	10.4%	3.2%	8.1%	13.7%	11.7%	8.2%	10.7%	0.0%	13.3%
	Investment	-	-	-	-	5.7%	30.6%	72.1%	20.6%	3.2%	21.0%
	Other	-	-23.4%	0.5%	0.0%	0.0%	-	-	-	-	-

Source: Shared Research based on company data
Note: Figures may differ from company data owing to differences in rounding methods.

Recent updates

Revision to full-year forecast for FY09/21

2021-09-06

AirTrip Corp. announced a revision to its earnings forecast.

Revised full-year company forecast for FY09/21 (announced on September 6, 2021)

AirTrip revised its full-year forecast for FY09/21 on September 6, 2021. The company’s revised forecast for FY09/21 projects JPY17.5bn in net sales (versus the company’s previous forecast of JPY19.0bn), JPY4.0bn in operating profit (previously JPY2.6bn), JPY4.0bn in pre-tax profit (previously JPY2.5bn), JPY2.4bn in profit attributable to owners of the parent (previously JPY1.7bn), and profit per share of JPY111.04 (previously JPY78.06).

Reasons for revisions

Operating revenue

The company projects a decline in operating revenue due to the removal of National Ryutsu Sangyo Co.,Ltd. from its scope of consolidation (due to the complete transfer of National Ryutsu Sangyo’s shares) and the additional removal of Hybrid Technologies Co., Ltd. and PikaPaka Corp. (due to the partial transfer of shares in these two companies).

Gains or losses on all profit lines

The company reported JPY3.1bn in cumulative operating profit for Q3 FY09/21, which exceeds its prior full-year projection. Although the AirTrip Travel Agency business is incurring impact from repeated state of emergency declarations, the company projects that it can stably secure operating profit over the course of FY09/21 by optimally adjusting its advertising according to changes in demand. AirTrip also expects performance in its five other existing businesses (Inbound Travel Agency business/Wi-Fi rental business, IT Offshore Development business, Media business, Healthcare business, and Investment business) to be favorable. Due in part to this favorable performance, the company has decided to conduct strategic investment primarily targeting future M&A, stake acquisitions, business partnerships, and advertising.

Trends and outlook

Quarterly trends and results

Cumulative		FY09/19 IFRS				FY09/20 IFRS				FY09/21 IFRS				FY09/21 IFRS
(JPYmn)		Q1	Q1–Q2	Q1–Q3	Q1–Q4	Q1	Q1–Q2	Q1–Q3	Q1–Q4	Q1	Q1–Q2	Q1–Q3	Q1–Q4	% of Est.	FY Est.
Handling volume		29,258	64,849	98,899	145,981	36,046	60,857	65,596	72,700	10,363	18,077	25,277	33,622
	YoY	159.4%	146.0%	108.6%	75.5%	23.2%	-6.2%	-33.7%	-50.2%	-71.3%	-70.3%	-61.5%	-53.8%
Operating revenue		4,735	10,643	16,148	24,306	7,980	14,741	17,908	21,241	6,560	11,202	14,198	17,662	100.9%	17,500
	YoY	191.6%	208.6%	155.3%	95.6%	68.5%	38.5%	10.9%	-12.6%	-17.8%	-24.0%	-20.7%	-16.8%		-17.6%
Gross profit		2,746	5,883	9,134	12,920	2,961	5,701	6,980	7,504	1,935	3,855	5,660	7,612
	Gross profit margin	58.0%	55.3%	56.6%	53.2%	37.1%	38.7%	39.0%	35.3%	29.5%	34.4%	39.9%	43.1%
SG&A expenses		3,023	6,181	9,478	12,868	3,013	5,879	7,414	9,121	1,272	2,644	3,924	5,248
	YoY	167.8%	160.1%	119.4%	76.4%	-0.3%	-4.9%	-21.8%	-29.1%	-57.8%	-55.0%	-47.1%	-42.5%
	SG&A ratio	63.8%	58.1%	58.7%	52.9%	37.8%	39.9%	41.4%	42.9%	19.4%	23.6%	27.6%	29.7%
Gain on investments		105	264	430	150	131	-270	-564	-412	72	165	613	240
Other operating revenue		9	220	225	546	149	183	239	330	44	74	231	365
Other operating expenses		-21	-34	-41	-71	-26	-1,066	-1,122	-7,296	-16	-45	-118	-431
Operating profit		-183	178	270	676	202	-1,332	-1,882	-8,994	763	2,001	3,071	3,158	79.0%	4,000
	YoY	-	-77.5%	-74.3%	-41.3%	-	-	-	-	277.7%	-	-	-		-
	Operating profit margin	-	1.7%	1.7%	2.8%	2.5%	-	-	-	11.6%	17.9%	21.6%	17.9%		22.9%
Pre-tax profit		-204	140	208	588	150	-1,425	-2,016	-9,190	725	1,955	3,018	3,059	77.4%	3,950
	YoY	-	-82.3%	-80.0%	-48.3%	-	-	-	-	383.3%	-	-	-		-
	Pre-tax profit margin	-	1.3%	1.3%	2.4%	1.9%	-	-	-	11.1%	17.5%	21.3%	17.3%		22.6%
Profit attributable to owners of the parent		-201	78	57	731	692	-741	-1,167	-8,692	432	1,286	2,206	2,361	98.2%	2,405
	YoY	-	-84.8%	-91.4%	-22.4%	-	-	-	-	-37.6%	-	-	-		-
	Profit margin	-	-	-	-	8.7%	-	-	-	6.6%	11.5%	15.5%	13.4%		13.7%
Quarterly		FY09/19 IFRS				FY09/20 IFRS				FY09/21 IFRS
(JPYmn)		Q1	Q2	Q3	Q4	Q1	Q2	Q3	Q4	Q1	Q2	Q3	Q4
Handling volume		29,258	35,591	34,050	47,082	36,046	24,811	4,739	7,104	10,363	7,714	7,200	8,345
	YoY	159.4%	136.0%	61.8%	31.7%	23.2%	-30.3%	-86.1%	-84.9%	-71.3%	-68.9%	51.9%	17.5%
Operating revenue		4,735	5,908	5,505	8,158	7,980	6,761	3,167	3,333	6,560	4,642	2,996	3,464
	YoY	191.6%	223.7%	91.5%	33.7%	68.5%	14.4%	-42.5%	-59.1%	-17.8%	-31.3%	-5.4%	3.9%
Gross profit		2,746	3,137	3,251	3,786	2,961	2,740	1,279	524	1,935	1,920	1,805	1,952
	Gross profit margin	58.0%	53.1%	59.1%	46.4%	37.1%	40.5%	40.4%	15.7%	29.5%	41.4%	60.2%	56.4%
SG&A expenses		3,023	3,158	3,297	3,390	3,013	2,866	1,535	1,707	1,272	1,372	1,280	1,324
	YoY	167.8%	153.2%	69.6%	13.9%	-0.3%	-9.2%	-53.4%	-49.6%	-57.8%	-52.1%	-16.6%	-22.4%
	SG&A ratio	63.8%	58.1%	58.7%	52.9%	37.8%	39.9%	41.4%	42.9%	19.4%	29.6%	42.7%	38.2%
Operating profit		-183	361	92	406	202	-1,534	-550	-7,112	763	1,238	1,070	87
	YoY	-	-45.4%	-64.6%	298.0%	-	-	-	-	277.7%	-	-	-
	Operating profit margin	-	6.1%	1.7%	5.0%	2.5%	-	-	-	11.6%	26.7%	35.7%	2.5%
Pre-tax profit		-204	344	68	380	150	-1,575	-591	-7,174	725	1,230	1,063	41
	YoY	-	-48.3%	-72.6%	291.8%	-	-	-	-	383.3%	-	-	-
	Pre-tax profit margin	-	5.8%	1.2%	4.7%	1.9%	-	-	-	11.1%	26.5%	35.5%	1.2%
Profit attributable to owners of the parent		-201	279	-21	674	692	-1,433	-426	-7,525	432	854	920	155
	YoY	-	-37.4%	-	139.9%	-	-	-	-	-37.6%	-	-	-
	Profit margin	-	4.7%	-	8.3%	8.7%	-	-	-	6.6%	18.4%	30.7%	4.5%

Source: Shared Research based on company data
Note: At the timing of each quarterly results disclosure in FY09/21, figures for the corresponding period in FY09/20 are adjusted to those that do not include discontinued operations. Quarterly (three month) figures are obtained by calculating the difference between quarterly cumulative results.
Note: Figures may differ from company data owing to differences in rounding methods.

By segment (cumulative)		FY09/19 IFRS				FY09/20 IFRS				FY09/21 IFRS
(JPYmn)		Q1	Q1–Q2	Q1–Q3	Q1–Q4	Q1	Q1–Q2	Q1–Q3	Q1–Q4	Q1	Q1–Q2	Q1–Q3	Q1–Q4
Operating revenue		4,735	10,643	16,148	24,306	7,980	14,741	17,908	21,241	6,560	11,202	14,198	17,662
	Online Travel Agency	4,124	9,500	14,088	21,505	7,402	13,653	15,894	18,794	5,838	9,931	12,725	15,570
	IT Offshore Development	611	1,142	1,817	2,455	507	1,016	1,461	1,888	426	925	1,088	1,348
	Investment	0	0	242	345	71	71	553	558	295	345	382	738
	Other	0	0	0	0	0	0	0	-	-	-	1	4
YoY		191.6%	208.6%	155.3%	95.6%	68.5%	38.5%	10.9%	-12.6%	-17.8%	-24.0%	-20.7%	-16.8%
	Online Travel Agency	312.4%	313.9%	204.6%	112.7%	79.5%	43.7%	12.8%	-12.6%	-21.1%	-27.3%	-19.9%	-17.2%
	IT Offshore Development	16.8%	8.5%	13.8%	14.0%	-17.0%	-11.0%	-19.6%	-23.1%	-16.0%	-9.0%	-25.5%	-28.6%
	Investment	-	-	139.6%	114.3%	-	-	128.5%	61.7%	315.5%	385.9%	-30.9%	32.3%
	Other	-	-	-	-	-	-	-	-	-	-	-	-
Operating profit		-183	178	270	676	202	-1,332	-1,882	-8,994	763	2,001	3,071	3,158
	Online Travel Agency	-196	234	147	1,110	307	-473	-1,025	-7,544	627	1,394	2,160	2,561
	IT Offshore Development	91	111	134	172	40	53	76	0	30	613	602	519
	Investment	97	237	473	332	163	-243	-79	-247	316	435	908	820
	Other	0	0	0	0	0	0	-0	0	-	-	-0	-
YoY		-	-77.5%	-74.3%	-41.3%	-	-	-	-	277.7%	-	-	-
	Online Travel Agency	-	706.9%	-	312.6%	-	-	-	-	104.2%	-	-	-
	IT Offshore Development	42.2%	6.7%	25.2%	16.2%	-56.0%	-52.3%	-43.3%	-	-25.0%	-	692.1%	-
	Investment	-15.7%	-74.3%	-66.0%	-74.6%	68.0%	-	-	-	93.9%	-	-	-
	Other	-	-	-	-	-	-	-	-	-	-	-	-
Operating profit margin		-	1.7%	1.7%	2.8%	2.5%	-	-	-	11.6%	17.9%	21.6%	17.9%
	Online Travel Agency	-	2.5%	1.0%	5.2%	4.1%	-	-	-	10.7%	14.0%	17.0%	16.4%
	IT Offshore Development	14.9%	9.7%	7.4%	7.0%	7.9%	5.2%	5.2%	-	7.0%	66.3%	55.3%	38.5%
	Investment	-	-	195.5%	96.2%	229.6%	-	-	-	107.1%	126.1%	237.7%	111.1%
By segment (quarterly)		FY09/19 IFRS				FY09/20 IFRS				FY09/21 IFRS
(JPYmn)		Q1	Q2	Q3	Q4	Q1	Q2	Q3	Q4	Q1	Q2	Q3	Q4
Operating revenue		4,735	5,908	5,505	8,158	7,980	6,761	3,167	3,333	6,560	4,642	2,996	3,464
	Online Travel Agency	4,124	5,376	4,588	7,417	7,402	6,251	2,241	2,900	5,838	4,093	2,794	2,845
	IT Offshore Development	611	531	675	638	507	509	445	427	426	499	163	260
	Investment	-	-	242	103	71	-	482	5	295	50	382	738
	Other	0	0	0	0	0	0	0	-	-	-	1	4
YoY		191.6%	223.7%	91.5%	33.7%	68.5%	14.4%	-42.5%	-59.1%	-17.8%	-31.3%	-5.4%	3.9%
	Online Travel Agency	312.4%	315.1%	96.9%	35.2%	79.5%	16.3%	-51.2%	-60.9%	-21.1%	-34.5%	24.7%	-1.9%
	IT Offshore Development	16.8%	0.2%	24.1%	14.7%	-17.0%	-4.1%	-34.1%	-33.1%	-16.0%	-2.0%	-63.4%	-39.1%
	Investment	-	-	-	71.7%	-	-	99.2%	-95.1%	315.5%	-	-20.7%	-
Operating profit		-183	361	92	406	202	-1,534	-550	-7,112	763	1,238	1,070	87
	Online Travel Agency	-196	430	-87	963	307	-780	-552	-6,519	627	767	766	401
	IT Offshore Development	91	20	23	38	40	13	23	-76	30	583	-11	-83
	Investment	97	140	236	-141	163	-406	164	-168	316	119	473	-88
	Other	0	0	-	0	0	0	0	0	-	-	-0	0
Operating profit margin		-	6.1%	1.7%	5.0%	2.5%	-	-	-	11.6%	26.7%	35.7%	2.5%
	Online Travel Agency	-	8.0%	-	13.0%	4.1%	-	-	-	10.7%	18.7%	27.4%	14.1%
	IT Offshore Development	14.9%	3.8%	3.4%	6.0%	7.9%	2.6%	5.2%	-	7.0%	116.8%	-	-
	Investment	-	-	97.5%	-	229.6%	-	34.0%	-	107.1%	238.0%	123.8%	-

Source: Shared Research based on company data
Note: FY09/20 figures include those from discontinued operations through Q3, with Q4 figures (excluding handling volume) not including discontinued operations. Figures for the three months of Q4 reflect the difference between cumulative Q3 and full-year results.
Note: Figures may differ from company data owing to differences in rounding methods.

Full-year FY09/21 results

In FY09/21, the company logged total handling volume of JPY33.6bn. On a continuing business basis, the company booked revenue of JPY17.7bn (-16.8% YoY), operating profit of JPY3.2bn (versus a loss of JPY9.0bn in FY09/20), pre-tax profit of JPY3.1bn (versus a loss of JPY9.2bn) and profit attributable to owners of the parent of JPY2.4bn (versus a loss of JPY8.7bn). The company revised its full-year forecasts on September 6, 2021. Against these revised forecasts, progress rates were 100.9% for revenue, 79.0% for operating profit, 77.4% for pre-tax revenue, and 98.2% for profit attributable to owners of the parent.
The booking of impairment losses of approximately JPY900mn was the primary reason for operating profit falling short of the company's forecast. This was due to the uncertain outlook for demand due to the COVID-19 pandemic.

Q4 gross profits were JPY430mn for July, JPY310mn for August, and JPY280mn for September in domestic travel, between JPY10mn and JPY20mn for each of the three months in overseas travel, and JPY330mn, JPY380mn, and JPY290mn, respectively, in other businesses. The company contained monthly SG&A expenses to between JPY450mn and JPY500mn in Q4. It controlled variable costs and advertising costs along with the decline in domestic travel demand.

Airtrip forecasts FY09/22 revenue of JPY13.0bn (-26.4% YoY), operating profit of JPY1.0bn (-68.3% YoY), pre-tax profit of JPY940mn (-69.3% YoY), profit attributable to owners of the parent of JPY700mn (-70.4% YoY), and basic EPS of JPY31.66. The company did not disclose an annual dividend forecast. In light of ongoing uncertainty in regard to socioeconomic conditions, the company stated that it was issuing conservative forecasts that did not take into account potential upside factors, including an earnings contribution from a recovery in domestic travel owing to the Go To Travel campaign, a recovery in overseas travel, a recovery in the number of tourists visiting Japan, and a contribution from the Investment business.

The company's Q1 gross profit forecasts are JPY330mn for October, JPY370mn for November, and JPY380mn for December in domestic travel, JPY10mn for each of the three months in overseas travel, and JPY230mn for each month in other businesses. It also targets monthly SG&A expenses from October onward at around JPY220mn to JPY270mn for variable costs and JPY250 to JPY300mn for fixed costs, as handling volume increases.

The company on September 15, 2021 decided to list on the new Prime Market segment of the Tokyo Stock Exchange. The Prime Market segment is s to come into effect with the scheduled transition in April 2022. As announced in July 2021, the company confirmed that it had received the the initial assessment from the Tokyo Stock Exchange that it was in compliance with the listing maintenance standards of the Prime Market segment.

Results by segment

Online Travel Agency

In FY09/21, the Online Travel Agency segment generated operating revenue of JPY15.6bn (-17.2% YoY) and segment operating profit of JPY2.6bn (versus a JPY7.5bn loss in FY09/20).

IT Offshore Development

In FY09/21, the IT Offshore Development segment generated operating revenue of JPY1.3bn (-28.6% YoY) and segment operating profit of JPY519mn (versus earnings at the breakeven point in FY09/20).

Investment

In FY09/21, the Investment segment generated operating revenue of JPY738mn (-32.3% YoY) and segment operating profit of JPY820mn (versus a JPY247 loss in FY09/20).

The number of companies in the investment portfolio grew to 66 as of November 2021. Total investment was about JPY2.8bn as of November 2021.

Full-year company forecast for FY09/22

(JPYmn)		FY09/20	FY09/21	FY09/22
		Act.	Act.	Est.
Handling volume		74,700	33,600
	YoY	-48.8%	-55.0%
Operating revenue		21,241	17,662	13,000
	YoY	-12.6%	-16.8%	-26.4%
Operating profit		-8,994	3,158	1,000
	YoY	-	-	-68.3%
Pre-tax profit		-9,190	3,059	940
	YoY	-	-	-69.3%
Profit attributable to owners of the parent		-8,692	2,361	700
	YoY	-	-	-70.4%

Source: Shared Research based on company data
Note: FY09/20 handling volume includes handling volume for discontinued operations.

Initial forecast (as of November 12, 2021)

Airtrip forecasts FY09/22 revenue of JPY13.0bn (-26.4% YoY), operating profit of JPY1.0bn (-68.3% YoY), pre-tax profit of JPY940mn (-69.3% YoY), profit attributable to owners of the parent of JPY700mn (-70.4% YoY), and basic EPS of JPY31.66.
The company did not disclose an annual dividend forecast. In light of ongoing uncertainty in regard to socioeconomic conditions, the company stated that it was issuing conservative forecasts that did not take into account potential upside factors, including an earnings contribution from a recovery in domestic travel owing to the Go To Travel campaign, a recovery in overseas travel, a recovery in the number of tourists visiting Japan, and a contribution from the Investment business.

The Go To Travel campaign is a subsidy-based program implemented by the Japanese government to assist tourism-related businesses impacted by the COVID-19 pandemic. The campaign was initially launched in July 2020, but was temporarily suspended in December of the same year as the spread of COVID-19 intensified. As of November 12, 2021, it was being reported that the government intends to resume the program from January 2022 amid an ongoing decline in the number of new cases. It is also being reported that as part of the campaign resuming, the government is likely to require proof of vaccination and negative test results, is reviewing items that were the subject of criticisms before the suspension, and is discussing ways to encourage people to stay at small and medium-sized lodging facilities and travel during the week.

Historical company forecasts vs. results

Results versus Initial Estimates		FY09/16	FY09/17	FY09/18	FY09/19	FY09/20	FY09/21
(JPYmn)		Cons.	IFRS	IFRS	IFRS	IFRS	IFRS
	Operating revenue (Initial Est.)	3,669	6,147	7,050	-	38,000	24,300
	Operating revenue (Results)	4,001	5,534	12,451	24,306	21,241	17,662
Results versus Initial Estimates		9.0%	-10.0%	76.6%	-	-44.1%	-27.3%
	Operating profit (Initial Est.)	481	1,001	1,500	na	2,000	449
	Operating profit (Results)	618	731	1,239	676	-8,994	3,158
Results versus Initial Estimates		28.6%	-27.0%	-17.4%	-	-	603.3%
	Pre-tax profit (Initial Est.)	449	961	na	na	1,900	389
	Pre-tax profit (Results)	696	1,095	1,226	588	-9,190	3,059
Results versus Initial Estimates		55.0%	13.9%	-	-	-	686.4%
	Net income attributable to owners of the parent (Initial Est)	270	594	881	na	1,300	275
	Net income attributable to owners of the parent (Act.)	340	420	942	731	-8,692	2,361
Results versus Initial Estimates		26.0%	-29.3%	6.9%	-	-	758.5%

Source: Shared Research based on company data
Note: Figures may differ from company data owing to differences in rounding methods.

In FY09/19, the company disclosed only a handling volume target. The impact from the spread of COVID-19 from around February 2020 contributed to operating revenue in FY09/20 falling substantially short of the management’s initial forecast and the company booking impairment losses, included as part of operating losses, of JPY7.0bn.

“AirTrip 2022” growth strategy

At the FY09/21 results briefing, the company announced its “AirTrip 2022” growth strategy. Shared Research intends to provide additional details following FY09/21 results interviews with company representatives.

AirTrip Travel Agency

In the domestic travel business, the company looks for a recovery in demand in Q1, the Go To Travel campaign contributing to an improvement in earnings in Q2 and Q3, and enhanced travel demand in Q4. Management aims to expand earnings through strategic mass-marketing investment throughout the year.

In the overseas travel business, the company looks for earnings to remain flat in Q1 and Q2 due to ongoing entry restrictions and quarantine requirements, but a gradual recovery in demand from Q3 in areas easing those measures. On the other hand, the company targets a quick recovery in profitability by expanding its product lineup catering to overseas travel demand and improving UI (User Interface) and UX (User Experience).

Medium-term growth strategy “AirTrip 5000”

On November 14, 2019, the company announced its medium-term growth strategy “AirTrip 5,000.” It is aiming for FY09/24 handling volume of JPY500bn (with FY09/19 as the base year, this is a CAGR of about 28%) with comprehensive strengthening of the AirTrip Travel Agency business and add-on growth areas through M&A. The company announced its medium-term growth strategy before the COVID-19 outbreak, but at the briefing to discuss FY09/20 results indicated that it would continue to work to achieve the targets in the “AirTrip 5000” medium-term growth strategy. Given the sharp decline in handling volume in FY09/20 as a result of the spread of COVID-19, the company in order to achieve its targets will need to post a CAGR of 61% in handling volume through FY09/24, based on the figure in FY09/20 (including discontinued operations).

Structural changes in the industry after the medium-term growth strategy announcement

The spread of COVID-19 resulted in structural changes taking place in the industry shortly after the company announced its medium-term growth strategy in November 2019. While the company expects business-related travel demand to decline as a result of the COVID-19 pandemic, management also expects to see its market share expand as users increasingly shift to Internet-based services. In November 2020, the company noted that the medium- to long-term impact was still rather difficult to assess, but that the impact from the Internet was likely to be greater than that from COVID-19.

The company expects travel demand to recover as COVID-19 is brought under control, but does not expect business-related travel, including domestic business travel, to recover to the level it held prior to the arrival of COVID-19. Management believes a structural shift is likely underway, especially with domestic business travel showing no significant recovery from the level seen in June–July 2020.

On the other hand, the company as the largest OTA in Japan is likely to benefit should travel demand recover as a result of consumers increasingly turning to Internet-based services. Beginning in summer 2020, store-based travel agencies one after another announced sharp reductions in store counts in line with the need to reduce fixed costs as demand for travel decreased and consumers increasingly turned to the Internet as part of their effort to avoid the spread of COVID-19. In contrast, AirTrip Plus, which the company launched in 2019 to sell airline ticket and hotel bookings as a packed set, is seeing an enhanced market share as its products are eligible for the government’s Go To Travel campaign.

Medium-term growth strategy “AirTrip 5000” (announced on November 14, 2019)

AirTrip is targeting FY09/24 handling volume of JPY500bn, which represents a CAGR of 28% if FY09/19 is taken as the base year. This CAGR is higher than the 23% growth rate targeted in the FY09/20 forecast, but the company believes it can also achieve growth in the medium to long term via M&A.

Organic growth

The company says the direction of its organic growth plan will not change substantially from that outlined in its FY09/20 forecast. It aims to achieve rapid growth by shifting from a lineup centered on airline tickets sold individually to airline ticket and hotel booking sets (AirTrip Plus).

M&A strategy

AirTrip aims to expand its product lineup by acquiring companies with superior products and to extend its sales channels by acquiring companies with excellent customer reach. It says it wants to acquire companies that can be turned around using three main measures: cost reduction that does not involve personnel restructuring, enhanced development leveraging offshore development capabilities, and enhanced marketing. It also says it will consider large acquisitions.

Business

Description

AirTrip is an online travel agency (OTA) providing travel-related content centered on its comprehensive travel platform called “AirTrip.” In FY09/20, the company had three business segments: Online Travel Agency (AirTrip Travel Agency, Healthcare, Inbound Travel/Wi-Fi Rental, and Media), IT Offshore Development, and Investment. The Online Travel Agency business was the core business (with 88.5% of sales and 72.5% of operating profit in FY09/19). With handling volume of PY146.0bn (+75.5% YoY) in FY09/19, it was the top domestic OTA. Impacted by the effects from the COVID-19 pandemic, handling volume, including for discontinued operations, was just JPY74.7bn in FY09/20, down sharply from JPY146.0bn in FY09/19.

In the AirTrip Travel Agency business, the company sells airline tickets and hotel bookings either individually or as sets (AirTrip Plus). Its three key sales channels are B2C (selling directly to consumers under its own brand), B2B2C (selling under the brands of other companies, including travel agencies), and business travel management (BTM, providing companies with a dedicated search system for business travel arrangements). Handling volume declined sharply since February 2020, with the company booking FY09/20 impairment losses (included in operating losses) of JPY7.0bn. Handling volume in domestic travel has started to recover since the state of emergency ended (June 2020), but handling volume in overseas travel has been a mere few percent of year-ago levels.

Performance by segment

Performance by segment		FY09/13	FY09/14	FY09/15	FY09/16	FY09/17	FY09/17	FY09/18	FY09/19	FY09/20
(JPYmn)		Par.	Cons.	Cons.	Cons.	Cons.	IFRS	IFRS	IFRS	IFRS
Operating revenue (Sales)		-	1,451	2,755	4,001	5,534	5,533	12,451	24,306	21,241
	Online Travel Agency	-	997	1,718	2,897	3,895	3,893	10,112	21,505	18,794
	IT Offshore Development	-	343	879	1,099	1,534	1,534	2,153	2,455	1,888
	Investment	-	-	-	-	103	103	161	345	558
	Other	-	112	158	4	2	1	-	-	-
YoY		-	-	89.8%	45.2%	38.3%	-	125.0%	95.2%	-12.6%
	Online Travel Agency	-	-	72.3%	68.7%	34.4%	-	159.7%	112.7%	-12.6%
	IT Offshore Development	-	-	156.4%	25.1%	39.5%	-	40.4%	14.0%	-23.1%
	Investment	-	-	-	-	-	-	56.3%	114.3%	61.7%
	Other	-	-	41.9%	-97.5%	-49.4%	-	-	-	-
% of operating revenue (sales)		-	100.0%	100.0%	100.0%	100.0%	100.0%	99.8%	100.0%	100.0%
	Online Travel Agency	-	68.7%	62.4%	72.4%	70.4%	70.4%	81.2%	88.5%	88.5%
	IT Offshore Development	-	23.6%	31.9%	27.5%	27.7%	27.7%	17.3%	10.1%	8.9%
	Investment	-	-	-	-	1.9%	1.9%	1.3%	1.4%	2.6%
	Other	-	7.7%	5.8%	0.1%	0.0%	0.0%	0.0%	0.0%	0.0%
Operating profit		-	99	313	618	731	1,088	1,239	676	-8,994
	Online Travel Agency	-	346	562	944	965	824	269	1,110	-7,544
	IT Offshore Development	-	32	19	83	163	168	148	172	0
	Investment	-	-	-	-	68	438	1,305	332	-247
	Other	-	-72	3	0	0	0	0	0	0
	Adjustments	-	-207	-271	-408	-466	-342	-571	-938	-1,204
YoY		-	-	215.2%	97.7%	18.2%	-	13.9%	-45.4%	-
	Online Travel Agency	-	-	62.3%	68.0%	2.2%	-	-67.4%	312.6%	-
	IT Offshore Development	-	-	-41.0%	342.1%	97.2%	-	-11.9%	16.2%	-
	Investment	-	-	-	-	-	-	197.9%	-74.6%	-
	Other	-	-	-	-	-51.5%	-	-	-	-
OPM (excluding adjustments)		-	6.8%	11.4%	15.5%	13.2%	19.7%	10.0%	2.8%	-42.3%
	Online Travel Agency	-	34.7%	32.7%	32.6%	24.8%	21.2%	2.7%	5.2%	-40.1%
	IT Offshore Development	-	9.3%	2.1%	7.5%	10.7%	11.0%	6.9%	7.0%	0.0%
	Investment	-	-	-	-	66.1%	425.2%	810.6%	96.2%	-44.3%
	Other	-	-64.2%	1.9%	-0.8%	-0.8%	-	-	-	-
% of operating profit (including adjustments)		-	100.0%	100.0%	100.0%	100.0%	100.0%	95.1%	100.0%	100.0%
	Online Travel Agency	-	113.0%	96.3%	91.9%	80.6%	57.6%	14.9%	68.8%	96.8%
	IT Offshore Development	-	10.4%	3.2%	8.1%	13.7%	11.7%	8.2%	10.7%	0.0%
	Investment	-	-	-	-	5.7%	30.6%	72.1%	20.6%	3.2%
	Other	-	-23.4%	0.5%	0.0%	0.0%	-	-	-	-

Source: Shared Research based on company data

Business domains

In December 2019, AirTrip changed to the following five business domains. Starting with Q1 FY09/20, the Online Travel Agency segment includes AirTrip Travel Agency, Healthcare, Inbound Travel/Wi-Fi Rental, and Media. Due to the impact of COVID-19, the company plans to restructure the group’s business portfolio to focus on profitability and growth potential. It will promote M&A in businesses with good profitability and growth potential that are not directly related to the travel business, but consider withdrawal or sale of less profitable travel-related businesses with weak growth potential by the end of the year.

AirTrip Travel Agency: Providing travel content centered on the comprehensive travel platform “AirTrip”

Healthcare: Providing PCR testing and other services

Inbound Travel/Wi-Fi Rental: Providing travel-related services to meet inbound demand, along with Wi-Fi rental services

Media: Comprising mainly mag2 Co., Ltd. (TSE JASDAQ: 4059), the industry's largest online magazine platform

IT Offshore Development: Providing quality, offshore IT hybrid development

Investment: Conducting mainly late-stage investment in growth companies

Overview by segment

AirTrip Travel Agency

Business model

Sales

In the AirTrip Travel Agency segment, AirTrip handles online reservations and sales of travel products*, mainly domestic airline tickets, overseas airline tickets, hotel bookings, and bullet train tickets. The company primarily purchases tickets from airlines and sells them to individuals and companies. When selling airline tickets, AirTrip receives compensation from both airlines and consumers. Handling volume indicates gross turnover from airline tickets, while commission revenue translates to sales. As of FY09/19, sales were split fairly evenly between domestic-related and international-related products. However, the spread of COVID-19 contributed to a sharp decline in sales in FY09/20, particularly for overseas travel, with overseas travel handling volume as of May 2021 dropping to less than 10% YoY.

*12 types of product: domestic airline tickets, overseas airline tickets, domestic hotels, high-end ryokans, overseas hotels, domestic airline ticket/hotel packages, overseas airline ticket/hotel packages, domestic tours, overseas tours, bullet train tickets, rental cars, and activities.

Travel products in AirTrip Travel Agency

Source: Shared Research based on company data

Three key sales routes

AirTrip has three key sales routes in the AirTrip Travel Agency segment: B2C (selling directly to consumers under its own brand); B2B2C (selling under the brands of other companies, including through travel agencies); and BTM (providing corporate travel arrangement services to companies).

Differentiators in airline ticket sales

Unlike companies that only sell tickets directly to consumers, AirTrip uses multiple sales routes. In addition to selling directly to consumers (B2C), it sells through companies that have brand power but no travel service offerings (B2B2C) and to competing OTAs that wish to procure domestic airline tickets at lower costs (B2B). This business model was based on that of an earlier company operated by President Yoshimura, which lacked brand power and financial strength. He launched the model in 2005, when the B2B2C category comprised more than 50 competing companies. AirTrip’s B2B2C business has expanded to include major companies such as H.I.S. Co., Ltd. (TSE1: 9603), Navitime Japan Co., Ltd. (unlisted), and NTT Docomo’s (TSE1: 9437) d travel.

Airline ticket procurement

Domestic airline tickets

AirTrip can purchase airline tickets directly under better conditions than rival OTAs; it is the only OTA to have direct sales agreements with all domestic airlines, allowing it to procure tickets without paying agency fees. Owing to the large volume of airline tickets it sells, AirTrip also receives sales incentives from airlines. These advantages are the result of relationships with airlines Chairman Oishi has built up since his travel agency launch in 1995.

International airline tickets

As a general rule the company procures tickets by connecting to a global airline ticket procurement system, but there are also cases in which it procures tickets directly from carriers for better routes. It has also taken over procurement channels from companies it has acquired, and its strength lies especially in procurement for short-haul flights.

Lodging

Because there are so many small lodging facilities, as a general rule the company procures bookings by connecting to other companies’ systems. However, it also has direct procurement agreements with major hotel chains.

Consumers can buy at a discount while accumulating reward points

When customers purchase/make reservations for air tickets and hotels, they are eligible for AirTrip points (points awarded vary according to a menu** and campaigns). AirTrip reward points may be used for discounts on subsequent purchases, traded for a variety of other points on the G-Point point redemption site, or exchanged into Amazon points for shopping.

**2% of purchase value for domestic air tickets, 7% for high-end ryokans, and 1% for domestic hotels

Revenue structure in AirTrip Travel Agency

Sales growth has focused on the B2B2C business AirTrip commenced in 2005. In FY09/11, the company assumed Japan’s leading position (in handling volume) on domestic airline routes. The main reason for the disparity is that a rise in demand for comparison searches of airline tickets bolstered the OTA market. An upsurge in the number of LCCs and other airlines flying domestic routes (from three in 1990 to 14 in 2018) increased consumer choice and, therefore, demand for comparison searches. At end-May 2018, AirTrip’s handling volume increased substantially with the acquisition from DeNA Co., Ltd. (TSE1: 2432) of DeNA Travel Co., Ltd. (now Airtrip International), which operates a comprehensive travel site.

Revenue recognition

AirTrip says that for airline tickets it recognizes the commission portion of revenue on a net basis on the day tickets are issued. For lodging, it recognizes the commission portion of revenue on a net basis on the first day of the customer’s stay. For AirTrip Plus and tours, it recognizes revenue in the form of product fees and commissions on a gross basis on the date customers return from their trips. For this reason, as the ratio of AirTrip Plus and tour sales increases, the cost ratio rises and GPM falls. AirTrip therefore uses the ratio of cost of sales to handling volume instead of the usual ratio of cost of sales to sales. At the time of customer cancellations, the company recognizes the net amount of cancellation fees as handling volume and revenue.

Basic revenue structure

Since AirTrip’s main business is as an OTA, the company essentially has no stores or store staff. Its main fixed costs are personnel expenses (SG&A expenses) and advertising expenses. Expansion in handling volume leads to improved profitability and competitiveness, making the company’s business model a typical breakeven point model.

Being a travel agency, the company does not refund customers who cancel flight reservations unless it receives a refund from the airline. Put another way, the company is protected from the financial risk of being unable to recover fares due to cancellations.

Profit control

AirTrip controls profits from the following three points of approach. GPM is about 10% versus handling volume.

Pricing strategy: For each product and sales channel, the company controls the balance between price and customer draw.

Commissions from suppliers: International routes have a larger number of carriers, so AirTrip has good pricing competitiveness, making it easier to improve margins.

SG&A expenses: The company controls SG&A expenses, for example by revising aspects of its advertising strategy.

Overview of AirTrip Travel Agency by sales channel/service

B2C channel

Through the B2C channel, AirTrip sells travel products directly to consumers. It mainly sells domestic airline tickets offered through proprietary comparison, search, reservation, and sales sites such as AirTrip. B2C sales are fee revenues for providing travel product comparison, reservation, and sales services, some of which is paid by consumers. Consumer fees include such charges as a commission and credit card usage fee per transaction. Customers of the AirTrip Travel Agency business are mostly in their 20s, 30s, and 40s, and are split fairly evenly between men and women.

AirTrip Plus

On August 14, 2019, the company announced AirTrip Plus, a service that allows users to purchase any combination of domestic and international airline tickets from over 400 companies and more than 600,000 hotel rooms in Japan and overseas.

By purchasing airline tickets and hotel rooms at the same time, users can get a package discount, reducing the cost of travel compared to purchasing services separately.

Unlike the dynamic package services offered by other companies, AirTrip Plus provides users with more options and lower starting prices by handling airline tickets from low-cost carriers (LCC) in addition to full-service carriers (FSC). This is made possible because AirTrip owns the airline ticket search platform.

AirTrip Plus products are sets of airline tickets and hotel bookings, so prices can be set more freely compared to airline tickets sold individually, in which case a set percentage is simply added to the price. However, as there is competition with other companies, GPM for the sets does not differ much from GPM for airline tickets sold individually, and is usually about 10%.

Outline of Go To Travel campaign, recent trends, and the impact on the company

Being an economic stimulus package to help the domestic tourism industry affected by COVID-19, the campaign was allocated roughly JPY1.7tn in the first FY2020 supplementary budget. It was planned to run from July 22, 2020 until spring 2021. However, it was suspended temporarily on December 28, 2020 to a renewed outbreak of the pandemic. It was still suspended as of September 7, 2021. The government is considering reinstating the program once the emergency declaration is lifted, but has not decided on timing or methodology yet. Media reports suggest it is mulling a staged resumption, lower caps on subsidies, and an extended period.

According to the Japan Tourism Agency announcement, the campaign provides a 50% subsidy for travel expenses and accommodation on day and overnight trips in Japan up to a maximum of JPY20,000 per person (JPY10,000 per person for day trips). There are no limits to the length of stay or frequency of use. The subsidy breaks down into roughly 70% travel expenses and 30% in coupons that can be used at the destination. For overnight trips, a package of accommodation and travel tickets will qualify discounts on travel as well as accommodation. For day trips, packages combining round trip tickets with spending at the destination (meals, tours, etc.) will qualify for discounts.

Thus, the campaign offers the biggest savings on relatively high-priced packages and smaller savings on lower-priced packages. Accommodation providers must register to take part in the campaign unless reservations are made through travel agencies. This has sparked criticism that the campaign favors travel agencies and major operators.

AirTrip Plus products are sets of airline tickets and hotel bookings and are eligible for the subsidies in the Go To Travel campaign. As such, the level of the public’s participation in Go To Travel campaign can result in either strong or weak performance in handling volume.

If a cancellation occurs and a cancellation fee is incurred, since the cancellation fee is incurred before the date of return, total revenue may be lower, but the cancellation fee will be brought forward and booked as revenue. Unlike for airline tickets alone, cancellation fees are not often incurred for accommodation packages until about 1.5 months before the scheduled dates of travel. Accordingly, unless a serious situation develops, such as a renewed and rapid spread of COVID-19, the cancellation fee impact on performance is likely to remain rather subdued.

When the Go To Travel campaign was first launched, funding tied to the campaign was divided up and allocated out to various travel agencies, though some of these agencies stopped accepting campaign-related reservations on concerns that funding would prove insufficient. However, the company noted that these issues had been resolved as of November 2020, and that it did not expect to see individual agencies suspending related reservations even on the termination of the campaign due to the exhaustion of its budget.

B2B2C channel

With the B2B2C channel, AirTrip sells travel products (mainly domestic airline tickets) to consumers via other companies’ comparison and sales sites. B2B2C sales (commission revenue) break down similarly to B2C sales: half are received from consumer fees, half from airline commissions. B2B2C handling volume and sales are affected by the customer draw of other companies’ website ads.

In addition to personnel and other operating expenses, expenses in the B2B2C category include commissions AirTrip pays to other companies for the use of their brands. Paid commissions amount to 3% of handling volume. Unlike with B2C, AirTrip in the B2B2C category does not cover advertising and promotional expenses: they are paid by the website operators that own the brands.

Business travel management (BTM)

With BTM, AirTrip sells travel products through Tabi Pro-BTM, a comparison and sales system specializing in arranging business trip transportation and lodging. As with B2C, AirTrip receives commissions from airlines and fees from customers for BTM services; the commissions and fees comprise around 13% of handling volume.

In January 2021, AirTrip BTM changed its name to PikaPaka, and the former PikaPaka changed its name to PikaPaka Medical Services. AirTrip BTM had previously focused on business travel services for the corporate sector, but in light of declining business travel demand, it pivoted to a welfare business including healthcare services (such as PCR testing).

Healthcare

The Healthcare business comprises PikaPaka Corp. and Mental Health Technologies Co., Ltd., and is part of the Online Travel Agency segment.

Making use of the customer base the company has built up through its corporate travel service, PikaPaka is developing services such as PCR testing and COVID-19 insurance for corporate clients as a welfare business. Registered companies can receive various tests and online medical services.

Mental Health Technologies is developing services related to mental health. Through its occupational health physician cloud services, it offers counseling services, e-learning, and AI-based mental health risk diagnostic services.

Inbound Travel/Wi-Fi Rental business

Inbound Travel/Wi-Fi rental includes the following businesses. The Inbound Travel/Wi-Fi Rental business is part of the Online Travel Agency segment.

Camper rentals for inbound tourists

Wi-Fi rentals for inbound tourists, for domestic and overseas use

Dynamic packages for inbound tourists

One-stop service for minpaku (private home rental) hosts (through AirTrip Stay, a joint venture owned 65% by AirTrip and 35% by Airbnb; AirTrip Stay has already moved into the black on a monthly basis)

Media

The Media business is part of the Online Travel Agency segment.

mag2 Co., Ltd. (TSE JASDAQ: 4059)

mag2 is the industry’s largest online magazine platform, with 7.5mn members. It operates media with a total of 7.3mn unique users per month. FY09/20 revenue was JPY683mn and operating profit JPY145mn.

AirTrip subsidiary mag2 Co., Ltd., became a listed company on September 24, 2020. Given that mag2 is a subsidiary, unrealized gains and losses on that company’s shares (acquisition price of about JPY1.4bn, market capitalization as of November 2020 of JPY6.0bn, remaining stake of about 75%) are not reflected in AirTrip’s consolidated results.

IT Offshore Development

Business model

In the IT Offshore Development segment, Vietnamese consolidated subsidiary Evolable Asia Co., Ltd., is mainly responsible for developing AirTrip’s systems for online sales of travel products and provides exclusive teams of engineers and offices for Japanese companies looking to develop offshore*. The company invoices customers based on a monthly charge per employee and employee numbers. Sales are affected by the number of engineers the company provides to its customers and their monthly wages.

* Evolable Asia Co., Ltd. and Evolable Asia Solutions Co., Ltd. are in charge of systems development. Evolable Asia Solution & Business Consultancy Co., Ltd. runs business process outsourcing (BPO) operations. Game development is the responsibility of Punch Entertainment (Vietnam) Company Limited (subsidiary of Evolable Asia Co., Ltd.), GREVO Co., Ltd. (a joint venture of Evolable Asia Co., Ltd. and GREE, Inc. [TSE1: 3632)), and Kayac Hanoi Co., Ltd. Evolable Asia Agent runs a recruitment agency.

In hybrid development, a Vietnamese project manager conducts upstream processes such as defining project specifications in Japan and manages a development team in Vietnam. This method helps to minimize the sort of miscommunication that tends to occur in offshore development. Clients simply give orders (in Japanese) to a liaison engineer assigned to AirTrip’s office.

Investment

AirTrip had previously invested in growth companies, and it established a new Investment segment for that purpose in FY09/17. As of August 2021, it had invested a total of some JPY2.8bn in 66 companies. According to material released by the company in June 2021 pertaining to its CVC and investment business, about 80% of its investees have progressed to the so-called N-3 phase, so multiple IPOs each fiscal year hereafter are likely.

AirTrip’s policy is to focus on capital gain and invest within a scope suited to investees’ valuation. As a result, many of the company’s investments are made at a later stage. Investees tend to be involved in online services, with many becoming clients of the company’s IT Offshore Development business. AirTrip’s policy is to watch investees’ valuation following initial public offering and sell its interest at an opportune time.

Companies in which AirTrip has invested (as of September 7, 2021)

IPOs

Company	Summary
Wagokoro Co., Ltd. (TSE Mothers: 9271)	Aiming to promote Japanese culture to the world, provides products and services characterized by Japanese tradition, art, and culture, mainly targeting inbound tourists.
Piala Inc. (TSE Mothers: 7044)	Owns RESULT platform (marketing automation system) and provides direct marketing support services to about 650 companies.
Branding Technology Inc. (TSE Mothers: 7067)	Operates a branding, digital marketing, and offshore development-related business targeting SMEs, mid-tier companies, and startups. Provides a one-stop marketing solution that covers planning, production, operation, and consulting.
AI Cross Inc. (TSE Mothers: 4476)	Operates a two-way SMS service and AI-based business chat service InCircle as B2B mobile communication platforms.
Cyber Security Cloud, Inc. (TSE Mothers: 4493)	Operates cloud type WAF Kougeki Shadan Kun, which identifies and blocks cyberattacks and provides related consulting services.
Headwaters Co., Ltd.	Known for track record of developing and implementing Japan's leading robot apps. Develops proprietary robot apps such as Pepper, the humanoid robot supplied by Softbank Robotics.

Other exits

Company	Summary
Kanxashi Corporation (partially exited)	Business centered on Kanxashi Cloud, a reservation site management tool for accommodation facilities. Cloud service freely linking accommodation reservation sites provides services to improve efficiency of administrative processes of hotels.
Metro Engines Co., Ltd. (partially exited)	Provides online services to help improve operational efficiency to hotel, ryokan, and vacation rental businesses such as dynamic pricing incorporating artificial intelligence and machine learning and a variety of analysis.
Senkyo Inc. (exited)	Provides Smart Election platform to support politicians' campaigns and political activity. Motto: "Making democracy smarter and Japan more exciting."

Investees

Company	Summary
hachidori	Provides hachidori, a chatbot development tool that requires no knowledge of programming. Chatbots use AI automated responses to customer inquiries.
Robot Payment Inc.	Provides Keiri no Mikata, a cloud service that manages, integrates, and automates billing and collection processes. Using robots for automation and efficiency improvement, the service automates all payment-related processes.
adval	Operates supenavi, Japan’s largest rental space matching site, develops and operates own rental spaces (space management business), platform, and runs bukenavi, a search site for commercial properties with fixtures and equipment left by previous tenants.
Willgate, Inc.	Content marketing business, has worked with over 3,000 companies. Provides a one stop web marketing solution that draws on its content production capability.
donut robotics	Specializes in robots. Mainly develops, manufactures, and sells home-use robots. Developed Cinnamon, the first home robot to provide medical assistance, which the company plans to market.
Cocolive, Inc.	Provides KASIKA, which analyzes and presents customer information for real estate companies, thereby transforming their approach to customers seeking homes.
Golf Life Inc.	Runs scramble golf tournaments and a golf academy. Support business with the concept of greater enjoyment of golf.
Ambition Corporation (TSE Mothers: 3300; partially exited)	Main business is subleasing condominiums, targeting younger consumers in city center locations. Services fulfill consumer needs at different life stages, such as Kariageoh (subleasing), real estate rental agency Room Pia, and Valor (residential real estate rental and management business).
Chikujin.jp	Employment agency that attracts and assigns skilled and experienced workers from around the world in food service, customer service, and nursing care. Uses strong ties with overseas organizations and proprietary HR management system.
MapleSystems Co., Ltd	Provides technical support services that assign full-time engineers, develops its own apps, and offers system consulting services. Provides PRO-SESS, Japan’s first direct matching platform for engineers and customers.
NIC Holdings Co., Ltd.	Seeking "Standard in 10 years (but nonexistent today)", aggressively utilizes AI based on the concept of fusing digital (use of ICT) and analog (real-world) marketing.
Fast Japan Co., Ltd.	Provides Tabiko, a chat help and advice service for inbound tourists in English and Traditional Chinese for a safe, secure vacation experience in Japan.
Upsell-Technologies Inc.	Marketing agent that creates business schemes that sell for clients. Strengthens inside sales operations by using AI.
AOS Data, Inc.	Provides AOSBOX AI Plus, a cloud backup service that safely backs up data, which are assets for all companies, so that they can manage and utilize voluminous big data smartly using artificial intelligence (AI).
TrendExpress Inc.	With a mission to “connect people to the world,” the company is expanding its cross-border marketing business (crossbound business) mainly in China. It provides information dissemination services to Chinese companies and Japanese companies seeking to expand in China.
EXTECH	Development of automatic currency exchange machines with fintech features that harness IoT and AI technologies. The machines offer multiple currency and language options to provide a safe, convenient service.
StockTech Inc. (formerly concourse Inc.)	Runs M&A management, online media, online ad agency and other businesses with philosophy of combining content (information) and media to create meeting places.
FANTAS technology Inc.	FANTAS incorporates technology to realize its vision of building smarter industry standards for the real estate market. The company operates investment crowdfunding platform “FANTAS funding” and several owned media platforms.
PetitJob Inc.	Real-time matching of job seekers to recruiting companies using GPS feature of smartphones. Company's philosophy is to make work a happier activity in the age of diverse working styles by fulfilling the needs of people who want immediate work and companies that want to hire people quickly.
Bike Startup & Co.	Operates online business specializing in cycling, centered on Japan’s leading cycling medium FRAME. Its mission is to harness technology to make cycling more enjoyable for sporting and leisure cyclists.
Conversion Technology, Inc.	Provides consultations to solve issues based on behavioral data obtained through its in-site remarketing tool, KaiU. Also uses AI to provide effective total solutions.
CINQSMILE Inc.	Supplies RECOG, a teamwork app for organizations that use Homelog, an SNS that improves employee engagement by encouraging users to thank and complement each other in the form of digital comments. RECOG visualizes Homelog’s effects and gathers and analyzes the data. CINQSMILE has sold RECOG to more than 1,000 companies in three years.
Switch Smile Co., Ltd.	Operates a location information platform business using beacons. Performs advertising and data mining by storing location information and behavior data in DMP. Also provides LINE BOT platform.
Cross Media Networks Corp.	Provides an information and advertising distribution service to smartphones via smartphone apps using IoT digital signage and beacons embedded in signage.
Marketing-Robotics Inc.	Develops and operates marketing automation tool KAIGAN. Additionally provides marketing automation agency and marketing automation recruitment services. Dramatically improves companies’ sales process by automating prospect development and management functions.
Shuminavi Inc.	Operates a hobby/experience matching service to contribute toward an abundant and fulfilling society by helping people lead rewarding lives through hobbies and lifelong learning.
Payment Technology Co., Ltd.	Operates Maebaraidekirukun, a service that enables advance salary payments based on actual hours worked by an employee. The system is free for companies, simple to install, and helps companies strengthen recruitment and improve retention rates.
Financial Agency, Inc.	An advocate for insurance technology, this company aims to employ the latest AI, RPA, and IoT technology to assist with the digitalization of the insurance industry.
Gz, Inc.	With the slogan “Let’s create Asia’s Hollywood!”, primarily engaged in the development and operation of games for smartphones, personal computers, and Nintendo Switch. Also has education and overseas businesses.
Residence Tokyo Co., Ltd.	Engages in business travel management and operations management platform business for residences/accommodation facilities involved in vacation rental associated with long-stay accommodation market.
UNCOVER TRUTH Co., Ltd.	Provides Userdive, a heatmap tool that makes users’ behavior on a web page visible and supports PDCA cycle for data-driven website upgrades.
M.I.T. Holdings Co., Ltd.	Concept is to “make women the world over smiling beauties!” Mainly operates in-store beauty salons. Uses IT for salon sharing and matching salons with beauticians.
Dazzle Inc.	Provides VR entertainment services in collaboration with amusement/theme parks, and also offers a VR service analysis/operation support tool, AccessiVR.
Paple'a Co., Ltd.	Operates PPAT Bridal, cloud-based system which aims at boosting sales and efficiency simultaneously for wedding halls. Provides arrangements that bring a smile to the faces of working people.
Mental Health Technologies Co., Ltd.	Vision is to help make health management a reality. Together with occupational health physicians, provides a variety of services using technology to prevent mental health issues of employees, which is the foundation of health management.
Synapse Corp.	Offers DEPPARI, a business trip management platform meant to make business trips simpler. Ancillary services using AI make relevant recommendations, with everything including management automated.
Tourbase Co., Ltd.	Vision: to make Japan a super tourism destination. Aims at becoming a “tour base” as a tourism logistics platform, taking care of and transporting tourists’ luggage.
Milize, Inc.	Vision: To build next-generation financial consulting platform with AI and financial engineering. Provides Milize, a new financial service using financial engineering, statistics, AI, and big data
Star Resort Co., Ltd.	Provides planning and operating services for hotels targeting inbound tourism. Handles everything from a single villa to 150-room hotels.
Stayway Inc.	Stayway is a hotel and vacation rental cross search and comparison platform with listings from facilities in over 100 countries across the world, including Japan. Also delivers exciting travel information.
Keeyls Co., Ltd.	Operates 24-hour face-to-face identity verification and key delivery system “KEY STATION” across Japan. Increases efficiency and enables unmanned operations for private lodging, rental meeting rooms, and open spaces through legally compliant automatic check-in services.
Tetsujin, Inc. (TSE2: 2404)	Mainly operates karaoke stores under the “Karaoke no Tetsujin” brand. Provides differentiated services through internally developed karaoke systems and membership services.
LS Corp.	Plans, operates, and manages lifestyle and influencer hotels with unique inbound tourist targeted branding. Provides modern customers with places and experiences that focus on face to face interaction.
Ancar Inc.	Matches buyers and sellers of cars with its network of partnered auto mechanic shops through its Ancar service. Removes middlemen and eliminates consumption taxes, while ensuring safe and fair transactions through a third-party professional.
2501 Inc.	Provides free viewpoint video generation services and video streaming services with a corporate mission to deliver life changing experiences to people around the world.
FC Ryukyu Co., Ltd.	With the operating philosophy of “Loving and being loved by the Okinawan community”, FC Ryukyu operates Okinawa City based J2 football club “FC Ryukyu”, representing the prefecture of Okinawa.
Nailie inc.	Provides Nailie, a C2C app to help customers make appointments directly with manicurists. Aims to provide manicurists with a venue for expressing their individuality.
C2C PTE. LTD.	Provides C2C platform to support matching between providers and users of C2C services. Aims to help companies to grow in various industries and solve social issues through joint development with them.
Japan M&A Solutions Co., Ltd.	Aims to be the top M&A company in Japan in terms of number of deals closed, with a policy of never turning down a consultation. Provides comprehensive proposal-based services including M&A advisory and consulting to SMEs with needs related to business succession, consolidation, and revitalization.
Last One Mile Co., Ltd.	Provides Last One Mile platform to market excellent services. Its core business is Last One Mile, linking companies with customers, aiming to bring happiness to customers worldwide by delivering innovative services in the 21st century.
Trust Co., Ltd.	Provides one-stop services: from property search for companies relocating/renovating offices/stores, through space design and website production. Also helps with digital transformation (systems development and network configuration) in the construction industry, leveraging IT services.
AJ InterBridge Inc.	Offers experience of staying, eating, and playing to people around the world, mainly at traditional Japanese townhouses (machiya) in Kyoto, Kanazawa, and Takayama since 2010. Its vision is to “build a bridge between Japan and the rest of the world by opening people’s hearts and minds to the wonders of Japanese culture.”

Source: Shared Research based on company website

Cost structure

The company has been working to change its cost structure since FY09/20 in response to the decline in handling volume associated with the spread of COVID-19 and improve its breakeven point. The company continued to reduce cash out costs across the group, and as of Q1 FY09/21, SG&A expenses stood at roughly JPY450mn/month. Depending on handling volume, the company aims to limit monthly SG&A expenses in FY09/21 to JPY420–570mn, with monthly fixed costs at JPY260mn–310mn and variable costs at JPY160mn–260mn.

Due to the sharp decline in handling volume amid the spread of COVID-19, the FY09/20 cost structure bears little resemblance with that prevailing previously.

Consolidated cost structure

		FY09/14	FY09/15	FY09/16	FY09/17	FY09/17	FY09/18	FY09/19	FY09/20
(JPYmn)		Cons.	Cons.	Cons.	Cons.	IFRS	IFRS	IFRS	IFRS
Handling volume		15,370	20,655	27,782	40,116	40,016	83,166	145,981	74,700
Operating revenue (Sales)		1,451	2,755	4,001	5,534	5,533	12,451	24,306	21,241
	Cost of sales (operating revenue)	349	730	679	937	937	5,590	11,386	13,737
Gross profit		1,102	2,025	3,322	4,597	4,596	6,861	12,920	7,504
Consolidated SG&A expenses		1,003	1,712	2,703	3,866	3,848	7,234	12,868	9,121
	Salaries and allowances	131	195	369	507	792	1,905	2,969	3,146
	Advertising expenses	369	662	1,269	1,897	1,896	2,964	5,726	2,148
	Sales commission	98	219	311	235	255	662	1,223	826
	Provision for bonuses	5	17	20	14	-	-	-	-
	Provision for loyalty points	0	0	3	1	-	-	-	-
	Provision for shareholder benefits	-	-	15	47	-	-	-	-
	Provision for doubtful accounts	-1	-2	0	-1	-	-	-	-
	Outsourcing expenses	-	-	-	-	428	681	1,057	1,124
	Depreciation and amortization	-	-	-	-	88	383	812	939
	Other	402	621	717	1,166	389	639	1,080	665
Gain on investments		-	-	-	-	370	1,288	150	-412
Other operating revenue		-	-	-	-	2	371	546	330
Other operating expenses		-	-	-	-	-40	-47	-71	-7,296
Operating profit		99	313	618	731	1,088	1,239	676	-8,994
% of handling volume
	Cost of sales (operating revenue)	2.3%	3.5%	2.4%	2.3%	2.3%	6.7%	7.8%	18.4%
Gross profit		7.2%	9.8%	12.0%	11.5%	11.5%	8.2%	8.9%	10.0%
Consolidated SG&A expenses		6.5%	8.3%	9.7%	9.6%	9.6%	8.7%	8.8%	12.2%
	Salaries and allowances	0.9%	0.9%	1.3%	1.3%	2.0%	2.3%	2.0%	4.2%
	Advertising expenses	2.4%	3.2%	4.6%	4.7%	4.7%	3.6%	3.9%	2.9%
	Sales commission	0.6%	1.1%	1.1%	0.6%	0.6%	0.8%	0.8%	1.1%
	Provision for bonuses	0.0%	0.1%	0.1%	0.0%	-	-	-	-
	Provision for loyalty points	0.0%	0.0%	0.0%	0.0%	-	-	-	-
	Provision for shareholder benefits	0.0%	0.0%	0.1%	0.1%	-	-	-	-
	Provision for doubtful accounts	0.0%	0.0%	0.0%	0.0%	-	-	-	-
	Outsourcing expenses	-	-	-	-	1.1%	0.8%	0.7%	1.5%
	Depreciation and amortization	-	-	-	-	0.2%	0.5%	0.6%	1.3%
	Other	2.6%	3.0%	17.9%	21.1%	1.0%	0.8%	0.7%	0.9%
Gain on investments		-	-	-	-	0.9%	1.5%	0.1%	-0.6%
Other operating revenue		-	-	-	-	0.0%	0.4%	0.4%	0.4%
Other operating expenses		-	-	-	-	-0.1%	-0.1%	0.0%	-9.8%
Operating profit		0.6%	1.5%	2.2%	1.8%	2.7%	1.5%	0.5%	-12.0%

Source: Shared Research based on company data
Note: Figures may differ from company data owing to differences in rounding methods.

Cost of sales

The cost ratio changes with the sales mix. AirTrip says that for airline tickets it recognizes the commission portion of revenue on a net basis on the day tickets are issued. For lodging, it recognizes the commission portion of revenue on a net basis on the first day of the customer’s stay. For AirTrip Plus and tours, it recognizes revenue in the form of product fees and commissions on a gross basis on the date customers return from their trips. For this reason, as the ratio of AirTrip Plus and tour sales increases, cost ratio rises and GPM falls. In addition, the cost of sales includes personnel expenses in the IT Offshore Development business.

Salaries and allowances

AirTrip pays salaries and allowances to operators in the AirTrip Travel Agency segment.

On June 24, 2020, the company announced a further business and capital alliance with unlisted company Upsell-Technologies Inc., in which it had already invested. Based on the new alliance, AirTrip will transfer its internal travel operations to Upsell under a business outsourcing agreement. As a result, operational costs are expected to convert to variable costs in stages from July 2020 to September 2021.

Advertising expenses

Advertising and promotional expenses are costs to acquire customers, mainly in B2C, where AirTrip pays Google and other major search engines for product listing ads, as well as YouTube advertising costs. AirTrip has also run TV commercials since August 2017 to boost the branding of AirTrip. Prior to the COVID-19 pandemic, the company had estimated advertising expenses as slightly under 30% of gross profit.

Sales commissions

AirTrip pays sales commissions to settle transactions with credit card companies in B2C. In B2B2C, AirTrip pays commissions for the use of other companies’ websites.

Other expenses

Includes impairment losses. The company booked JPY7.0bn in impairment losses in FY09/20.

Market and value chain

Domestic travel market

Online sales by travel agencies

In 2017, the OTA handling volume by Japanese travel agencies was JPY2.2tn (+36% versus 2015), and the ratio of OTA handling volume to total travel agency handling volume increased to 27.1%. In contrast, the online handling volume for TTAs rose only slightly. This indicates that a portion of TTAs’ offline handling volume has shifted to OTAs.

TTA: Traditional travel agency
OTA: Online travel agency

Breakdown of travel agencies’ handling volume

(JPYbn)		FY2015	FY2017	Change
TTA offline		5,464.5	5,270.3	-3.6%
	% of total	69.8%	63.7%
TTA online		711.4	754.5	6.1%
	% of total	9.1%	9.1%
OTA		1,649.7	2,243.2	36.0%
	% of total	21.1%	27.1%

Source: Shared Research based on Japan Online Travel Market Survey Fourth Edition (Phocuswright Japan)

Domestic online travel market

In the domestic travel market, the online travel market was worth JPY4.5tn in 2017. In 2015, when the last survey was conducted, its value was JPY3.7tn, so there was an increase of 19.5%.

Breakdown of domestic online travel market

(JPYbn)	FY2015	FY2017	Change
Accommodation	1,659.5	2,005.3	20.8%
Airlines	1,208.1	1,436.1	18.9%
Railways	513.2	598.1	16.5%
Busses	228.1	265.3	16.3%
Rental cars	119.1	150.4	26.3%
Cruise	0.0	1.2	-
Total	3,728.0	4,456.4	19.5%

Source: Shared Research based on Japan Online Travel Market Survey Fourth Edition (Phocuswright Japan)

Numbers of Japanese traveling overseas and inbound tourists

In 2020, the number of Japanese traveling overseas fell 84.2% YoY to 3mn and the number of foreign tourists visiting Japan (inbound tourists) 87.1% YoY to 4mn. Both the number of Japanese traveling overseas and inbound tourists in 2020 were negatively affected by the spread of COVID-19. As of June 2021, the pandemic had not been brought under control, so prospects are for an ongoing slump in 2021.

Number of Japanese traveling overseas, number of inbound tourists

(mn)		2011	2012	2013	2014	2015	2016	2017	2018	2019	2020
Overseas travelers		16.99	18.49	17.47	16.90	16.21	17.12	17.89	18.95	20.08	3.17
	YoY	-	8.8%	-5.5%	-3.3%	-4.1%	5.6%	4.5%	6.0%	5.9%	-84.2%
Visitors to Japan		6.22	8.36	10.36	13.41	19.74	24.04	28.69	31.19	31.88	4.12
	YoY	-	34.4%	24.0%	29.4%	47.1%	21.8%	19.3%	8.7%	2.2%	-87.1%

Source: Shared Research based on data from Ministry of Justice and Japan National Tourism Organization (JNTO)

Comparable companies and competitors

AirTrip’s business portfolio contains the AirTrip Travel Agency (online travel agency business) and IT Offshore Development segments. Competitors exist for each business; however, no other company has the same portfolio, making simple comparisons difficult.

Comparable companies and competitors for AirTrip’s AirTrip Travel Agency include Adventure, Ad Tourist Co., Ltd. (unlisted), Sakura Travel Co., Ltd. (unlisted), and the Japanese subsidiary for Expedia (NASDAQ: EXPE).

In IT Offshore Development, one competitor is CO-WELL (unlisted).

Below is an overview of the main comparable companies and competitors for each business.

Adventure, Inc. (TSE Mothers: 6030)

Established in 2006, Adventure is the No. 2 OTA in Japan. The company operates Skyticket, a flight search, comparison, and booking website. Product handling volume totaled about JPY49.6bn in FY06/20. Adventure’s OPM was 0.9% in FY06/20.

Open Door Inc. (TSE1: 3926)

This company operates the TRAVELKO travel comparison site, established in 1997. TRAVELKO conducts bulk searches of travel products with over 350 reservation sites, including AirTrip’s. However, Open Door’s relationship with AirTrip is collaborative rather than competitive.

Listed companies comparable to or competing with AirTrip

Comparison of key financial data				FY13-14	FY14-15	FY15-16	FY16-17	FY17-18	FY18-19	FY19-20
(JPYmn)
AirTrip (6191)				FY09/14	FY09/15	FY09/16	FY09/17	FY09/18	FY09/19	FY09/20
				Cons.	Cons.	Cons.	Cons.	IFRS	IFRS	IFRS
	Operating revenue			1,451	2,755	4,001	5,534	12,451	24,306	21,241
		YoY		51.0%	89.8%	45.2%	38.3%	125.0%	95.2%	-12.6%
		Online Travel Agency		997	1,718	2,897	3,895	10,112	21,505	18,794
			YoY	-	72.3%	68.7%	34.4%	159.6%	112.7%	-12.6%
		IT Offshore Development		343	879	1,099	1,534	2,153	2,455	1,888
			YoY	-	156.4%	25.1%	39.5%	40.3%	14.0%	-23.1%
	Operating profit			99	313	618	731	1,239	676	-8,994
		Operating profit margin		6.8%	11.4%	15.5%	13.2%	10.0%	2.8%	-
		Online Travel Agency		346	562	944	965	269	1,110	-7,544
			Operating profit margin	34.7%	32.7%	32.6%	24.8%	2.7%	5.2%	-40.1%
		IT Offshore Development		32	19	83	163	148	172	-
			Operating profit margin	9.3%	2.1%	7.5%	10.7%	6.9%	7.0%	0.0%
	Profit attributable to owners of the parent			45	172	340	420	942	731	-8,692
	Shareholders' equity			-	341	2,276	2,822	5,135	6,579	389
		ROE		53.1%	67.5%	26.0%	19.1%	23.0%	7.5%	-28.0%
	Number of employees			391	510	616	866	1,412	1,527	1,296
	Sales per employee	Operating revenue per employee		4	5	6	6	9	16	16
		Online Travel Agency		-	-	33	69	390	568	562
			Operating revenue per employee	-	-	88	56	26	38	33
		IT Offshore Development		-	-	548	768	974	941	712
			Operating revenue per employee	-	-	2	2	2	3	3
Adventure (6030)				FY06/14	FY06/15	FY06/16	FY06/17	FY06/18	FY06/19	FY06/20
				Cons.	Cons.	Cons.	Cons.	Cons.	IFRS	IFRS
	Revenue			893	1,510	2,684	5,269	18,788	50,475	49,627
		YoY		-	69.1%	77.7%	96.3%	256.6%	168.7%	-1.7%
	Operating profit			30	158	286	414	527	512	461
		Operating profit margin		3.4%	10.5%	10.7%	7.9%	2.8%	1.0%	0.9%
	Profit attributable to owners of the parent			21	110	146	242	331	185	301
	Shareholders' equity			17	1,028	1,168	1,543	1,406	1,497	1,493
		ROE		292.5%	21.1%	13.3%	17.9%	22.4%	12.7%	20.1%
	Number of employees			12	17	22	37	158	363	365
		Revenue per employee		74	89	122	142	119	139	136
OpenDoor (3926)				FY03/14	FY03/15	FY03/16	FY03/17	FY03/18	FY03/19	FY03/20
				Cons.	Cons.	Cons.	Cons.	Cons.	Cons.	Cons.
	Sales			1,989	2,468	2,997	4,010	4,970	4,937	1,122
		YoY		-	24.1%	21.4%	33.8%	23.9%	-0.7%	-77.3%
	Operating profit			332	850	999	1,156	1,703	1,538	-772
		Operating profit margin		16.7%	34.4%	33.3%	28.8%	34.3%	31.2%	-68.8%
	Net income attributable to owners of the parent			400	536	633	757	1,099	925	-652
	Shareholders' equity			1,787	2,706	3,345	4,140	5,202	6,124	6,210
		ROE		25.1%	23.9%	20.9%	20.2%	23.5%	16.3%	-10.6%
	Number of employees			131	138	143	158	166	179	195
		Sales per employee		15	18	21	25	30	28	6

Source: Shared Research based on company data

Strengths and weaknesses

Strengths

Limited impact from the COVID-19 pandemic by reducing fixed costs in the AirTrip Travel Agency business

As an online travel agency (OTA), AirTrip has no brick-and-mortar stores. It has achieved low fixed costs by outsourcing travel-related operations early in the pandemic, converting some fixed costs to variable costs. As of Q3 FY09/21, gross profit averaged about JPY300mn per month in domestic travel (almost nonexistent in overseas travel) and about the same in other businesses. In terms of SG&A expenses, fixed costs were just under JPY300mn per month and variable costs just over JPY200mn per month. As a result, the group as a whole has been able to maintain profitability month to month.

Cross-selling via dynamic package services (AirTrip Plus)

AirTrip aims to achieve growth by shifting from a lineup centered on airline tickets sold individually to airline ticket and hotel booking sets (AirTrip Plus). Unlike the dynamic package services offered by other companies, AirTrip Plus provides users with more options and lower starting prices by handling airline tickets from low-cost carriers (LCCs) in addition to tickets from full-service carriers. This is made possible by the fact that the company has its own search system for airline tickets. Japan Airlines (JAL group) and All Nippon Airways (ANA group) moving to dynamic pricing for discount airline tickets targeting travel agencies is a tailwind for AirTrip Plus. In addition, the company is well positioned to benefit from the Go To Travel campaign (temporarily suspended as of August 2021 due to a renewed surge of the pandemic), which was introduced by the government to subsidize the tourism industry in response to the spread of COVID-19, as its packaged airline ticket and accommodation products are eligible for those subsidies.

Certain amount of natural customer inflow on improved awareness of the AirTrip brand and higher repeat customer rate

The company has actively promoted the AirTrip brand, spending more than 40% of gross profit on advertising prior to the arrival of COVID-19. One of the company’s important KPIs, organic gross profit (gross profit from customers who arrived at the company’s website by doing a search with AirTrip as a keyword or who used the company’s app, rather than being brought by ads or meta search engines) approximately quintupled over the two years through FY09/19. This indicates improvement in customer awareness of the AirTrip brand and in the repeat customer rate. According to the company’s survey, brand recognition stood at just under 50% as of November 2020.

Weaknesses

Sensitivity of business portfolio to the external environment, since core is the Online Travel Agency business

Due to the pandemic, travel demand for both business and pleasure dropped significantly, resulting in a sharp decline in handling volume from February 2020 onward. As a result, in FY09/20, the company booked impairment losses (included in operating losses) of JPY7.0bn. Handling volume in domestic travel has started to recover since the state of emergency (issued in April 2020) was lifted in June 2020, but handling volume in overseas travel continues to hover at a mere few percent of its year-ago level. The company assumes travel demand will gradually recover once the COVID-19 outbreak is brought under control, but as long as the travel agency business continues as the core of the company's business portfolio, there is no denying its sensitivity to the external environment.

High direct-to-consumer sales ratio by airlines for domestic airline tickets

AirTrip is the leading Japanese OTA in domestic airline tickets, but it had only about 5% of the JPY1.6tn handling volume for domestic airline tickets (2018). This is because domestic airline websites (JAL and ANA groups) dominate direct-to-consumer sales, with a 70% market share.

Weaker global brand awareness and capital strength than overseas OTAs

Overseas, there are OTAs such as Expedia and Booking.com with global brand awareness and strong capital positions that clearly exceed AirTrip’s. As AirTrip expands the scale of its businesses, it is likely to face increasing competition from these companies (or from domestic companies that partner with them). The revenue structure of OTAs is a typical breakeven point model in which the greater the handling volume, the greater the advantage. For this reason, it is not easy for the company to expand into areas in which it would compete with overseas OTAs.

Historical performance and financial statements

Income statement

Income statement		FY09/13	FY09/14	FY09/15	FY09/16	FY09/17	FY09/17	FY09/18	FY09/19	FY09/20
(JPYmn)		Par.	Cons.	Cons.	Cons.	Cons.	IFRS	IFRS	IFRS	IFRS
Operating revenue (Sales)		961	1,451	2,755	4,001	5,534	5,533	12,451	24,306	21,241
	YoY	24.8%	51.0%	89.8%	45.2%	38.3%	-	125.0%	95.2%	-12.6%
Cost of sales (operating revenue)		-	349	730	679	937	937	5,590	11,386	13,737
	Cost ratio	-	24.0%	26.5%	17.0%	16.9%	16.9%	44.9%	46.8%	64.7%
Gross profit		-	1,102	2,025	3,322	4,597	4,596	6,861	12,920	7,504
	Gross profit margin	-	76.0%	73.5%	83.0%	83.1%	83.1%	55.1%	53.2%	35.3%
SG&A expenses		-	1,003	1,712	2,703	3,866	3,848	7,234	12,868	9,121
	YoY	-	-	70.7%	57.9%	43.0%	-	88.0%	77.9%	-29.1%
	SG&A ratio	-	69.1%	62.2%	67.6%	69.9%	69.5%	58.1%	52.9%	42.9%
Gain on investments		-	-	-	-	-	370	1,288	150	-412
Other operating revenue		-	-	-	-	-	2	371	546	330
Other operating expenses		-	-	-	-	-	-40	-47	-71	-7,296
Operating profit		25	99	313	618	731	1,088	1,239	676	-8,994
	YoY	-68.8%	297.0%	215.1%	97.7%	18.1%	-	13.9%	-45.4%	-
	Operating profit margin	2.6%	6.8%	11.4%	15.5%	13.2%	19.7%	10.0%	2.8%	-
Pre-tax profit		23	93	306	571	696	1,095	1,226	588	-9,190
	YoY	-	311.7%	227.2%	87.0%	21.8%	-	12.0%	-52.0%	-
	Pre-tax profit margin	2.4%	6.4%	11.1%	14.3%	12.6%	19.8%	9.8%	2.4%	-
Extraordinary gains (losses)		-	-	-2	1	-	-	-	-	-
Income taxes (tax expenses)		-	-	109	179	162	273	146	165	-80
	Implied tax rate	-	-	35.9%	31.3%	23.3%
Net income attributable to minority (non-controlling) interests		-	24	22	52	113	112	137	19	-133
Profit attributable to owners of the parent		15	45	172	340	420	702	942	731	-8,692
	YoY	-	209.0%	283.3%	97.3%	23.5%	-	34.2%	-22.4%	-
	Profit margin	1.5%	3.1%	6.3%	8.5%	7.6%	12.7%	7.6%	3.0%	-

Source: Shared Research based on company data
Note: Figures may differ from company data owing to differences in rounding methods.

Difference between JGAAP and IFRS

AirTrip (formerly EA) voluntarily adopted International Financial Reporting Standards (IFRS) from FY09/18. Significant differences in earnings results based on JGAAP and IFRS are as follows.

Goodwill amortization: Under JGAAP, goodwill must be amortized annually within 20 years. Under IFRS, the scope of goodwill is different from JGAAP, an impairment test must be conducted at least once a year, and there is no goodwill amortization.

Investment profit/loss: Under IFRS, the valuation of operating investment securities and investment securities (including unlisted securities) at the end of each fiscal year is on a market value basis.

		FY09/14	FY09/15	FY09/16	FY09/17	FY09/17	FY09/18	FY09/19	FY09/20
(JPYmn)		Cons.	Cons.	Cons.	Cons.	IFRS	IFRS	IFRS	IFRS
Handling volume		15,370	20,655	27,782	40,116	40,016	83,166	145,981	74,700
Operating revenue		1,451	2,755	4,001	5,534	5,533	12,451	24,306	21,241
	Cost of operating revenue	349	730	679	937	937	5,590	11,386	13,737
Gross profit		1,102	2,025	3,322	4,597	4,596	6,861	12,920	7,504
Consolidated SG&A expenses		1,003	1,712	2,703	3,866	3,848	7,234	12,868	9,121
	Salaries and allowances	131	195	369	507	792	1,905	2,969	3,146
	Advertising expenses	369	662	1,269	1,897	1,896	2,964	5,726	2,148
	Sales commission	98	219	311	235	255	662	1,223	826
	Provision for bonuses	5	17	20	14	-	-	-	-
	Provision for loyalty points	0	0	3	1	-	-	-	-
	Provision for shareholder benefits	-	-	15	47	-	-	-	-
	Provision for doubtful accounts	-1	-2	0	-1	-	-	-	-
	Outsourcing expenses	-	-	-	-	428	681	1,057	1,124
	Depreciation and amortization	-	-	-	-	88	383	812	939
	Other	402	621	717	1,166	389	639	1,080	665
Gain on investments		-	-	-	-	370	1,288	150	-412
Other operating revenue		-	-	-	-	2	371	546	330
Other operating expenses		-	-	-	-	-40	-47	-71	-7,296
Operating profit		99	313	618	731	1,088	1,239	676	-8,994
% of handling volume
	Cost of operating revenue	2.3%	3.5%	2.4%	2.3%	2.3%	6.7%	7.8%	18.4%
Gross profit		7.2%	9.8%	12.0%	11.5%	11.5%	8.2%	8.9%	10.0%
Consolidated SG&A expenses		6.5%	8.3%	9.7%	9.6%	9.6%	8.7%	8.8%	12.2%
	Salaries and allowances	0.9%	0.9%	1.3%	1.3%	2.0%	2.3%	2.0%	4.2%
	Advertising expenses	2.4%	3.2%	4.6%	4.7%	4.7%	3.6%	3.9%	2.9%
	Sales commission	0.6%	1.1%	1.1%	0.6%	0.6%	0.8%	0.8%	1.1%
	Provision for bonuses	0.0%	0.1%	0.1%	0.0%	-	-	-	-
	Provision for loyalty points	0.0%	0.0%	0.0%	0.0%	-	-	-	-
	Provision for shareholder benefits	0.0%	0.0%	0.1%	0.1%	-	-	-	-
	Provision for doubtful accounts	0.0%	0.0%	0.0%	0.0%	-	-	-	-
	Outsourcing expenses	-	-	-	-	1.1%	0.8%	0.7%	1.5%
	Depreciation and amortization	-	-	-	-	0.2%	0.5%	0.6%	1.3%