AirTrip 6191

エアトリ

Recent Updates

2022-01-05

Partial revision of financial results for FY09/21

2022-01-05

Partial revision of financial results for FY09/21

2021-12-17

Full-year FY09/21 report update

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

2022-01-05

Full-year FY09/21 flash update

2021-11-15

Q3 FY09/21 flash update

2021-08-13

Download

Executive summary

Business overview

Core businesses: AirTrip Corp. is an online travel agency (OTA) providing travel-related content centered on its comprehensive travel platform called “AirTrip.” In FY09/21, the company had three business segments: Online Travel Agency (AirTrip Travel Agency, 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. In the AirTrip Travel Agency business, the company sells airline tickets and accommodation individually or as sets (AirTrip Plus). Main sales channels are B2C, where it sells directly to consumers under its own brand, and B2B2C, where it sells via the brands of other companies such as travel agencies.

Segment results: In FY09/21, the company reported total handling volume of JPY33.6bn. On a continuing business basis, the company booked operating revenue of JPY17.5bn (-17.5% YoY), operating profit of JPY3.1bn (versus loss of JPY9.0bn in FY09/20), pre-tax profit of JPY3.0bn (versus loss of JPY9.2bn), and profit attributable to owners of the parent of JPY2.4bn (versus loss of JPY8.7bn). By segment, it booked operating revenue of JPY15.5bn (-17.4% YoY) and segment profit of JPY2.7bn (versus loss of JPY7.5bn in FY09/20) in the Online Travel Agency segment, operating revenue of JPY1.3bn (-33.2% YoY) and segment profit of JPY572mn (versus nothing in FY09/20) in the IT Offshore Development segment, and operating revenue of JPY738mn (+32.3% YoY) and segment profit of JPY731mn (versus loss of JPY247mn in FY09/20) in the Investment segment.

Revenue structure: The AirTrip Travel Agency business, which is a subset of the Online Travel Agency segment, saw a substantial drop in handling volume starting in FY09/20 due to the COVID-19 pandemic. However, as an 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. It has also been diversifying its revenue sources by commercializing PCR testing (included in the Online Travel Agency business). On top of this, the Investment segment, which was already in the works before COVID-19 appeared, is entering the harvest phase. As a result, gross profit was in the range of JPY300–400mn per month in the domestic travel domain, nearly nonexistent in the overseas travel domain, and roughly JPY230mn in other businesses. Meanwhile, in SG&A expenses, fixed expenses came to about JPY250–300mn per month and variable expenses to roughly JPY220–270mn per month (however, this does not include strategic marketing costs).

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 operating revenue of JPY17.5bn (-17.5% YoY), operating profit of JPY3.1bn (versus loss of JPY9.0bn in FY09/20), pre-tax profit of JPY3.0bn (versus loss of JPY9.2bn) and profit attributable to owners of the parent of JPY2.4bn (versus loss of JPY8.7bn). The company revised its full-year forecasts on September 6, 2021. Against these revised forecasts, progress rates were 100.1% for operating revenue, 78.6% for operating profit, 77.0% for pre-tax revenue, and 98.6% 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. With the recording of deferred tax assets, profit attributable to owners of the parent was essentially according to plan.

FY09/22 forecast: Airtrip forecasts FY09/22 operating revenue of JPY13.0bn (-25.8% YoY), operating profit of JPY1.0bn (-68.2% YoY), pre-tax profit of JPY940mn (-69.1% YoY), profit attributable to owners of the parent of JPY700mn (-70.5% 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 recovery in domestic travel owing to the Go To Travel campaign, recovery in overseas travel, recovery in the number of tourists visiting Japan, and a contribution from the Investment business. The initial forecast assumes current levels of operating revenue, gross profit, and SG&A expenses will continue for one year, on top of which the company anticipates additional marketing costs of about JPY500mn.

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.

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) compensation for loss of the overseas travel market by diversifying revenue sources; and 3) cross-selling via dynamic package services (AirTrip Plus).

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	74,700	33,622
	YoY	30.6%	9.8%	34.4%	34.5%	44.4%	-	107.8%	75.5%	-48.8%	-55.0%
Operating revenue		961	1,451	2,755	4,001	5,534	5,533	12,451	24,306	21,241	17,524	13,000
	YoY	24.8%	51.0%	89.8%	45.2%	38.3%	-	125.0%	95.2%	-12.6%	-17.5%	-25.8%
Gross profit		-	1,102	2,025	3,322	4,597	4,596	6,861	12,920	7,504	7,614
	Gross profit margin	-	76.0%	73.5%	83.0%	83.1%	83.1%	55.1%	53.2%	35.3%	43.4%
SG&A expenses		-	1,003	1,712	2,703	3,866	3,848	7,234	12,868	9,121	5,309
	YoY	-	-	70.7%	57.9%	43.0%	-	88.0%	77.9%	-29.1%	-41.8%
	SG&A ratio	-	69.1%	62.2%	67.6%	69.9%	69.5%	58.1%	52.9%	42.9%	30.3%
Gain on investments		-	-	-	-	-	370	1,288	150	-412	209
Other operating revenue		-	-	-	-	-	2	371	546	330	416
Other operating expenses		-	-	-	-	-	-40	-47	-71	-7,296	-407
Operating profit		25	99	313	618	731	1,088	1,239	676	-8,994	3,142	1,000
	YoY	-68.8%	297.0%	215.2%	97.7%	18.2%	-	13.9%	-45.4%	-	-	-68.2%
	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	3,043	940
	YoY	-	311.7%	227.2%	87.0%	21.8%	-	12.0%	-52.0%	-	-	-69.1%
	Pre-tax profit margin	2.4%	6.4%	11.1%	14.3%	12.6%	19.8%	9.8%	2.4%	-	17.4%	7.2%
Profit							814	1,080	751	-8,825	2,514
	YoY						-	32.7%	-30.5%	-	-
	Profit margin						14.7%	8.7%	3.1%	-	14.3%
Profit attributable to owners of the parent		15	45	172	340	420	702	942	731	-8,692	2,372	700
	YoY	-	209.0%	283.3%	97.3%	23.5%	-	34.2%	-22.4%	-	-	-70.5%
	Profit margin	1.5%	3.1%	6.3%	8.5%	7.6%	12.7%	7.6%	3.0%	-	13.5%	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	112.2	31.7
EPS (fully diluted; JPY)		-	-	-	21.1	27.7	40.1	46.7	37.9	-433.8	109.5
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	334.5
Balance sheet (JPYmn)
Current assets		-	892	1,521	4,025	5,158	5,395	15,202	20,140	15,023	15,568
	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	1,298
	Operational investment securities	-	-	-	-	1,100	1,520	3,889	4,606	4,359	4,852
	Inventories	-	13	75	274	45	45	87	428	435	166
	Other current assets	-	254	197	290	487	208	1,463	868	821	479
Fixed assets		-	381	543	817	2,321	2,491	9,736	11,112	6,916	5,804
	Tangible fixed assets	-	59	61	41	367	393	1,111	1,324	480	394
	Intangible assets	-	99	155	306	1,335	1,393	7,403	8,398	5,419	4,166
	Investments and other assets	-	222	328	471	619	705	1,222	1,390	1,017	1,244
Total assets		-	1,273	2,064	4,842	7,479	7,888	24,939	31,253	21,940	21,373
Current liabilities		-	1,022	1,487	2,281	3,519	3,584	15,014	15,717	11,490	8,928
	Trade payables	-	514	669	1,293	1,558	2,045	4,333	4,414	2,646	1,291
	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	2,345
Fixed liabilities		-	49	180	190	733	903	4,444	5,436	7,911	4,308
	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	2,158
Net assets		-	202	397	2,371	3,226	3,400	5,567	10,099	2,538	8,136
	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	3,864
	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	661
Total liabilities and equity		-	1,273	2,064	4,841	7,479	7,888	24,939	31,253	21,940	21,373
Statement of cash flows (JPYmn)
Cash flows from operating activities		-	160	331	605	217	218	527	-76	-559	3,630
Cash flows from investing activities		-	-139	-167	-456	-1,312	-1,437	-1,010	-678	256	-1,715
Cash flows from financing activities		-	112	216	1,477	943	941	3,662	4,459	-1,643	-253
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%	50.1%
Current ratio		-	87.3%	102.3%	176.5%	146.6%	150.5%	101.3%	128.1%	130.7%	174.4%
Fixed ratio		-	188.6%	136.8%	34.5%	71.9%	73.3%	174.9%	110.0%	272.5%	71.3%
Equity ratio		-	13.3%	16.5%	47.0%	37.1%	38.0%	20.4%	31.1%	9.0%	35.0%

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			961	1,451	2,755	4,001	5,534	5,533	12,451	24,306	21,241	17,524
	YoY		24.8%	51.0%	89.8%	45.2%	38.3%	0.0%	125.0%	95.2%	-12.6%	-17.5%
	Online Travel Agency		-	997	1,718	2,897	3,895	3,893	10,112	21,505	18,794	15,518
		YoY	-	-	72.3%	68.7%	34.4%	0.0%	159.7%	112.7%	-12.6%	-17.4%
		% of operating revenue (sales)	-	68.7%	62.4%	72.4%	70.4%	70.4%	81.2%	88.5%	88.5%	88.6%
	IT Offshore Development		-	343	879	1,099	1,534	1,534	2,153	2,455	1,888	1,262
		YoY	-	-	156.4%	25.1%	39.5%	0.0%	40.4%	14.0%	-23.1%	-33.2%
		% of operating revenue (sales)	-	23.6%	31.9%	27.5%	27.7%	27.7%	17.3%	10.1%	8.9%	7.2%
	Investment		-	-	-	-	103	103	161	345	558	738
		YoY	-	-	-	-	-	-0.4%	56.3%	114.3%	61.7%	32.3%
		% of operating revenue (sales)	-	-	-	-	1.9%	1.9%	1.3%	1.4%	2.6%	4.2%
	Other		-	112	158	4	2	1	-	-	-	4
		YoY	-	-	41.9%	-97.5%	-49.4%	-49.3%	-	-	-	-
		% of operating revenue (sales)	-	7.7%	5.8%	0.1%	0.0%	0.0%	0.0%	0.0%	0.0%	0.0%
Operating profit			25	99	313	618	731	1,088	1,239	676	-8,994	3,142
	YoY		-68.8%	297.0%	215.2%	97.7%	18.2%	48.9%	13.9%	-45.4%	-	-
	Operating profit margin		2.6%	6.8%	11.4%	15.5%	13.2%	19.7%	10.0%	2.8%	-	17.9%
	Online Travel Agency		-	346	562	944	965	824	269	1,110	-7,544	2,680
		YoY	-	-	62.3%	68.0%	2.2%	-14.6%	-67.4%	312.6%	-	-
		Operating profit margin	-	34.7%	32.7%	32.6%	24.8%	21.2%	2.7%	5.2%	-	17.3%
		% of total	-	113.0%	96.3%	91.9%	80.6%	57.6%	14.9%	68.8%	-	67.2%
	IT Offshore Development		-	32	19	83	163	168	148	172	0	572
		YoY	-	-	-41.0%	342.1%	97.2%	2.8%	-11.9%	16.2%	-	-
		Operating profit margin	-	9.3%	2.1%	7.5%	10.7%	11.0%	6.9%	7.0%	-	45.3%
		% of total	-	10.4%	3.2%	8.1%	13.7%	11.7%	8.2%	10.7%	-	14.3%
	Investment		-	-	-	-	68	438	1,305	332	-247	731
		YoY	-	-	-	-	-	540.8%	197.9%	-74.6%	-	-
		Operating profit margin	-	-	-	-	66.1%	425.2%	810.6%	96.2%	-	99.1%
		% of total	-	-	-	-	5.7%	30.6%	72.1%	20.6%	-	18.3%
	Other		-	-72	3	-0	-0	-	-	-	-	-
		YoY	-	-	-	-	-	-	-	-	-	-
		Operating profit margin	-	-	1.9%	-	-	-	-	-	-	-
		% of total	-	-	0.5%	-	-	-	-	-	-	-
	Adjustments		-	-207	-271	-408	-466	-342	-571	-938	-1,204	-846

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

Recent updates

Partial revision of financial results for FY09/21

2022-01-05

On December 29, 2021, AirTrip Corp. announced partial revisions to the accounting treatment of operating revenue and estimates of investment profit and loss in its FY09/21 results announcement (out November 12, 2021).

The revised figures for FY09/21 were operating revenue of JPY17.5bn (JPY17.7bn before revision), operating profit of JPY3.1bn (JPY3.2bn), pre-tax profit of JPY3.0bn (JPY3.1bn), profit of JPY2.5bn (JPY2.6bn), profit attributable to owners of the parent of JPY2.4bn (JPY2.4bn), and fully diluted EPS of JPY109.48 (JPY108.96).

Note: Figures in this report reflect the company’s revisions.

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	17,524	100.1%	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%	-17.5%		-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	7,614
	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%	43.4%
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	5,309
	YoY	167.8%	160.1%	119.4%	76.4%	-0.3%	-4.9%	-21.8%	-29.1%	-57.8%	-55.0%	-47.1%	-41.8%
	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%	30.3%
Gain on investments		105	264	430	150	131	-270	-564	-412	72	165	613	209
Other operating revenue		9	220	225	546	149	183	239	330	44	74	231	416
Other operating expenses		-21	-34	-41	-71	-26	-1,066	-1,122	-7,296	-16	-45	-118	-407
Operating profit		-183	178	270	676	202	-1,332	-1,882	-8,994	763	2,001	3,071	3,142	78.6%	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	3,043	77.0%	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%	17.4%		22.6%
Profit attributable to owners of the parent		-201	78	57	731	692	-741	-1,167	-8,692	432	1,286	2,206	2,372	98.6%	2,405
	YoY	-	-84.8%	-91.4%	-22.4%	-	-	-	-	-37.6%	-	-	-		-
	Profit margin	-	-	-	-	8.7%	-	-	-	6.6%	11.5%	15.5%	13.5%		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	3,326
	YoY	191.6%	223.7%	91.5%	33.7%	68.5%	14.4%	-42.5%	-59.1%	-17.8%	-31.3%	-5.4%	-0.2%
Gross profit		2,746	3,137	3,251	3,786	2,961	2,740	1,279	524	1,935	1,920	1,805	1,954
	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%	58.7%
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	1,385
	YoY	167.8%	153.2%	69.6%	13.9%	-0.3%	-9.2%	-53.4%	-49.6%	-57.8%	-52.1%	-16.6%	-18.9%
	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%	41.6%
Operating profit		-183	361	92	406	202	-1,534	-550	-7,112	763	1,238	1,070	71
	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%	2.1%
Pre-tax profit		-204	344	68	380	150	-1,575	-591	-7,174	725	1,230	1,063	25
	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%	0.8%
Profit attributable to owners of the parent		-201	279	-21	674	692	-1,433	-426	-7,525	432	854	920	166
	YoY	-	-37.4%	-	139.9%	-	-	-	-	-37.6%	-	-	-
	Profit margin	-	4.7%	-	8.3%	8.7%	-	-	-	6.6%	18.4%	30.7%	5.0%

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	17,524
	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	15,518
	IT Offshore Development	611	1,142	1,817	2,455	507	1,016	1,461	1,888	426	925	1,088	1,262
	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%	-17.5%
	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%	-17.4%
	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%	-33.2%
	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	3,142
	Online Travel Agency	-196	234	147	1,110	307	-473	-1,025	-7,544	627	1,394	2,160	2,680
	IT Offshore Development	91	111	134	172	40	53	76	0	30	613	602	572
	Investment	97	237	473	332	163	-243	-79	-247	316	435	908	731
	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%	17.3%
	IT Offshore Development	14.9%	9.7%	7.4%	7.0%	7.9%	5.2%	5.2%	-	7.0%	66.3%	55.3%	45.3%
	Investment	-	-	195.5%	96.2%	229.6%	-	-	-	107.1%	126.1%	237.7%	99.1%
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	3,326
	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	2,793
	IT Offshore Development	611	531	675	638	507	509	445	427	426	499	163	174
	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%	-0.2%
	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%	-3.7%
	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%	-59.3%
	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	71
	Online Travel Agency	-196	430	-87	963	307	-780	-552	-6,519	627	767	766	520
	IT Offshore Development	91	20	23	38	40	13	23	-76	30	583	-11	-30
	Investment	97	140	236	-141	163	-406	164	-168	316	119	473	-177
	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%	2.1%
	Online Travel Agency	-	8.0%	-	13.0%	4.1%	-	-	-	10.7%	18.7%	27.4%	18.6%
	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 (after revision by the company)

In FY09/21, the company logged total handling volume of JPY33.6bn. On a continuing business basis, the company booked operating revenue of JPY17.5bn (-17.5% YoY), operating profit of JPY3.1bn (versus loss of JPY9.0bn in FY09/20), pre-tax profit of JPY3.0bn (versus loss of JPY9.2bn) and profit attributable to owners of the parent of JPY2.4bn (versus loss of JPY8.7bn). The company revised its full-year forecasts on September 6, 2021. Against these revised forecasts, progress rates were 100.1% for operating revenue, 78.6% for operating profit, 77.0% for pre-tax revenue, and 98.6% 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. With the recording of deferred tax assets, profit attributable to owners of the parent was essentially according to plan.

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.

The company's Q1 FY09/22 gross profit projections 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 (excluding the aforementioned JPY500mn in marketing costs) from October onward of about JPY220mn to JPY270mn for variable costs and JPY250 to JPY300mn for fixed costs, as handling volume increases.

Airtrip forecasts FY09/22 revenue of JPY13.0bn (-25.8% YoY), operating profit of JPY1.0bn (-68.2% YoY), pre-tax profit of JPY940mn (-69.1% YoY), profit attributable to owners of the parent of JPY700mn (-70.5% 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 recovery in domestic travel owing to the Go To Travel campaign, recovery in overseas travel, recovery in the number of tourists visiting Japan, and a contribution from the Investment business. The initial forecast assumes current levels of operating revenue, gross profit, and SG&A expenses will continue for one year, on top of which the company anticipates additional marketing costs of about JPY500mn. For detail on assumptions underlying the forecast, please refer to the "Full-year company forecast for FY09/22" section.

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 JPY15.5bn (-17.4% YoY) and segment profit of JPY2.7bn (versus loss of JPY7.5bn in FY09/20).

Gross profit in the domestic travel business was JPY430mn in July, JPY310mn in August, and JPY280mn in September. This downward trend was caused by a sharp increase in the number of COVID-19 cases from mid-July onward, which led to a decline in domestic travel demand.

At the time of the Q3 results, the gross profit plan for other businesses was JPY290mn in July, JPY320mn in August, and JPY310mn in September. In fact, gross profit was JPY330mn in July, JPY380mn in August, and JPY290mn in September, so July and August were well above plan. The company says the main reason was that a surge in new COVID-19 cases in July and August caused demand for PCR testing to greatly exceed expectations.

At end-August 2021, PikaPaka Corp. was removed from the scope of consolidation, and the company reorganized the Healthcare business into the AirTrip Travel Agency business and Investment segment. As for recent PCR testing demand, there has been increasing demand for proof of negative test results in connection with events, leisure, and business travel. The company plans to continue cross-selling PCR tests in the AirTrip Travel Agency business.

In the Media business, FY09/21 results for mag2 Co., Ltd. (TSE JASDAQ: 4059) were revenue of JPY666mn (-2.5% YoY), operating profit of JPY127mn (-12.2% YoY), recurring profit of JPY127mn (+0.2% YoY), and profit of JPY86mn (-6.0% YoY).

In the Wi-Fi business, Inbound Platform Corp. reported robust corporate demand for Wi-Fi rentals in Japan and favorable media business targeting foreigners. FY09/21 results for Inbound Platform were revenue of JPY946mn (+68% YoY) and operating profit of JPY59mn (versus loss of JPY104mn in FY09/20).

IT Offshore Development

In FY09/21, the IT Offshore Development segment generated operating revenue of JPY1.3bn (-33.2% YoY) and segment profit of JPY572mn (versus earnings at the breakeven point in FY09/20).

Roughly JPY500mn of the segment operating profit derives from the Q2 deconsolidation of Hybrid Technologies Co., Ltd.

Investment

In FY09/21, the Investment segment generated operating revenue of JPY738mn (+32.3% YoY) and segment profit of JPY731mn (versus loss of JPY247mn 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. In September 2021, investee Robot Payment Inc. (TSE Mothers: 4374) went public, and AirTrip posted a profit of approximately JPY200mn.

Impairment and other losses (including lump-sum depreciation and valuation loss)

The company recorded some JPY900mn in impairment loss, lump-sum depreciation, and valuation loss across the group in Q4. In light of the uncertain travel demand outlook due to the COVID-19 pandemic, it posted impairment loss on software in the Online Travel Agency segment and conducted lump-sum depreciation on a portion of its investments. In addition, it posted valuation loss on a subsidiary's fixed assets and inventory investment in the Online Travel Agency segment and loss on investment in the games business (included in the IT Offshore Development segment). Furthermore, the company posted valuation loss regarding some operating investees due to significant changes in their business models following the spread of COVID-19, which caused them to alter their initial plans and forecasts.

Full-year company forecast for FY09/22

(JPYmn)		FY09/20	FY09/21	FY09/22
		Act.	Act.	Est.
Handling volume		74,700	33,622
	YoY	-48.8%	-55.0%
Operating revenue		21,241	17,524	13,000
	YoY	-12.6%	-17.5%	-25.8%
Operating profit		-8,994	3,142	1,000
	YoY	-	-	-68.2%
Pre-tax profit		-9,190	3,043	940
	YoY	-	-	-69.1%
Profit attributable to owners of the parent		-8,692	2,372	700
	YoY	-	-	-70.5%

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 operating revenue of JPY13.0bn (-25.8% YoY), operating profit of JPY1.0bn (-68.2% YoY), pre-tax profit of JPY940mn (-69.1% YoY), profit attributable to owners of the parent of JPY700mn (-70.5% 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, it stated that it was issuing conservative forecasts that did not take into account potential upside factors, including an earnings contribution from recovery in domestic travel owing to the Go To Travel campaign, recovery in overseas travel, recovery in the number of tourists visiting Japan, and a contribution from the Investment business. When the company announced its initial forecast, the omicron variant of COVID-19 had not yet appeared, but the forecast did incorporate uncertainties related to events that are possible but difficult to anticipate, such as the appearance of variants.

The initial forecast assumes current levels of operating revenue, gross profit, and SG&A expenses will continue for one year, on top of which the company anticipates additional marketing costs of about JPY500mn. Although it has not disclosed a handling volume target, as with operating revenue, the company expects handling volume to remain at the current level (monthly handling volume of JPY2.5–3.0bn) for one year.

The company's Q1 FY09/22 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 (excluding the aforementioned JPY500mn in marketing costs) from October onward of about JPY220–270mn for variable costs and JPY250–300mn for fixed costs, as handling volume increases.

Based on past performance, even if the number of new COVID-19 cases increases again to the level seen in August and September 2021, the company believes it can maintain monthly gross profit of roughly JPY300mn. Even with lingering concerns about infection, if the number of cases remains low as it has recently, the company expects monthly gross profit closer to JPY400mn.

AirTrip plans to increase marketing in FY09/22, since reduced marketing during the earlier part of the pandemic resulted in a decline in awareness of the company's services. However, the timing, scale, and media it will use when injecting the roughly JPY500mn in marketing costs projected by the initial forecast are subject to change, depending on when the Japanese government resumes the Go To Travel campaign, prospects for recovery in domestic travel demand, and the impact of the omicron variant.

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 December 9, 2021, it was being reported that the government intends to resume the program from end-January 2022 amid growing uncertainties such as the recent appearance of the omicron variant. 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. The maximum amount of subsidies is also likely to be lowered and the spring vacation season excluded from subsidy coverage as subsidies are not deemed necessary then because people are likely to travel anyway.

Domestic travel business

With the full lifting of Japan's state of emergency declarations at end-September 2021 and curbing of new infections thereafter, domestic travel demand has been on a recovery track since November 2021. AirTrip's Q1 FY09/22 gross profit projections are JPY330mn for October, JPY370mn for November, and JPY380mn for December. In November 2021, the company began increasing its marketing spending.

Although the initial forecast does not reflect the effects of the Go To Travel campaign, there is a risk that resumption of the campaign will be delayed due to the appearance of the omicron variant of COVID-19. As for domestic air travel demand related to the year-end and New Year holidays, bookings were robust in the second half of November as it became clear the campaign would not resume in time to make a difference. However, the pace of bookings slowed thereafter due to media reports about the omicron variant. As of early December 2021, the company expects domestic air travel demand around the New Year to be only about 50% of what it was before the COVID-19 outbreak began.

Incidentally, prior to the outbreak, monthly gross profit in the domestic travel business averaged about JPY500mn.

Overseas travel business

The initial forecast did not reflect any expectation of recovery in overseas travel, as the company believes it will take quite some time for overseas travel demand to recover. At the start of the fiscal year, gross profit contribution from the business was negligible, but prior to the outbreak, monthly gross profit in the overseas travel business averaged about JPY400mn.

Other businesses

The company expects monthly gross profit from other businesses to be roughly JPY230mn in Q1 FY09/22, down from JPY290–380mn in Q4 FY09/21. This is mainly due to the full lifting of Japan's emergency declarations in September 2021 and steady decline in new COVID-19 cases since then, which is expected to reduce anxiety-induced demand for PCR testing. The company says monthly gross profit from PCR testing has been just under JPY100mn recently.

Media (mag2)

In the Media business, the FY09/22 forecast for mag2 Co., Ltd. (TSE JASDAQ: 4059) calls for revenue of JPY710mn (+6.7% YoY), operating profit of JPY62mn (-51.4% YoY), recurring profit of JPY62mn (-51.1% YoY), and profit of JPY42mn (-50.8% YoY).

Investment

The initial forecast does not reflect the contribution of the investment business. For reference, in FY09/21, the Investment segment generated operating revenue of JPY738mn (+32.3% YoY) and segment profit of JPY731mn (versus loss of JPY247mn in FY09/20). After the initial forecast was released, investee Last One Mile Co., Ltd. (TSE Mothers: 9252) conducted an IPO and group company Hybrid Technologies Co., Ltd. (TSE Mothers: 4260) announced that it plans to conduct an IPO on December 23, 2021. AirTrip considers Hybrid Technologies an equity-method affiliate, so an IPO by Hybrid Technologies will not affect AirTrip's income statement, since AirTrip will conduct no secondary offering at that time. In the event that it sells its holdings thereafter, AirTrip would realize gain or loss on the sale, but since there is a six-month lock-up, it is unable to sell any shares until late June 2022. The company also has several other investees in advanced stages in its pipeline.

Historical company forecasts versus 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	17,524
Results versus Initial Estimates		9.0%	-10.0%	76.6%	-	-44.1%	-27.9%
	Operating profit (Initial Est.)	481	1,001	1,500	na	2,000	449
	Operating profit (Results)	618	731	1,239	676	-8,994	3,142
Results versus Initial Estimates		28.6%	-27.0%	-17.4%	-	-	599.8%
	Pre-tax profit (Initial Est.)	449	961	na	na	1,900	389
	Pre-tax profit (Results)	696	1,095	1,226	588	-9,190	3,043
Results versus Initial Estimates		55.0%	13.9%	-	-	-	682.3%
	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	2,372
Results versus Initial Estimates		26.0%	-29.3%	6.9%	-	-	762.5%

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.

AirTrip Travel Agency

Unlike the company's conservative initial forecast for FY09/22, the following growth strategy assumes travel demand will recover. However, it should be noted that AirTrip announced this strategy early in the fiscal year, so it does not incorporate any impact from the spread of the omicron variant of COVID-19.

In the domestic travel business, the company looks for recovery in demand in Q1, the Go To Travel campaign contributing to improved earnings in Q2 and Q3, and increased travel demand in Q4. It expects earnings to grow each quarter, with recovery in Q2 being particularly pronounced. 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. It expects earnings to grow each quarter, with recovery in Q3 and Q4 being particularly pronounced. However, even in Q4, it expects revenue from the overseas travel business to be less than half that of the domestic travel business. Nevertheless, 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.

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.

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. On the other hand, users are moving to online services at an accelerating pace, so recovery in travel demand would serve as a tailwind to AirTrip, the top OTA in Japan. Some store-based travel agencies are closing stores due to the need to reduce fixed costs in the face of stagnant travel demand, and users are moving online to lower their likelihood of contracting COVID-19.

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

Core businesses

AirTrip is an online travel agency (OTA) providing travel-related content centered on its comprehensive travel platform called “AirTrip.” In FY09/21, the company had three business segments: Online Travel Agency (AirTrip Travel Agency, 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. In the AirTrip Travel Agency business, the company sells airline tickets and accommodation individually or as sets (AirTrip Plus). Main sales channels are B2C, where it sells directly to consumers under its own brand, and B2B2C, where it sells via the brands of other companies such as travel agencies.

Segments

In FY09/21, the company reported total handling volume of JPY33.6bn. On a continuing business basis, the company booked operating revenue of JPY17.5bn (-17.5% YoY), operating profit of JPY3.1bn (versus loss of JPY9.0bn in FY09/20), pre-tax profit of JPY3.0bn (versus loss of JPY9.2bn), and profit attributable to owners of the parent of JPY2.4bn (versus loss of JPY8.7bn). By segment, it booked operating revenue of JPY15.5bn (-17.4% YoY) and segment profit of JPY2.7bn (versus loss of JPY7.5bn in FY09/20) in the Online Travel Agency segment, operating revenue of JPY1.3bn (-33.2% YoY) and segment profit of JPY572mn (versus nothing in FY09/20) in the IT Offshore Development segment, and operating revenue of JPY738mn (+32.3% YoY) and segment profit of JPY731mn (versus loss of JPY247mn in FY09/20) in the Investment segment.

Revenue structure

The AirTrip Travel Agency business, which is a subset of the Online Travel Agency segment, saw a substantial drop in handling volume starting in FY09/20 due to the COVID-19 pandemic. However, as an 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. It has also been diversifying its revenue sources by commercializing PCR testing (included in the Online Travel Agency business). On top of this, the Investment segment, which was already in the works before COVID-19 appeared, is entering the harvest phase. As a result, gross profit was in the range of JPY300–400mn per month in the domestic travel domain, nearly nonexistent in the overseas travel domain, and roughly JPY230mn in other businesses. Meanwhile, in SG&A expenses, fixed expenses came to about JPY250–300mn per month and variable expenses to roughly JPY220–270mn per month (however, this does not include strategic marketing costs).

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. 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.

Performance by segment

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			961	1,451	2,755	4,001	5,534	5,533	12,451	24,306	21,241	17,524
	YoY		24.8%	51.0%	89.8%	45.2%	38.3%	0.0%	125.0%	95.2%	-12.6%	-17.5%
	Online Travel Agency		-	997	1,718	2,897	3,895	3,893	10,112	21,505	18,794	15,518
		YoY	-	-	72.3%	68.7%	34.4%	0.0%	159.7%	112.7%	-12.6%	-17.4%
		% of operating revenue (sales)	-	68.7%	62.4%	72.4%	70.4%	70.4%	81.2%	88.5%	88.5%	88.6%
	IT Offshore Development		-	343	879	1,099	1,534	1,534	2,153	2,455	1,888	1,262
		YoY	-	-	156.4%	25.1%	39.5%	0.0%	40.4%	14.0%	-23.1%	-33.2%
		% of operating revenue (sales)	-	23.6%	31.9%	27.5%	27.7%	27.7%	17.3%	10.1%	8.9%	7.2%
	Investment		-	-	-	-	103	103	161	345	558	738
		YoY	-	-	-	-	-	-0.4%	56.3%	114.3%	61.7%	32.3%
		% of operating revenue (sales)	-	-	-	-	1.9%	1.9%	1.3%	1.4%	2.6%	4.2%
	Other		-	112	158	4	2	1	-	-	-	4
		YoY	-	-	41.9%	-97.5%	-49.4%	-49.3%	-	-	-	-
		% of operating revenue (sales)	-	7.7%	5.8%	0.1%	0.0%	0.0%	0.0%	0.0%	0.0%	0.0%
Operating profit			25	99	313	618	731	1,088	1,239	676	-8,994	3,142
	YoY		-68.8%	297.0%	215.2%	97.7%	18.2%	48.9%	13.9%	-45.4%	-	-
	Operating profit margin		2.6%	6.8%	11.4%	15.5%	13.2%	19.7%	10.0%	2.8%	-	17.9%
	Online Travel Agency		-	346	562	944	965	824	269	1,110	-7,544	2,680
		YoY	-	-	62.3%	68.0%	2.2%	-14.6%	-67.4%	312.6%	-	-
		Operating profit margin	-	34.7%	32.7%	32.6%	24.8%	21.2%	2.7%	5.2%	-	17.3%
		% of total	-	113.0%	96.3%	91.9%	80.6%	57.6%	14.9%	68.8%	-	67.2%
	IT Offshore Development		-	32	19	83	163	168	148	172	0	572
		YoY	-	-	-41.0%	342.1%	97.2%	2.8%	-11.9%	16.2%	-	-
		Operating profit margin	-	9.3%	2.1%	7.5%	10.7%	11.0%	6.9%	7.0%	-	45.3%
		% of total	-	10.4%	3.2%	8.1%	13.7%	11.7%	8.2%	10.7%	-	14.3%
	Investment		-	-	-	-	68	438	1,305	332	-247	731
		YoY	-	-	-	-	-	540.8%	197.9%	-74.6%	-	-
		Operating profit margin	-	-	-	-	66.1%	425.2%	810.6%	96.2%	-	99.1%
		% of total	-	-	-	-	5.7%	30.6%	72.1%	20.6%	-	18.3%
	Other		-	-72	3	-0	-0	-	-	-	-	-
		YoY	-	-	-	-	-	-	-	-	-	-
		Operating profit margin	-	-	1.9%	-	-	-	-	-	-	-
		% of total	-	-	0.5%	-	-	-	-	-	-	-
	Adjustments		-	-207	-271	-408	-466	-342	-571	-938	-1,204	-846

Source: Shared Research based on company data

Business domains

AirTrip operates in the following five business domains. The Online Travel Agency segment includes AirTrip Travel Agency, Inbound Travel/Wi-Fi Rental, and Media.

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

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 and FY09/21, particularly for overseas travel, with overseas travel handling volume as of November 2021 at less than 10% what it was prior to the pandemic.

*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 Hideki Yoshimura (now CGO), 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 cancelations, the company recognizes the net amount of cancelation 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 cancelations.

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 and recent trends

Being an economic stimulus package to help the domestic tourism industry affected by COVID-19, the Go To Travel 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, due to a renewed outbreak of the pandemic. It was still suspended as of December 9, 2021.

As of December 9, 2021, it was being reported that the government intends to resume the program from end-January 2022 amid various uncertainties such as the recent appearance of the omicron variant. 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. The maximum amount of subsidies is also likely to be lowered and the spring vacation season excluded from subsidy coverage as subsidies are not deemed necessary then because people are more likely to travel anyway.

Go To Travel campaign prior to suspension
According to a Japan Tourism Agency announcement, the campaign provided 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 were 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 qualified for discounts on both travel and accommodation. For day trips, packages combining round trip tickets with spending at the destination (meals, tours, etc.) qualified for discounts.
Thus, the campaign offered the biggest savings on relatively high-priced packages and smaller savings on lower-priced packages. Accommodation providers had to register to take part in the campaign unless reservations were made through travel agencies. This sparked criticism that the campaign favored travel agencies and major operators.
AirTrip Plus products are sets of airline tickets and hotel bookings and are eligible for subsidies under the Go To Travel campaign.
If a cancelation occurs and a cancelation fee is incurred, total revenue may be lower, but the cancelation fee will be brought forward and booked as revenue as the cancelation fee is incurred before the date of return. Unlike for airline tickets alone, cancelation 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 cancelation fee impact on performance is likely to remain rather subdued.

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): Operated via nonconsolidated PikaPaka

With BTM, the company sells travel products through Tabi Pro-BTM, a comparison and sales system specializing in arranging business trip transportation and lodging. As with B2C, it receives commissions from airlines and fees from customers for BTM services. The business was operated by PikaPaka Corp., but at end-August 2021, PapaPaka was removed from the scope of consolidation.

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 operates the industry’s largest online magazine platform. Its various media together had some 97mn unique users as of FY09/21.

mag2 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 December 2021 of roughly JPY2.0bn, remaining stake of about 72%) are not reflected in AirTrip’s consolidated results.

In the Media business, FY09/21 results for mag2 were revenue of JPY666mn (-2.5% YoY), operating profit of JPY127mn (-12.2% YoY), recurring profit of JPY127mn (+0.2% YoY), and profit of JPY86mn (-6.0% YoY).

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 November 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 December 9, 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.
Robot Payment Inc. (TSE Mothers: 4374)	Operates Billing Management Robot, a service for managing, integrating, and automating billing and collection operations, and Online Payment Processing Service, which improves the efficiency of fee collection related to online businesses and B2B transactions, with the professed aim of making the world smile with cloud services connecting money.
Last One Mile Co., Ltd. (TSE Mothers: 9252)	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.

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	Descriptions
hachidori	Provides hachidori, a chatbot development tool that requires no knowledge of programming. Chatbots use AI automated responses to customer inquiries.
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)	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.	Runs M&A management, online media, online ad agency and other businesses with philosophy of combining content (information) and meda 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 a consulting service using KaiU, a website remarketing tool. Harnesses AI to provide an efficient, effective solution package.
CINQSMILE Inc.	Supplies RECOG, a teamwork app for organizations that use Homelog, an SNS that improves employee engagement by encouraging users to thank and compliment 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's 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 Heath 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.
CONOC. inc.	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.”
PikaPaka Corp.	Provides digital transformation support services for medical institutions and planning and operation of PCR testing centers in the healthcare business. Provides corporate travel support services in the welfare business.

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, for example by shifting travel-related operations from fixed costs to variable costs, with the aim of improving its breakeven point. As a result, its cost structure is no longer continuous with what it was through FY09/19. From October 2021 onward, in response to growth in handling volume, the company plans monthly SG&A expenses of JPY220–270mn in variable costs and JPY250–300mn in fixed costs. In addition to this, its FY09/22 plan calls for JPY500mn in marketing costs.

Consolidated cost structure

		FY09/14	FY09/15	FY09/16	FY09/17	FY09/17	FY09/18	FY09/19	FY09/20	FY09/21
(JPYmn)		Cons.	Cons.	Cons.	Cons.	IFRS	IFRS	IFRS	IFRS	IFRS
Handling volume		15,370	20,655	27,782	40,116	40,016	83,166	145,981	74,700	33,622
Operating revenue		1,451	2,755	4,001	5,534	5,533	12,451	24,306	21,241	17,524
	Cost of operating revenue	349	730	679	937	937	5,590	11,386	13,737	9,910
Gross profit		1,102	2,025	3,322	4,597	4,596	6,861	12,920	7,504	7,614
Consolidated SG&A expenses		1,003	1,712	2,703	3,866	3,848	7,234	12,868	9,121	5,309
	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	209
Other operating revenue		-	-	-	-	2	371	546	330	416
Other operating expenses		-	-	-	-	-40	-47	-71	-7,296	-407
Operating profit		99	313	618	731	1,088	1,239	676	-8,994	3,142
% of handling volume
	Cost of operating revenue	2.3%	3.5%	2.4%	2.3%	2.3%	6.7%	7.8%	18.4%	29.5%
Gross profit		7.2%	9.8%	12.0%	11.5%	11.5%	8.2%	8.9%	10.0%	22.6%
Consolidated SG&A expenses		6.5%	8.3%	9.7%	9.6%	9.6%	8.7%	8.8%	12.2%	15.8%
	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%	0.6%
Other operating revenue		-	-	-	-	0.0%	0.4%	0.4%	0.4%	1.2%
Other operating expenses		-	-	-	-	-0.1%	-0.1%	0.0%	-9.8%	-1.2%
Operating profit		0.6%	1.5%	2.2%	1.8%	2.7%	1.5%	0.5%	-12.0%	9.3%

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 were converted 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 also ran TV commercials between August 2017 and the beginning of the COVID-19 outbreak to boost the branding of AirTrip. Prior to the 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 segment) 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 JPY25.4bn in FY06/21.

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	FY20–21
(JPYmn)
AirTrip (6191)				FY09/14	FY09/15	FY09/16	FY09/17	FY09/18	FY09/19	FY09/20	FY09/21
				Cons.	Cons.	Cons.	Cons.	IFRS	IFRS	IFRS	IFRS
	Operating revenue			1,451	2,755	4,001	5,534	12,451	24,306	21,241	17,524
			YoY	51.0%	89.8%	45.2%	38.3%	125.0%	95.2%	-12.6%	-17.5%
		Online Travel Agency		997	1,718	2,897	3,895	10,112	21,505	18,794	15,518
			YoY	-	72.3%	68.7%	34.4%	159.6%	112.7%	-12.6%	-17.4%
		IT Offshore Development		343	879	1,099	1,534	2,153	2,455	1,888	1,262
			YoY	-	156.4%	25.1%	39.5%	40.3%	14.0%	-23.1%	-33.2%
	Operating profit			99	313	618	731	1,239	676	-8,994	3,142
			Operating profit margin	6.8%	11.4%	15.5%	13.2%	10.0%	2.8%	-	17.9%
		Online Travel Agency		346	562	944	965	269	1,110	-7,544	2,680
			Operating profit margin	34.7%	32.7%	32.6%	24.8%	2.7%	5.2%	-40.1%	17.3%
		IT Offshore Development		32	19	83	163	148	172	0	572
			Operating profit margin	9.3%	2.1%	7.5%	10.7%	6.9%	7.0%	0.0%	45.3%
	Net income attributable to owners of the parent			45	172	340	420	942	731	-8,692	2,372
	Shareholders' equity			-	341	2,276	2,822	5,135	6,579	389	5,495
		ROE		53.1%	67.5%	26.0%	19.1%	23.0%	7.5%	-148.5%	50.1%
	Number of employees			391	510	616	866	1,412	1,527	1,296
		Operating revenue per employee		3.7	5.4	6.5	6.4	8.8	15.9	16.4
		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	FY06/21
				Cons.	Cons.	Cons.	Cons.	Cons.	IFRS	IFRS	IFRS
	Revenue			893	1,510	2,684	5,269	18,788	50,475	35,766	36,239
		YoY		-	69.1%	77.7%	96.3%	256.6%	168.7%	-	1.3%
	Operating profit			30	158	286	414	527	512	1,384	983
		Operating profit margin		3.4%	10.5%	10.7%	7.9%	2.8%	1.0%	3.9%	2.7%
	Net income attributable to owners of the parent			21	110	146	242	331	185	72	850
	Shareholders' equity			17	1,028	1,168	1,543	1,406	1,497	1,264	1,675
		ROE		292.5%	21.1%	13.3%	17.9%	22.4%	12.7%	4.8%	44.7%
	Number of employees			12	17	22	37	158	363	365	255
		Revenue per employee		74.5	88.8	122.0	142.4	118.9	139.0	98.0	142.1
OpenDoor (3926)				FY03/15	FY03/16	FY03/17	FY03/18	FY03/19	FY03/20	FY03/21	FY03/22
				Cons.	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%
	Profit 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		15.2	17.9	21.0	25.4	29.9	27.6	5.8

Source: Shared Research based on company data
Note: For Adventure, there is no continuity between FY06/20 and FY06/19 due to the transfer of shares in a subsidiary, so the FY06/20 revenue YoY figure is shown as "-."

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 end-FY09/21, gross profit averaged JPY300–400mn per month in domestic travel (almost no gross profit in overseas travel) and about JPY230mn in other businesses. In terms of SG&A expenses, fixed costs were JPY250–300mn per month and variable costs JPY220–270mn per month (although this does not include strategic marketing costs).

Compensation for loss of overseas travel market by diversifying revenue sources

Before the pandemic, monthly gross profit averaged about JPY400mn in the overseas travel business, but has been almost nonexistent since FY09/20. However, AirTrip has been promoting diversification in revenue sources, for example by establishing a PCR testing business (included in the Online Travel Agency business, with gross profit included in other businesses). In addition, the Investment business, which was already in the works before COVID-19 appeared, is entering the harvest phase. In FY09/21, the Investment segment generated operating revenue of JPY738mn (+32.3% YoY) and segment profit JPY731mn (versus loss of JPY247mn in FY09/20). These revenue sources outside the travel business are compensating for the loss of the overseas travel market.

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.

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 where it was before the pandemic. 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	FY09/21
(JPYmn)		Par.	Cons.	Cons.	Cons.	Cons.	IFRS	IFRS	IFRS	IFRS	IFRS
Operating revenue		961	1,451	2,755	4,001	5,534	5,533	12,451	24,306	21,241	17,524
	YoY	24.8%	51.0%	89.8%	45.2%	38.3%	-	125.0%	95.2%	-12.6%	-17.5%
Cost of operating revenue		-	349	730	679	937	937	5,590	11,386	13,737	9,910
	Cost ratio	-	24.0%	26.5%	17.0%	16.9%	16.9%	44.9%	46.8%	64.7%	56.6%
Gross profit		-	1,102	2,025	3,322	4,597	4,596	6,861	12,920	7,504	7,614
	Gross profit margin	-	76.0%	73.5%	83.0%	83.1%	83.1%	55.1%	53.2%	35.3%	43.4%
SG&A expenses		-	1,003	1,712	2,703	3,866	3,848	7,234	12,868	9,121	5,309
	YoY	-	-	70.7%	57.9%	43.0%	-	88.0%	77.9%	-29.1%	-41.8%
	SG&A ratio	-	69.1%	62.2%	67.6%	69.9%	69.5%	58.1%	52.9%	42.9%	30.3%
Gain on investments		-	-	-	-	-	370	1,288	150	-412	209
Other operating revenue		-	-	-	-	-	2	371	546	330	416
Other operating expenses		-	-	-	-	-	-40	-47	-71	-7,296	-407
Operating profit		25	99	313	618	731	1,088	1,239	676	-8,994	3,142
	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%	-	17.9%
Pre-tax profit		23	93	306	571	696	1,095	1,226	588	-9,190	3,043
	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%	-	17.4%
Extraordinary gains (losses)		-	-	-2	1	-	-	-	-	-	-
Income taxes (tax expenses)		-	-	109	179	162	273	146	165	-80	-528
	Implied tax rate	-	-	35.9%	31.3%	23.3%	24.9%	11.9%	28.1%	0.9%	-17.4%
Net income attributable to minority (non-controlling) interests		-	24	22	52	113	112	137	19	-133	142
Profit attributable to owners of the parent		15	45	172	340	420	702	942	731	-8,692	2,372
	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%	-	13.5%

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, but not including shares in subsidiaries and affiliated companies) at the end of each fiscal year is on a market value basis.

Impairment loss: Under IFRS, impairment loss is included in operating income (loss). The company recorded impairment loss of JPY7.0bn in FY09/20 and JPY285mn in FY09/21.

		FY09/14	FY09/15	FY09/16	FY09/17	FY09/17	FY09/18	FY09/19	FY09/20	FY09/21
(JPYmn)		Cons.	Cons.	Cons.	Cons.	IFRS	IFRS	IFRS	IFRS	IFRS
Handling volume		15,370	20,655	27,782	40,116	40,016	83,166	145,981	74,700	33,622
Operating revenue		1,451	2,755	4,001	5,534	5,533	12,451	24,306	21,241	17,524
	Cost of operating revenue	349	730	679	937	937	5,590	11,386	13,737	9,910
Gross profit		1,102	2,025	3,322	4,597	4,596	6,861	12,920	7,504	7,614
Consolidated SG&A expenses		1,003	1,712	2,703	3,866	3,848	7,234	12,868	9,121	5,309
	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