Star Flyer Inc.

Aircraft fuel costs are directly linked to crude oil prices, and aircraft lease fees, maintenance costs, and other expenses are recorded mainly in US dollars, so a rise in crude oil prices or a weakening yen could have a significant impact on business performance. As a countermeasure, the Company uses derivative transactions such as commodity swap transactions and foreign exchange forward contracts strictly for hedging purposes, and prohibits speculative use based on the "Regulations on Market Risk Management."

The balance of interest-bearing debt at the end of FY2026 (ending March 2026) reached ¥10,820 million (29.3% of total assets), and an increase in interest burden due to deterioration in financial conditions could affect business performance. In addition, the total amount of unexpired operating lease payments amounted to ¥25,812 million, and if continuous fund procurement for business expansion cannot be secured, there is a risk of delays or changes to business plans such as route development. The Company responds by making early repayments during favorable periods and comparing proposals from multiple leasing companies.

If an economic downturn is prolonged, in addition to a decrease in leisure demand, business travelers, who are the Company's key customers, may decrease due to corporate restrictions on business trips, which could significantly affect business performance. Event risks such as international conflicts, terrorism, and infectious disease outbreaks also greatly affect air travel demand, and there are concerns about reduced convenience due to stricter security regulations and increased insurance premiums and security cost expenses. As a countermeasure, the Company aims to strengthen its financial base through planned accumulation of net assets.

In addition to competition with other airlines, including LCCs, and other modes of transportation such as the Shinkansen, competition with existing carriers arises when new routes are opened, which could significantly affect business performance due to declining sales prices or failure to achieve planned passenger numbers. The Company appropriately stimulates demand and implements yield control, securing revenue opportunities while assessing appropriate pricing and passenger trends.

The Company operates 6 domestic routes and 2 international routes (international routes have been suspended since March 2020), and if Kitakyushu Airport, where headquarters functions are concentrated, or Haneda Airport, where routes are concentrated, becomes unusable, this could have a significant impact on operations and management. The Company aims to reduce business continuity risk through risk diversification by considering diversification of revenue sources over the medium to long term, and through stable system operation via headquarters location in Kitakyushu and a robust data center.

Global supply chain disruptions have caused delays in aircraft and engine manufacturing plans, and there is a possibility that the Company's scheduled aircraft delivery timing could also be delayed from the plan, raising concerns about impact on scheduled flight operations. The Company confirms progress through close communication with aircraft manufacturers and leasing companies, while flexibly adjusting the timing of heavy maintenance for currently operated aircraft and setting flight schedules to avoid flight cancellations.

Since the Company limits the aircraft type and engine used, if a serious defect is discovered in the relevant aircraft type, there is no substitute aircraft available, which could raise serious concerns about continued operations. In addition, the current average aircraft age is approximately 7 years, and future repair and maintenance costs may increase as the fleet ages. The Company suppresses cost concentration through prompt response to maintenance programs provided by manufacturers and by setting planned maintenance opportunities that take the aircraft lifecycle into account.

Since the employment market for qualified personnel such as flight crew, flight operations officers, and maintenance engineers is limited to the aviation industry, if training and securing of such personnel does not proceed as planned, or if a large number become unable to work, this could significantly affect stable operations and route development. The Company always formulates recruitment and training plans looking several years ahead, continues to train qualified personnel in other job categories as well, and aims to prevent personnel attrition through improved treatment and enhanced engagement.

The Company has a wide range of business relationships with All Nippon Airways Co., Ltd., including a code-share cooperation agreement, reservation and sales business contracting agreement, information system usage agreement, and airport handling outsourcing, and ANA Holdings Inc. is both the largest shareholder and a counterparty to aircraft lease agreements. If such partnerships were to be dissolved, this could have a significant impact on operations, and the Company currently addresses this by working to maintain good relationships.

If unauthorized access and other threats become more sophisticated and cause disruptions to information processing, or if personal information is leaked, this could significantly affect business performance due to loss of customer trust and decline in social credibility. As countermeasures, in addition to technical measures such as access authority management, cyberattack countermeasure software, and installation of integrated threat management devices, the Company strengthens its liability risk response and incident response system by taking out specialized business liability insurance (cyber risk insurance).