FY2022-FY2028

Airport Facilities Co. Group (AFC Group)

Medium- to Long-Term
Management Plan
May 13, 2022

Securities Identification Code: 8864

Table of contents

1. AFC Vision

P2

2. Executive summary (outline of the plan)

P3

3. Objective of the Medium- to
Long-Term Management Plan
and the roadmap for the future

P4

4. Overview of the business environment P5
5. Medium- to Long-Term
Management Plan—Basic Policy

P6

6. Business portfolio strategy

P7

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7. Business strategy

P9(i) Haneda Airport 1-Chome project(ii) Airport-related real estate business(iii) Airport-related infrastructure business(iv) Non-airport business(v) Non-asset business(vi) Foreign business(vii) Study on creation of new businesses
toward future prosperity

8. Strengthening of the business foundation

P16

9. Numerical targets

P17

10. Return of profits to shareholders

P18

11. ESG activities

P19

Reference: Review of the previous
Medium-Term Management Plan

P20

1

1. AFC Vision

AFC VISION
Toward creating unique value within and outside airports
In the post-Covid-19 era, with 50 years cumulative knowhow and experience, AFC Group will
endeavor to heighten customer satisfaction and social responsibility in airport and non-airport
related business.
•

With Haneda as a hub, enhancing airport value through, growth in coverage for facilities
and functions across Japan•

Tailored to create unique value for each customer, through their trust•

Ensuring long term sustainable growth, in the ever changing challenges andenvironment

Copyright© AIRPORT FACILITIES CO.,LTD. All Rights Reserved22. Executive summary (outline of the plan)
Further strengthening of
the business foundation

Optimization of the business portfolio
centering on three priority measures
Haneda Airport

Ⅰ 1-Chome projectⅡ

Expansion of
non-asset
businesses

Improvement of
the profitability
Ⅲ of existing
businesses

Human resource andorganization development
strategy

Development of a capital efficiency-conscious business portfolio
resilient to risks
Airport-related
infrastructure businessAirport-related realestate business

Foreign business

Strengthening ofgovernanceNon-airport
business

Use of IT

Restructuring projects

Continuation of sustainable growth anddevelopment of a profit foundation for the next stage
Numerical
targets for
FY2028Net sales:

Net income:

32.0 billion yen

3.3 billion yen

ROA*

5.0%

*ROA (return on assets) = business profit (operating profit + non-operating profit) ÷ total assets

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33. Objective of the Medium- to Long-Term Management Plan
and the roadmap for the future
Emerging from post Covid-19, we are strengthening our management foundation and pro-actively exploringnew business opportunities, to make AFC resilient, through realizing solid sustainable profitability growth forshareholders.
Within this seven years business plan, we are optimistic to achieve sizeable investments in real estate.
FY2022-FY2028

AFC VISION

Medium- to Long-Term
Management Plan

I. Haneda Airport 1-Chome project
A facility redevelopment project in the Haneda Airport 1-Chome
area
II. Expansion of non-asset businesses
Diversification of profit sources and improvement of capitalefficiency
III. Improvement of the profitability of existing businesses
Improvement of the occupancy rate and implementation of
restructuring projects

Further strengthening of
the business foundation

ROA
Actualresults

Continuation of sustainable growth anddevelopment of a profit foundation
for the next stage

FY2029 –Endeavor toward realizing
the AFC Vision

Creation of value within andoutside airports
Toward creating unique value• More precise anticipation of customers’
needs• Bold expansion into new business areas• Realization of a sustainable society
through ESG activity

ROA
Targets

5.0%

3.4%

End of FY2021
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FY2028*Scheduled completion of Phase 1 of
the Haneda Airport 1-Chome project44. Overview of the business environment
AFC is continuously monitoring and adapting to the ever changing external environment, meeting the needs ofcustomers and society.
Noteworthy current external environment factors
Item

Recognition of the environment
Recovery from the COVID-19 crisis and further
strengthening of Haneda Airport’s functions

Aviation/
airports

The real
estateindustry

AFC Group’s response• Strengthening and expansion of the
airport-related real estate businessSpecific measures• Haneda Airport 1-Chomeproject

P9

Airport-related real estatebusiness

P10

Airport-related
infrastructure business

P11•
Replacement demand due to the strengthening of • Identification of customers’
diversifying needs, and proposals
the functions of airport facilities andinfrastructure• Active capital investment in the airport- •related infrastructure business
Promotion of the “eco-airport” initiative
Changes in office demand due to work stylereform and technological innovation

Growing needs for renovation and replacement
due to an increase in aged real estate stock
A lack of transparency over the future course of
inflation, real estate prices, and interest rates• Activities related to a non-airport new
business model• Non-asset business• Selective investments conscious of
bipolarization of the real estate market • Non-airport business• Enhancement of governance• Strengthening of thebusiness foundation• Airport-related
Climate change, and the increasing frequency and • Strengthening of BCP efforts
Society andinfrastructure businessseverity of natural disasters• Investments related to theeconomyenvironment and energy
Progress in research and development and• Study on creation of newpractical application of next-generation aviation• Surveys looking toward future aviation
businesses toward future
mobility
prosperity

Overseas

Increasing populations, economic development
and expanding aviation demand in Asia

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P12• Thorough risk management

Further enhancement of corporate governance
Need for activities to realize a sustainable society

P13• Creation of new businesses to capture
Asia’s growth• Foreign business

P16
P11

P15
P14

5

5. Medium- to Long-Term Management Plan—Basic Policy
Basic policy

Maximizing and continuous implementation of strategies affecting key resources to support
growth and development

Businesses that support
AFC’s growth
Airport-related businesses

Non-airport andforeign businesses

Priority measure I

Priority measure II

Priority measure III

Haneda Airport
1-Chome project

Expansion of
non-asset businesses

Improvement of
the profitability ofexisting businesses

Provision of facilities andservices that meet the needsof customers and society

Optimization of the business portfolio centering on
three priority measures

Creation of value

Further strengthening of
the business foundation

Creation of value forstakeholders anda sustainable society

Human resource
and organization
development strategy

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Strengthening ofgovernanceUse of IT

66. Business portfolio strategy
Business classification and policy
Leveraging on company’s strengths to pursue sustainable growth in profitability and capital efficiency.

Airport-related realestate businessAirport-related
infrastructurebusiness

Non-airport
business

Foreign businessRestructuring
projects• Steadily promote the Haneda Airport 1-Chome project andstrengthen the profit foundation• Aim to create new businesses by promptly identifying customer
issues and responding to their ever changing needs• Maintain stable supply

Increase profits
through investment• Actively implement capital investment from the viewpoint of the
BCP and the environment (eco-airport)• Diversify profit sources by securing investment and fee revenues
through the promotion of non-asset business• Classify owned and developed assets into core and noncore assets andearn profits based on an exit strategy• Incorporate Asia's growth through business and capital investments
based on collaborations with business partners• Continuous restructuring of properties to ensure good growthpotential / capital efficiency

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Promote business growth bystrengthening organizationand human capital and bycollaboration with business
partners

Ensure thoroughprofit management76. Business portfolio strategy
Changes in the business structure and profit growth
AFC aims to grow and diversify profit sources by steadily building on non-asset and foreign businesses,
while expanding airport-related assets through large-scale investments at Haneda Airport

Develop a capital efficiency-conscious business portfolio that is resilient to risks
Asset mix target

Targets for business profit growth and business mix
Airportrelated
businesses

End of FY2028

End of FY2021

Foreignbusiness

Non-asset
business
Airport-related
real estatebusiness

Airport-related
infrastructure business1.7-foldincrease

Foreignbusiness

Airport-related
real estatebusiness

1.1-foldincrease
Airport-related
infrastructure business

Foreignbusiness
Non-airport
business

Non-airport
business

Airportrelated
real estatebusiness
Haneda Airport
1-Chome projectNon-airport
business

５ ： ５

３

：

59%

56%

Non-airport
business

７

Airportrelated
businesses

Non-airport
business

Foreignbusiness
Non-asset
business

Non-airport
business
Airport-related
infrastructurebusiness

Haneda Airport
1-Chome project
Airportrelated
real estatebusiness

Restructuring
projects

FY2021

FY2028*Business profit = operating profit + non-operating profit

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87. Business strategy
Businessoverview(i) Haneda Airport 1-Chome project

Priority measure I

Haneda 1-Chome area, home to clusters of aviation-related companies, birth place and HQ of AFC, will be
reorganize / restructure to ensure utmost quality and maintaining highest level risk management, that is
expected of the aviation industry.

Strengthen the profit foundation by leveraging on
AFC Group’s strengths

Overall view ofHaneda Airport

Improvement of profitability• Divide the project period into Phases 1 and 2 andefficiently reorganize and rebuild eight existing
facilities• Provide the most advanced facilities that meetcustomers’ needs and ensure sustainable profits
over a long term

Consideration for the environment

Terminal 1 and 2 areas
Domestic cargo area

New maintenance area

Seibijo
StationTerminal 3 area

• Contributing towards a greener workplace byimplementing energy efficiency in new facilities
under reorganization and rebuilding projects

Assurance of safety and security• Ensure BCP to maintain services for customers bystrengthening disaster risk management measures,
including against floods and high tides.
• Contribute to stable airport operation by providing
the functions essential to Haneda Airport

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Haneda1-Chomearea
Existing facilities owned by AFC(Redevelopment area)

Phase 1

FY2022－FY2028(Period of the medium
and long-term plan)

Phase 2

FY2029－FY2031

9

7. Business strategy
Business
policy(ii) Airport-related
real estate business

Strengthening profitability of existing facilities and striving to boost growth

Maximize profits from existing facilities
and enhance customer satisfaction.
Airport-related facilities••••

Domestic cargo terminal (Haneda Airport)

Further raise the occupancy rate bystrengthening sales activity
Implement repair and replacement works
in an efficient and systematic manner.
Improve facility maintenance cost
Strengthen the BCP function

Implementation of restructuring projects•

Priority measure III••

Realize a smart air cargo terminal by
improving the operational efficiency of thearea, which is the largest air cargo terminal
in Japan, and by improving the terminal
functionsImprove the quality and profitability of theterminal area by consolidating facilities,
promoting common use, and introducing
multi-level systems

Contribute to profit by restructuring
problematic facilities (including closures)
Completed in December 2019

An expanded hangar
building at Kobe Airport

Competed in January 2020

Expansion of
the ARC building

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•
•

•

•

Capture demand in a post-COVID-19 era byusing and strengthening customers’ networks
Identify the needs for hangars and otherfacilities and actively advance into airports
where AFC currently has no presence
Present proposals for leasing and common
use of GSE* and other equipment related toAFC’s facilities
Consider engaging in airport operation
business*GSE: Ground support equipment

Completed in January 2020

A heliport hangar in Nata

Pilot opening in July 2020
Full opening in 2023

HANEDA INNOVATION CITY

(inflight meal factory)

FY2019Strive to capture new demand

FY2020

FY2021

Established in December 2020

A solar light power generation
facility at the domestic cargoterminal of Haneda Airport

FY
2022

Medium- andlong-term plan10

7. Business strategy

Business
policy(iii) Airport-related
infrastructure businessContribute to the sustainability of airports and society by strengthening the foundation forstable supply and reducing the environmental burden at the same time
• Prepare for various risks, including natural disasters, through continuous reforms of the crisis management
system and implementation of appropriate security measures• Contribute to the realization of an “eco-airport” through active upgrading of equipment

Heat supply (Haneda)•

Adopting environmental friendly andeconomically efficient area-wide air
conditioning system•

Proactively embrace renewable energy
and highly efficient equipment toenhance CO2 reduction

SD plants (eight domestic airports,
including Haneda)•

Reduce the environmental burden by
purifying waste water generated onboard•

Aim to further reduce the environmental
burden and improve efficiency throughtimely upgrading of equipment

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Common communication(Haneda)•Provide communication lines resilient
to natural disasters•

Exploring services using dedicatedoptical fiber network

Water supply and discharge(Haneda, New Chitose, and Itami)•

Manage and operate water supply anddischarge infrastructure based on contracts
with airport operators•

Strengthen human resource development tomaintain a sustainable management andoperation system

Aircraft washing facility(Haneda)•Reduce the environmental burden by
purifying and reusing waste waterfrom aircraft washing•

Contribute to CO2 reduction by
improving fuel efficiency throughaircraft washing

Maintenance of water supply anddischarge facilities

SD plant (Haneda)

11

7. Business strategy
Business
policy(iv) Non-airport business

Expand and enhance real estate investments anddevelopment projects
Improvement of
the profitability ofexisting properties

Acquisition and development of new properties•

Select investment assets based on business strategy•

Accumulate properties with excellent returns and advance into
fund business•Priority measure III•

Contribute to profitability by increasing theoccupancy rate and by setting the rents inlight of the rental housing market situation.

Earn capital gains through continuous portfolio revision andexit strategy•

Restructuring of lower performance
properties (including sale)•

Develop rental houses for airport-related workers near airports••

Develop logistics facility by taking advantage of the knowledge
and network related to the cargo facility business

Reduce cost through efficiency improvementof management and operation

Image of growth of non-airport businesses
Acquisition of
profitable properties
Self development

Offices

Portfolio
management

Securing capital gains anddevelopment profits

Sale toself-developed funds

Use of proceeds from sale toinvest in new properties

Long-termholdings as stableprofit sources

Involvement in AM/PM after sale
Earning of fees

Rental houses
Other real estate
assets, including
distribution facilities

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127. Business strategy
Business
policy(v) Non-asset businessPriority measure II

Grow non-asset business as a new business area
outside of airports
Developmentof funds, andinvestment

Real estate fund development•

Develop real estate funds (privately offered funds and privately
offered RIETs) by combining excellent properties•

Earn management fees through AM/PM subsidiaries•

Improve the ROA through “revolving business” leveraging on efficient
funds management•

Strengthen preparedness for collaboration with partners and M&As•

Establishing an AM subsidiary (June 2022)

Expansion of fee business•

Apply the experience of facility management (PM/BM) that has
been cultivated within airports to other airport-related facilities
and facilities outside of airports•

Expand construction management (CM) business by taking
advantage of ACM’s in-depth knowhow regarding airport-related
facilities

Profit from“revolving
business”

Self-developed
funds
AM/PM
business

Expansion of
non-asset
businesses

Provideoutsourcing
PM/BM
services within
and outside
airportsCMbusiness
withinairports

Image of development of a real estate fundAccumulation of excellent
properties through developmentof new properties and acquisitionof properties with higher value

Development of funds, andinvestment

Development of human resourcesand organization

Management by newly
established AM/PM subsidiaries

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Earning fees andsecuring capital gains

Expansion of the size offund assets

13

7. Business strategy
Business
policyExisting
operations(vi) Foreign business

Venturing into Capital Investments / Financing
Leverage on well established network and cumulative knowhow to seize Asia’s growing economic
opportunities

Finance business

Strategy: Use asset-based finance business as the profit
foundation for foreign businessContinue to secure stable profits by using finance as the corebusiness
Example: Flight simulator finance and finance-leasing of aircraft
maintenance facilities

Recent activities
Implemented finance for an aircraft engine leasing company
in Singapore

A foothold for business investment

New
operations

Business and capital investments

Strategy: Pivoting into businesses with higher profitability
Strengthening business foundation while minimizing risks throughcollaboration with reliable partner companies
Example: Investment in aircraft parts/ aircraft leasing

Forecast of the aircraft market
Higher growth is expected in
Asia than in other regions ina post-COVID-19 era
Forecast of
demand for newly
built aircraft*
2021-2040

19%

40%

43,61020%

units

Comparison between 2019 and 2040

19,150 units

North America
Others*Source: Commercial Market Outlook 2021–2040 (Boeing: Commercial Market Outlook)

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Forecast of the number ofaircraft operated in Asia*

Asia-Pacific
Europe21%

Keep watch on growth indemand for small aircraft in
Asia and the progress in“point-to-point” strategy and
LCCs’ advance into local
airports

2019
2019年

Small
小型機

aircraft

8,020 units

Others
その他

2040
2040年

14

7. Business strategy(vii) Study on creation of new businesses toward future prosperity

Response to next-generation aviation technology
Response to commercialization of “flying cars”
Expect progress in aviation innovation, including expansion of transportation service areas, in the second half of the 2020s
through the 2030s

Strengthen collaboration with companies related to “flying cars” in order to prepare
for commercialization
Provide AFC’s knowhowAcquire new knowledgeSupport next-generation
aviation technology

Identify the needs by taking advantage ofinter-company networks

Investigate demand for facilities, including vertiports - comprised of landing/takeoff
areas, maintenance facilities, and recharging equipment and customers’ needs, andendeavor to create new businesses
Source: Ministry of Economy, Trade and Industry’s website(https://www.meti.go.jp/press/2018/12/20181220007/20181220007.html)

Activities related to environmental business
Creation of businesses that contribute to “reduction of theenvironmental burden and efficiency improvement”
Consider replacing forklifts used in cargo terminal areas with EV or FCV
types, leasing environment-friendly vehicles and building recharging stations“Further development of the solar light power generation business”
Make progress in use of green electricity by installing solar and other power
generation and storage facilities on the rooftops of buildings owned by AFC
and other companies and by promoting consulting business in order torealize an “eco-airport.”

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Established the “innovation promotion office”(in April 2022)

Exploration of “new business opportunities”
Explore new business opportunities within and outside airports andpromote creation of new businesses

Launch of the “AFC innovation lab” program to invite
proposals from employees
Engage in integrated activities to start up new businesses withrespect to promising employee proposals

15

8. Strengthening of the business foundation
Strengthen the management foundation

human resource andthat supports business strategy by devoting efforts to organization development
Human resource and organization
development strategy
Human resource development• Career plan support program – training and retraining, upgrading skill• Human capital investment – growing and developing professionalism

governanceandStrengthening of corporate governance
Strengthening of the board of directors’ functions
Review the number of outside directors and the composition of
the board of directors and the role of executive officers

Optimization of the business structure

Prompt and appropriate information dissemination• Capitalizing on developed core competences for enhanced operations• Strengthen the sales infrastructure

Highly transparent corporate management

Strengtheningof theImplement working style reform and provide a more comfortable working
management
environment
foundation

IT

Work-life balance

Promotion of health-oriented management

Help maintain sound mental and physical health on a company-wide basis byenhancing mental health consultation service for employees

Efficiency improvement using IT
Use of IT in real estate management
Real estate management using digital tools, such as AI and RPA

Improvement of customer service and cost reduction

Enhancement of employee engagement

Implementing real and timely digital information

Promote diversity and inclusion

Further strengthening of information security
Continuous education and investment in human and physical resources

Copyright© AIRPORT FACILITIES CO.,LTD. All Rights Reserved169. Numerical targets
Sales

Operating income
1.3-fold

32 billion yen

1.5-foldincreaseincrease

Net income

5 billion yen

4.0-fold

3.3 billion yen

increase

3.2 billion yen

23.7 billion yen

0.82 billion yen

Actual figure in
FY2021…
FY2021

Target in

Actual figure in
FY2021…
FY2021

FY2028…
FY2028

ROA (Return on Assets)

Target in

FY2028…
FY2028FY2028FY2028実績

目標

EBITDA + recovered funds

1.5-fold

1.3-foldincreaseincrease

3.4%

5.0%

Actual figure in FY2021

Target in FY2028

Target in

Actual figure in
FY2021
FY2021

7.5 billion yen

10 billion yen

Actual figure in FY2021

Target in FY2028

ROA = business income (operating income + non-operating income) ÷ total assets

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1710. Return of profits to shareholders
Paying stable dividends and achieving the right balance among financial soundness and sustainable growth,
return of profits to shareholders.
Basic policy
for return ofprofits toshareholders•

Stable and continuous return of profits•

Dividend increase linked to businessperformance improvement

Raise the consolidated payout ratio to

40％ or higher

Raise the consolidated payout ratio
Aim for a consolidated payout ratioof 40% or higher

45%
40%
35%
30%

20

18

Consolidated payout ratioof 30% or higher
14

14

14

16

14

14

Aim to increase dividends
through a rise in the payout ratio

25%

12

20%

Aim to steadily expand
return of profits toshareholders by raising
the dividend payout ratio
while giving consideration
to profit plans

10

15%
10%

8
FY2018FY2019FY2020

FY2021

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FY2022

FY2023

FY2024FY2025

FY2026FY2027

FY202818

11. ESG activity
AFC will continue to create value by contributing to the economy and society and by resolving various challenges,
including environmental problems, by taking advantage of its strengths in airport-related real estate and otherbusinesses.
AFC will increase its awareness of environmental problems andreduce the environmental burden in light of up-to-datetechnology trends during various corporate activities.
AFC strongly support government’s policy to reduce CO2
emissions by FY2030 by 46% (compared with FY2013) inorder to achieve carbon neutrality by 2050.
AFC Group will strive to expand and operate facilities in a waythat provides safety and security to all people andcommunities, including customers. It will also develop an
environment in which executives and employees can work witha sense of fulfillment and fully exercise their abilities while
maintaining good mental physical health.

Contributions

AFC will appropriately respond to social and environmental
changes, continuously reform and strengthen its corporate
governance, and further enhance management transparency
and soundness.

For detailed information on the basic policy for sustainability, see AFC’s website. https://www.afc.jp/csr/
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19[Reference] Review of the previous medium-term management plan

Basic policy

Maximum use and efficiency improvement ofbusiness resources and redistribution of theresources through selection and concentration

Business strategy
Make new investments to meet aviation-relation demand within and outside airports
Financial strategy
Make investments on a scale larger than the value of annual cash flow
Strengthening of the management foundation
Reinvigorate the organization and develop a human resource strategy

Business and financial strategies

Strengthening of the management foundation• Built facilities within and outside airports to meet aviation demand and madea larger amount of investments than planned in the first year of the plan

• Introduced a flex time system and telework as part of workstyle reform.

• Proceeded with projects according to a revised plan because the businessenvironment changed dramatically from February 2020 onward due to theimpact of COVID-19, with aviation demand in particular slumping on an
unprecedented scale.
• Maintained annual dividend payment of 14 yen per share despite the severebusiness environment, as the priority was placed on stable and continuous
return of profits to shareholders.

• Implemented reorganization in order to strengthen sales and planning activities
with an eye toward a post-COVID-19 era.
• Established a project team for promoting environmental business from theviewpoint of promoting sustainability.

• Started operating a new enterprise system and reinforced information
infrastructure security, and also enhanced customer services throughproductivity improvement efforts.

[Trends in business performance indicators]
Implemented stable and continuous return of profits to shareholders although the target figures
under the plan failed to be achieved due to the impact of COVID-19.
FY2018FY2019FY2020

Unit: million yen

FY2021

Sales

24,21424,855

24,15523,777

Operating income

4,130

4,186

3,831

3,280

Net income

2,104

2,227

-933

821

14 yen (31.2%)

14 yen (33.1%)

Dividend per share(dividend payout ratio)

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14 yen (-) 14 yen (90.0%) (planned)20[Reference] Review of the previous medium-term management plan
Provided aviation-related facilities, mainly at Haneda Airport, and also concluded CM contracts at local airports by taking advantage ofthe environmental investment and the knowhow so far cultivated.
Provided finance for aviation-related facilities and engine leasing companies abroad, and also established local offices in order toprepare for future demand for facilities
HanedaAirportLocal
airports

 Built new facilities, including an inflight meal factory, an SD plant, and warehouses,
in response to an increase of 39,000 landing/takeoff slots per year, growth ininbound tourism demand, and an increase in international routes.

 Built two new maintenance facility buildings for small aircraft Concluded a construction management contract with All Nippon Helicopter andprovided services using AFC's facility management knowhow (Okadama Airport)

 Installed a solar light power generation facility for self-consumption purposes using
a green bond and introduced LED lighting equipment in the domestic cargo area

An inflight meal factory
within the ARC building

A new SD plant
at Haneda Airport

A warehouseat the Technical Center

Non-airport
business

An expanded hangar building
at Kobe Airport

A heliport hangar in Nata

Overseas Actively advanced into non-airport businesses by taking advantage of thetechnical acumen and proposal expertise cultivated within and outside airports.

 Provided finance for flight simulators through a subsidiary in Singapore

 Provided finance for an aircraft engine leasing company in Singapore

 Provided dormitory and car dealer shop facilities for the first time.

The international student dormitory ofKanto Gakuin University

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A shop of Alpine NewsA full flight simulator

An aircraft engine

The office in Singapore

21Disclaimer

Warnings
 This reference document is not intended to solicit investment.
 Descriptions of future prospects are based on information currently available and assumptions that areconsidered to be rational, and therefore, the actual outcome may be different from the described prospects,
depending on changes in the business environment, among other factors.
 Users should make important decisions on investment and other matters at their own discretion.

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22