February 9, 2015 7:00 am JST
Japanese airlines

ANA sets sights on demand for Asia-North America routes

TAKESHI SHIRAISHI, Nikkei staff writer

TOKYO -- Japan's ANA Holdings expressed its ambition to increase sales to 2.5 trillion yen ($21.1 billion) in fiscal 2025, up 50% from the estimated number for fiscal 2014, in its long-term strategic vision unveiled late last month. The operator of All Nippon Airways will attract growing demand from passengers, primarily those traveling between Asia and North America.

     "We wanted to clarify our challenging spirit by setting a goal for 10 years from now. Maybe we could have said 3 trillion yen [instead of the targeted sales of 2.5 trillion yen]," a senior ANA Holdings official said.

     There is no denying that the domestic flight market is unlikely to grow due to Japan's aging society with fewer children. But ANA sees a golden opportunity in the Japanese government's plan to strengthen the functions of airports in the Tokyo metropolitan area to receive 30 million foreign visitors by 2030, using the 2020 Tokyo Olympics as the driving force.

     According to Japan Aircraft Development, passenger demand in terms of revenue passenger kilometers in the Asia-Pacific region is projected to grow at an average annual pace of 6.0% during 2013 and 2033.

     Meanwhile, the average annual growth rate of sales until fiscal 2025 that ANA indicated in its strategic vision is only 3.5%.

     Toyoyuki Nagamine, a senior vice president of ANA Holdings, said that ANA "will concentrate managerial resources in the flights connecting North America and Asia, a source of growth for the global aviation market" to steadily achieve the numerical targets.

     The flight between Japan's Narita Airport near Tokyo and Houston, Texas, to be launched in fiscal 2015 will be a touchstone for the initiative. By securing routes from Houston to North American cities through code-sharing with United Airlines, ANA aims to attract passengers traveling between Asia and North America via Narita.

     In the strategic vision, ANA also included plans to expand its international flight network to untapped destinations, such as Central and South America, Oceania, Eastern Europe, Russia, the Middle East and Africa.

     In fiscal 2025, ANA expects to see sales from the international flight business climb 50% from the planned sales for fiscal 2015, overtaking those from the domestic flight business, which has been the backbone of the company since its foundation.

     As for domestic flights, ANA will keep market share and thoroughly streamline operations to maintain profitability. It will have extra aircraft by ordering 15 small and midsize airplanes in addition to the orders for a record 70 airplanes it announced in March 2014.

     By properly using aircraft of different sizes depending on passenger demand, ANA expects its revenue to improve by 9 billion yen annually by fiscal 2021.

     ANA also positioned its low-cost carrier as the fourth core business after the three cores -- international flight services, domestic flight services and cargo services -- in the strategic vision.

     It hopes that the low-cost carrier will trigger aviation demand by taking advantage of low fares and attract Asian travel demand to Japan by actively expanding into the short-distance international flight services.

     With all these measures, ANA aims to increase a consolidated operating profit by 140% from the estimated figure for fiscal 2014 to 200 billion yen in fiscal 2025.  

     But Asian skies are crowded with no-frills carriers and the aviation market is said to be falling into excessive competition. The key for ANA to make the strategic vision happen is how flexible it can be when dealing with competitors' moves and other uncertainties.

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