March 1, 2014 12:57 am JST

ANA shoots for the stars with expansion of global routes

RYOHEI NAKAO, Nikkei staff writer

TOKYO -- With Japanese figure skater Yuzuru Hanyu having captivated the world with his gold-medal-winning performance at the Sochi Olympics, sponsor All Nippon Airways hopes to replicate his success by vaulting to a top spot on the global stage.

     ANA has set ambitious goals, seeking to grow consolidated operating profit 120% from fiscal 2013 to 130 billion yen ($1.3 billion) in the year ending March 2017. It also aims to raise the operating profit ratio to 7% from this year's projection of 3.8%.

     Toward this end, ANA will expand capacity on international routes by 45%, broadening its overseas business beyond domestic operations and that of rival Japan Airlines. It will target 60 billion available seat kilometers -- the number of seats times distance flown -- for fiscal 2016. The figure exceeds JAL's planned 52.5 billion available seat kilometers.

     Its departure and landing slots at Tokyo's Haneda Airport will increase by 11 in fiscal 2014, enabling the carrier to boost flights to Europe and Southeast Asia. The company will also make full use of expanded slots at Narita Airport, near Tokyo.

Profit ascent

Maintaining profit levels while sharply expanding international routes is seen as a challenge, but the airline remains confident. It got a 33 billion yen lift from the weak yen in the April-December period, compared with JAL's 18.2 billion yen, indicating that ANA's sales of foreign-currency-denominated plane tickets and cargo revenue were already bigger than JAL's.

     In addition to code-sharing, ANA is also pursuing deeper collaboration with Star Alliance partners United Airlines and Lufthansa, including joint marketing.

     "With the largest network at Haneda, we will increase the convenience of domestic connecting flights, allowing us to enhance competitiveness," President Shinichiro Ito says. For example, only ANA and the Star Alliance fly to Germany from that airport.

     Even with aggressive expansion, ANA asserts that it will be able to maintain yield, a profit gauge that looks at revenue per passenger kilometer. It expects to benefit from higher-priced business travel and strategic fare pricing during peak and off-peak seasons.

     But international routes are susceptible to particular risk factors, such as fuel costs swayed by foreign exchange rates and commodity prices, as well as global conflicts and pandemics. Cargo operations are vulnerable to price fluctuations, too.

Domestic routes still have a role

Meanwhile, ANA aims to focus on profitability over size for its Japanese routes, which will be eclipsed by international operations. With the domestic business facing overcapacity amid an onslaught of budget carriers, ANA will work to enhance yield. But improving profits on domestic routes might prove elusive, since the airline likely will not raise fares unless JAL does.

     Given the difficulty of fare hikes, ANA would have to focus on achieving 84 billion yen in proposed cost reductions through such measures as soliciting early retirements and increasing cabin crew hours.

     Another important step is strengthening flight-related businesses, such as training services for budget and other airlines as well as revamping aircraft maintenance operations. Such businesses can provide relatively stable earnings even amid economic, forex and fuel price fluctuations. They may prove pivotal in supporting ANA should earnings from mainstay operations face turbulence.

 

Get Insights on Asia In Your Inbox

To read the full story, Subscribe or Log in

Get your first month for $0.99

Redeemable only through the Subscribe button below

Once subscribed, you can…

  • Read all stories with unlimited access (5 articles per month without subscription)
  • Use our smartphone and tablet apps

To read the full story, Subscribe or Log in

3 months for $9
SUBSCRIBE TODAY

Take advantage of this limited offer.
Subscribe now to get unlimited access to all articles.

To read the full story, Update your account

Resubscribe now to continue reading.
BEST OFFER:
Only US$ 9.99 per month for a full-year subscription

To read the full story, Subscribe or Log in

Once subscribed, you can…

  • Read all stories with unlimited access (5 articles per month without subscription)
  • Use our smartphone and tablet apps

To read the full story, Subscribe or Log in

3 months for $9
SUBSCRIBE TODAY

Take advantage of this limited offer.
Subscribe now to get unlimited access to all articles.

To read the full story, Update your account

We could not renew your subscription.
You need to update your payment information.