June 24, 2014 3:40 am JST

ANA tries to make money without leaving the ground

TAKESHI SHIRAISHI, Nikkei staff writer

TOKYO -- ANA Holdings, the parent of one of Japan's biggest airlines, is out to make customers of its low-cost Asian competitors.

     It will open a pilot-training facility in Thailand and an aircraft maintenance unit in Okinawa. Both new departures are targeted at the region's budget airlines.

     ANA crossed a milestone in April, overtaking longtime rival Japan Airlines in available international seat-kilometers -- a measure of passenger-carrying capacity -- for the first time since venturing abroad in 1986. But management knew better than to get carried away. Operating profit fell 36% to 65.9 billion yen ($639 million) for the year ended March 31 as a weak yen drove up fuel costs. ANA shares are still struggling to gain altitude after a roughly 170 billion yen capital increase in 2012.

     Under President Shinichiro Ito, ANA is looking to the broader Asian market to lift its earnings potential. It will "invest strategically in Asia, mainly areas that can generate substantial synergies with our aviation business," Senior Executive Vice President Shinya Katanozaka told shareholders Monday.

     ANA sees pilot training as a key test of this strategy. It will open a training center in Bangkok this fiscal year in partnership with Assumption University, a local school with an aviation program, people familiar with the company's plans say. Students will learn to fly the Airbus 320, a workhorse for low-cost carriers, on flight simulators. ANA also expects Asian budget airlines to use the facility to drill their own pilots.

     "Demand for pilots in Asia is only going to grow," said a senior executive.

     By one estimate, Asia will need 230,000 commercial pilots in 2030 -- four and a half times the number now. Anticipating what many see as a serious shortage, ANA bought U.S.-based Pan Am International Flight Academy last year for around 13 billion yen.

     ANA has another new business in the works. It plans to set up an aircraft maintenance unit next fiscal year in Okinawa, which it also sees as a hub for its Asian cargo transport network. With a staff of nearly 300 technicians, the unit will handle heavy-duty jobs such as breaking down and servicing engines. Until now, ANA has only serviced its own planes.

     ANA sees Lufthansa as the benchmark for its own efforts to branch out. The German carrier is regarded as a model of diversification in the industry, offering a broad range of training and maintenance services. As proof, it earned more half of its profit last year from non-flight operations.

     But the business of flying passengers and cargo still provides nearly 90% of ANA's earnings. And international service will become a bigger part of that business. By fiscal 2016, the company aims to boost its capacity on international routes by 45%. It sees itself surviving as a full-service carrier.

     With budget airlines being forced to cut flights for want of pilots, ANA needs to shore its own base. Becoming Asia's top carrier will require both investing for growth and improving the profitability of existing operations.

 

 

 

 

 

 

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