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All Nippon Airways

All Nippon Airways to boost international service due to demand growth


TOKYO—All Nippon Airways Co. is set to boost its international service amid a travel upturn in Asia by capitalizing on its Star Alliance partnerships, recent government aviation agreements and new slots at Tokyo's Haneda airport.

Demand for international flights has grown in March and April, led by increasing travel to China, ANA President and Chief Executive Shinichiro Ito said in an interview.

"The worst is over," said Mr. Ito, referring to the industry's travails in the past couple of years due to the global downturn.

"It is vital how we can transform the growth in customer numbers to growth in income per customer," he added, noting that income growth usually follows a pickup in passengers by several months.

ANA, Japan's second largest airline by revenue, has said it expects a wider net loss for the fiscal year that ended Wednesday, due to sluggish customer demand.

It would be the carrier's second straight year in the red.

Under a two-year business plan outlined two weeks ago, ANA aims to post a profit of five billon yen ($53.3 million) in the current fiscal year and a profit of 37 billion yen in the following year. The carrier has targeted cost cuts of 86 billion yen.

In the fiscal year through March 2012, ANA is looking to raise significantly the share of total revenue it derives from its international passenger business.

The carrier thinks it can do this as demand in China and other Asian countries grows, even as the domestic market remains sluggish.

ANA and its alliance partners, United Airlines, a unit of UAL Corp., and Continental Airlines Inc., filed a request in December for antitrust immunity to expand their pact on U.S.-Japan routes. The move followed an "open skies" agreement between the two countries that will ease restrictions on cross-border flights.

Once the antitrust request is approved, the three airlines will team up to market routes offered jointly by the partners and will share revenue from the routes.

"Of course, we have to think about how to raise revenue from our own routes," Mr. Ito said. "But we will also have to think about our partners as we share the revenue. This is a new stage."

He expects the joint operations to start paying off next year, as the antitrust immunity should be approved by this autumn.

Meanwhile, ANA is studying how it might use new international flight slots that will be offered at Tokyo's Haneda airport to increase flights between the U.S. West Coast and Asia.

The Japanese government will decide on the allocation of the slots among carriers by this summer, before the airport's new, fourth runway becomes available for both morning and night use in October.

"If a plane arrives at Haneda at 6 a.m., [passengers] can fly to countries like China with planes departing in the morning," Mr. Ito said.

As part of its growth strategy in Asia, ANA may need a budget airline subsidiary.

But to run such a subsidiary in Japan, it would need a low-cost airport that operates around the clock.

Low-cost carriers usually economize by increasing the number of daily routes and flights per aircraft, and by using low-fee airports, such as in Singapore. But no such facility is on the horizon in Japan.

Mr. Ito said that if ANA can't find a base for a budget airline in its home market, it may have to look elsewhere, in Hong Kong, perhaps.

As for the woes of its larger rival, Japan Airlines Corp., Mr. Ito said the restructuring process shouldn't undermine fair competition in the industry.

JAL, which filed a bankruptcy protection in January, has been extended a government-backed lifeline of $10 billion.

Such taxpayer funds should be used only to maintain routes that the people in the country need, and not to fund investment in a new business or sales promotions such as discount air tickets, Mr. Ito said.

Under its restructuring plan, JAL plans to shed 14 international routes over the next three years. ANA may raise the number of its flights on those routes if demand warrants, Mr. Ito said.

All Nippon Airways to boost international service due to demand growth
ANA President and Chief Executive Shinichiro Ito / Image via Reuters


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