http://online.wsj.com/article/BT-CO-20120217-704169.html
-- All Nippon Airways to boost international capacity by 22% in fiscal 2013 compared with fiscal 2011
-- To launch Narita-Seattle, Tokyo-San Jose routes
-- Says it aims to cut costs by Y100 billion by fiscal 2014
(Recasts 1st paragraph, adds comments by ANA executives in 5th, 7th, 9th-11th paragraphs, net profit target in 12th paragraph, background throughout)
By Yoshio Takahashi and Hiroyuki Kachi
Of DOW JONES NEWSWIRES
TOKYO (Dow Jones)--All Nippon Airways Co. (9202.TO) said Friday it will transform its corporate structure into a holding company to optimize groupwide operations and capitalize on its new low-cost carriers. But doubts remain over how effectively full-service and budget carriers can operate under the same corporate umbrella.
The planned new group structure comes as ANA looks to more than double profit over the next two years under a new mid-term business plan.
The airline unveiled the plan two days after resurgent rival Japan Airlines Co. disclosed its five-year business plan. JAL has already undertaken broader restructuring steps than ANA in the wake of its bankruptcy protection filing in 2010 and competition between the two is set to further intensify as ANA looks to strengthen its grip on what was JAL's long-held crown as Japan's largest carrier.
ANA said it plans to adopt a holding company structure on April 1, 2013, pending approval at its shareholders' meeting on June 19 and from transport authorities.
"It will be the best structure for handling multiple brands," Shinzo Shimizu, an ANA senior vice president, said at a press conference.
Next month ANA will start operating Peach Aviation Ltd., a low cost carrier in which it owns the largest stake of 39%. Its 67%-held AirAsia Japan Co. budget airline subsidiary will also begin services in August. AirAsia Japan is a joint venture with Malaysia's AirAsia Bhd. (5099.KU).
Under the current group formation, "we are likely to think about ANA first" when compiling group strategy, said Osamu Shinobe, an ANA executive vice president.
ANA executives have warned they should keep the low-cost carriers relatively independent as they have a business model that is completely different from and new to ANA.
Budget airlines focus on serving at the lowest possible costs while ordinary carriers focus more on providing quality service.
Shimizu said the ANA, AirAsia Japan and Peach brands will all operate under the holding company, which will oversee them all to make strategies for the entire group. He shrugged off the possibility that the new carriers would lose independence by being placed under the same entity as ANA, saying: "We can guarantee their freedom."
By establishing the new company, the airline can also integrate back-office operations to reduce costs, Shimizu added.
ANA aims to rack up an annual net profit of Y55 billion in the fiscal year ending March 2014, compared with Y20 billion that the company is predicting for this fiscal year. The target indicates that ANA hopes to narrow the gap in profit with JAL, which is targeting Y115 billion for the same year compared to Y160 billion expected for this fiscal year.
All Nippon Airways said that it will boost its passenger transport capacity on international flights by 22% by the fiscal year ending March 2014, compared with the current fiscal year, to beef up routes to the U.S., Europe and Asia.
The Tokyo-based airline will bank on the new fuel-efficient Boeing 787 Dreamliner for the increased international services. The company plans to receive 27 787s by the end of March 2014 out of a total of 55 that it has ordered.
It already plans to introduce new services linking Narita Airport with Seattle and San Jose from April using the Dreamliner aircraft.
The carrier expects the aircraft, which is 20% more fuel-efficient than its current equivalent, to give it an edge in the intensifying fray with low-cost carriers flying to Japan while fuel costs remain high. ANA is the first airline to take possession of the new-generation aircraft.
At the same time, ANA is attempting to strip back costs by Y100 billion by the fiscal year ending March 2015 through ongoing reform steps, which in part take the form of a reduction in labor costs and other expenses.
-By Yoshio Takahashi and Hiroyuki Kachi, Dow Jones Newswires; 813-6269-2789; Hiroyuki.Kachi@dowjones.com
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