By Bjorn Fehrm in Tokyo
May 18, 2016, ©. Leeham Co: The CEO of All Nippon Airways (ANA) Osamu Shinobe opened the 2016 International Society of Transport Aircraft Trading (ISTAT) conference in Tokyo today, in front of some 700 delegates. Shinobe presented an overview of the airline’s recent success and its future plans. This includes the plans for use of the three Airbus A380 that the airline bought in January this year.
ANA is Japan’s most successful carrier in recent years, leading the incumbent Japan Airlines in revenue and profits since 2010. The airline had its historical base in a large domestic market share but has been complementing that with an aggressive international expansion in recent years.
Its landmark buy of Boeing 787 Dreamliners shall be seen in this context. The 787, for which ANA was the launch customer, is the kingpin in ANA’s expansion plans, where an expanding international network shall feed the established domestic network.
From domestic giant to International competitor
ANA was formed as Japan’s private airline competing with state owned Japan Airlines (JAL). JAL had a monopoly on international flights until 1986 so ANA focused on becoming the largest domestic carrier, something it achieved by 1974.
1986 ANA got the right to fly scheduled international flights, only having operated charter flights to major holiday destinations before. By 2004 ANA had passed JAL in company profits, chipping away at JAL’s lead in international passenger transportation and dominating the domestic market.
ANA overtook JAL as the largest Japanese carrier after the JAL bankruptcy in 2009. ANA has had excellence in serving its passengers as part of its core strategy and got awarded a 4 Star rating by Skystrax by 2007 and 5 Star rating in 2013.
International expansion and branding
The network strategy has followed the idea that the international expansion shall be the feeder service to keep the large domestic network safe from up-and-coming Low Cost Carriers, LCCs. This strategy has been successful, ANA’s domestic network has kept its market share at the same time as the international network has been expanding with 30% per year since 2010.
Part of the international growth plan was the aggressive launch order for 80 Boeing 787 Dreamliners. Before the buy the ANA long range fleet had 35 Boeing 777 and 38 767. The 787 buy was over double in size of the 767 fleet it should replace, signaling an acceleration of the international growth. ANA’s international traffic has expanded with 25-30% per year since 2010 and it expects to expand with another 20% until the 2020 Japanese Olympic games.
Par of the expansion strategy has been programs to increase ANA’s overseas brand recognition. ANA had seen that their brand had low recognition in key markets. “Our StarWars branding on the 787 shall be seen in this context” says Shinobe. “We want people to recognize ANA as an interesting airline”
The airline has kept Return On Equity (ROE) at around 10% over recent years, a high figure for an Asian airline. Gross profit has steadily been around 5-7% from 2010 to 2015 and is expected to grow to 9% by 2020.
ANA turned some heads by buying the three Airbus A380 coming out the Skymark bankruptcy. The carrier will use these aircraft for its re-expansion in the leisure market, currently focused on Honolulu flights. The expansion will be carried out by the newly formed Vanilla Air LCC subsidiary.
So if I read this correctly, the A380s will be operated by Vanilla Air?
If my interpretation is correct, these will be the very first true LCC configured A380s. Any idea what the seat count will be?
Who knows. It may simply be used as an opportunity to carry a large number of passengers with a step up in quality too.
Will have a high seat count merely because they are tourist routes and have a low business seat numbers.
Asian people are more disciplined so FAA raised the max seat count by 5 %.
I expect 460 economy and about 80 business class seats.
Max capacity has nothing to do with cultures.
So you are saying they do cultural studies and then each country is assigned an evacuation capacity based on how they score?
Can I see the links to those studies?
Do you have to subtract if there are other nationality on your flight?
Japan has been able to pack more people into aircraft (max) as they are smaller stature on average (or not as bulky as Americans depends on how you want to look at it)
ANA run 787-9s on short haul domestic routes with 395 seats but the international version has 215 seats.
It doesnt seem to be any ‘smaller’ about it. Just domestic planes which are 90% economy seating.
The distances in Japan are tiny compared to US or Europe , the longest flights would be 1500km ( Sapporo to Nagasaki) which is Boston to Atlanta, and most flights would be around an hour. Hence the high seat count.
They may have been the first operator of the 787, but the current routes are just standard cities in Europe Asia, Noth america. The only ‘out of the box’ destination with 787 is San Jose in silicon valley.
It would be hard pressed to find more than a hand full of new city pairs amoungst all the 787 operators that wasn’t a 767 or 777 route. And so much for the so called hub bypasses too!
Boston for JAL?
What you do see is non traditional pairs. Central hub to a non traditional secondary city.
Yes a handful globally. And yet 400 delivered.
Boston is a major hub anyway, so Tokyo- Boston not really outside hub to hub. With low fuel prices you would think 787 would be boldly opening up a lot of unserved city pairs, but so far San Jose ( ANA and Brtish Airways) Dusseldorf and a few others.
And with the 787-9 in production , mostly those are used for 777-200 replacement. Very Long range may be nice to have but filling the seats trumps it all the time
From July 2014…
787 network analysis: 20% of Dreamliner routes are new, others replace aircraft on existing routes
“Boeing’s 787 Dreamliner was billed as a “hub-buster”, an aircraft that would open new routes and allow passengers to fly non-stop in thinner markets rather than transfer via a hub. With the 787 approaching three years of service, how have airlines used the aircraft? Looking at routes planned for the northern winter 2014/2015 schedule, 17% of 787 routes have been launched with the Dreamliner.”
From a more recent article (Sept. 2015) …
Realizing the 787 Dream: New Routes Come to Life on the Dreamliner
“Want non-stop service from Boston to Asia? Japan Airlines (JAL) was the first to fly such service and it uses the 787. Hainan Airlines followed a couple years later with service to Beijing and, a year after that, service to Shanghai. Norwegian Air Shuttle has bet big on the 787 for its long-haul LCC expansion and three new destinations – London, Copenhagen & Oslo – will launch in early 2016 from Boston with the type. The 787 is not the only aircraft opening up new international destinations for Boston. Emirates and Cathay Pacific brought their 777s to town while Turkish and Qatar Airways are using Airbus wide-body aircraft in their efforts. But the frequency of 787 service is noticeable and significant.
Boston is not alone in seeing this phenomenon. San Diego added service to Japan thanks to the 787, as did San Jose, California. The latter also added Hainan Airlines service to China on the 787 and British Airways service from London was just announced for a 2016 launch. Austin, Texas saw its first intercontinental service launch with British Airways bringing a 787 into town, a route which was eventually up-gauged to a 777. JAL is returning to DFW. American added China service from DFW. United brought connectivity between Denver and Tokyo. United Airlines also used the 787 to launch non-stop service to Melbourne, Australia, a move which Jim Compton described as a game-changer economically. Speaking at the International Aviation Forecast Summit recently Compton explained the shift there:
Australia is a very competitive market. And for us the challenge in the Australia was flying Sydney-Melbourne, a tag. That tag was incredibly a loser for us in terms of financial results. The 787-9 changes the economics for us. No longer is the tag there. It is sized for the market on its own.
…Outside the US there are many more examples of 787s opening new long-haul markets. LCCs in Europe are using the type to fuel expansion, such as Arkefly’s 10 new routes from the Netherlands across the Atlantic Ocean into Caribbean islands. Air India is now serving Australia. Norwegian has 20+ routes crossing the Atlantic on the type. These are just some of the nearly 250 long-haul (>3500 miles) routes filed to fly on 787s. Many did not and would not exist without the new, more efficient aircraft.”
Yes, for some airlines the new 787s are simply a means to upgrade aging aircraft in their fleet. But a sizable portion of the 787s in service are opening new markets and launching new opportunities.”
20% of 787 routes being new hardly counts as a hub buster though, at least not yet. I’ve not heard that the major hub airports are now suddenly a lot quieter as a result.
I wonder how many A380 routes are ‘new’ also. Here in the UK Emirates have two daily flights to Manchester and as of 2 Sep 2015 were contemplating laying on a third. That might not be a new route as such, but it’s a lot of new capacity.
TUI Netherlands could fly to Galápagos Islands with an old A330-300. So I do not see the link that a 787 was required to open routes from the Netherlands to the Careabian.
Delhi – Wellington would be 787 territory but Australia could be reached by A330ceo.
They could fly their but they make enough profit from the 330 to make it worthwhile?
Would they fly it otherwise?
Apparently they are not (330) according to the articles.
They still use 767 on the same routes.
Maybe Arkefly was offered the 787 for less than a 767.
Today I would doubt TUI Netherlands would order the 787 again.
787-9: $264 million
A332: $232 million
For $32 million TUI can buy a lot of fuel.
So they could fly the 330 but they don’t have any. Got it.
Regardless that’s one airline, what about the rest that were mentioned?
The 787 network analysis has it both ways:
“ANA has opened five, although some are not entirely new: ANA served Frankfurt, Jakarta and Munich from Tokyo Narita with other aircraft prior to opening a 787 service from Haneda. ”
The high fuel costs recently shut down a lot of routes, so reopening them is not “new”
If you take out Norwegian ( London Gatwick isnt a hub buster, there just isnt room at Heathrow)
Delhi- Rome , whats hub buster about that ? Heathrow Santiago ?
WE could look at other long serving planes and see new routes too, it happens all the time.
Air NZ has new routes to Buenos Aires, Ho Chi Minh City, Manila, Houston, but they arent using their 787s.
Long routes are opened up with 2-3 flights a week two class 220-250 seaters with good cargo capability.
That used to be 767 and A330/340. These days mostly the 787 or A332. Name it hub buster if it suits you. It’s not new to the 787.
The next true hub buster could be the A321LR because there are more airports with runways around 2,000 m than 3,000 m.
A true Scottsman …
Well the A321LR does not do really well out of 2000m runways. At least not if you are going (medium-haul) places…
More in the region of 2700m.
Where’s that MoM when you need it ..
Seriously, if there ever is going to be a MoM, that will the aircraft opening up <4000Nm routes because you can offer decent frequency earlier then the bigger twins.
LCC operated A380 sounds exciting. Even with 18″ wide seats and a generous pitch, an all economy configured A380 can seat 850 passengers. With each of the A380 taking at least one turn-return tips to Hawaii each day, we are talking in excess of 2500 passenger each day in each direction.
Any competing airline will face difficulties against a LCC that is dumping the ticket price in order to fill up three daily A380.
What will happen to ANA’s odd ball 737-700ER they retired a month ago?
Long flights with small aircraft never seem successful, because utilization is low and CASM uncompetitive. Probably why there’s complete silence on the 737-8 ERX. https://leehamnews.com/wp-content/uploads/2015/03/737-8ERX-Spec.jpg