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.