All Nippon Airways (ANA) president Shinichiro Ito said the carrier is targeting annual sales of between JPY150 billion and JPY200 billion (USD1.8 billion and USD2.5 billion) in five years from its LCC subsidiaries launching in 2012, acccording the The Nikkei reports. AirAsia Japan "will add five or six planes to its fleet each year, bringing the total to 25-30 aircraft in fiscal 2016," Mr Ito noted, adding that while the LCCs will "take away some of ANA's customers, they will contribute to group earnings". Peach Aviation, meanwhile, launched operations on 01-Mar-2012. [more - CAPA Blog]
ANA expects LCC subsidiaries to achieve annual sales of USD1.8bn to USD2.5b in five years
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Japan's expanding LCCs drive growth but need cultivating; Spring Airlines and AirAsia re-entry loom
The new wave of low-cost carriers in Japan are entering their third year of operations, with Peach Aviation passing the milestone in Mar-2014 and Jetstar Japan doing so in Jul-2014. Along with AirAsia Japan (launched in Aug-2012 and re-launched in Dec-2013 as Vanilla Air) and a number of preceding LCCs, they are not only delivering on Japan's objective to raise passenger figures but are seeing LCCs become a serious force in Japan. In the last nine months of 2013 LCCs carried 17% of passengers in Japan's domestic market while for the first three months of 2014 they offer 24% – nearly one quarter – of available seat capacity, according to OAG.
The three new LCCs – Peach, Jetstar and Vanilla – carried 6% of traffic. While depressed from the AirAsia/Vanilla switch, it marks a start for the first carriers to eliminate all frills, unlike predecessors such as Skymark, which alone carried 7% of traffic. The adoption to LCCs in Japan is slow, and there were some early painful lessons, but growth is near-guaranteed. Jetstar Japan added nearly as many seats as JAL while Peach added nearly as many seats as ANA. Meanwhile ANA and JAL project long-term decreases in Japan's domestic market. Further, Jun-2014 sees the launch of Spring Airlines Japan with domestic flights and in the future international services, mainly to China. This is the first (but will not be the last) international JV for China's Spring Airlines. AirAsia is also looking to re-enter. However, five new LCCs plus three existing mean excessive market fragmentation.
Although it may challenge the epithet that airlines never die in Japan, consolidation is in order. But more importantly, until prevailing legacy attitudes are redirected towards supporting economic expansion goals, LCCs will continue to labour under unnecessary handicaps.
All Nippon Airways order for 70 aircraft to help it shift to international markets, catch up to JAL
All Nippon Airways' order for 70 aircraft – 20 777Xs, six 777-300ERs, 14 787-9s and 30 A320neo/A321neos – is part of a calibrated strategy to shift its focus to the faster growing international markets as Japan's domestic environment remains slow. In 2015 the previously all-domestic ANA expects to have more international than domestic capacity for the first time in its history. Japan Airlines has historically been larger in the international market while ANA was dominant domestically. ANA's more bullish long-haul growth with the 777X, larger than the 777-300ERs it is replacing, contrasts to JAL's 2013 decision to replace its 777-300ERs with smaller A350-1000s.
In ANA's order there is considerable replacement of existing aircraft; over two-thirds of the order will be used for replacement. But there will be international, and particularly long-haul, growth as ANA capitalises on Japan being a more attractive destination with a weaker yen, as well as Japan's advantageous geography for North America-Asia traffic flows. International is to drive growth at ANA. These objectives are helped by ANA's joint-venture partners who should benefit from ANA having a larger international role, although the trade off may be yield pressure.