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17-Feb-2014 11:39 AM

ANA Holdings outlines Mid-term Corporate Strategy for FY2014-2016

ANA Holdings (ANA HD) outlined (14-Feb-2014) its corporate strategy for achieving further growth over the period FY2014-2016 in the face of an increasingly competitive business environment. The key elements of the plan are:

  • Further expansion in international traffic, supported by growth at Tokyo Haneda Arport;
  • An increase in the cost reduction target to JPY136 billion (USD1.3 billion);
  • Targeting a doubling in net profit and 20% rise in revenues between 2014 and 2016.

The carrier outlined the following priorities:

  • Optimising business portfolio: ANA HD will pursue higher profitability from its full-service carrier ANA which will remain the holding's primary earnings base. ANA HD will also optimise its business portfolio to be resilient to risks by diversifying its source of earnings.
    • ANA International Passenger Services: ANA will expand international passenger services to meet increased demand created by overseas expansion of Japanese companies and the growing numbers of foreign travellers visiting Japan. At the same time, cost increases caused by currency fluctuations will be kept to a minimum. Capacity (ASK) on international routes will be increased by about 45% by FY2016 compared to FY2013, so that for the first time in ANA's history non-domestic operations will be equivalent to the ASK of its domestic network. ANA will also:
      • Use its position as the largest international airline at Haneda to secure high-yield business customers from/to the Tokyo metropolitan area. This will also enable ANA to capture demand from/to local destinations in Japan;
      • Actively pursue services to new destinations considered promising in the mid- to longer term which are currently not served by Japanese airlines;
      • Implement a growth strategy from Narita following the planned slot increase at the airport in 2015 with the aim of capturing more of the demand between Asia and North America including best use of Star Alliance and joint venture partners. ANA will also consider additional bilateral relationships with other selected airline partners;
      • Complete the installation of full-flat seats in business class for all long-haul services by the end of FY2014. ANA will also improve cabin service on mid-haul routes;
      • Strengthen its overseas marketing in order to expand overseas sales to provide resilience against exchange rate fluctuations;
      • Reduce unit costs by improving productivity, controlling overseas costs and more efficient purchasing;
      • Improve profitability with the arrival of new aircraft, starting with the first Boeing 787-9 (long-haul configuration) at the end of FY2014'
    • ANA Domestic Passenger Services: In order to retain profitability, ANA's priority is to respond to increased competition from the 'Shinkansen' bullet train and LCCs. Measures will include:
      • A drive to raise load factors by attracting the increasing number of foreign travellers visiting Japan onto ANA's domestic network and capturing demand for overseas travels from domestic destinations via Haneda;
      • A more flexible fare structure on domestic routes to respond to cost pressures. Lowering operation cost by better match of supply and demand. To do so, ANA will maximise its utilisation of mid- and small-size aircraft and ANAHD will accelerate the transfer of smaller aircraft operations from ANA to ANA WINGS;
      • The introduction of two 787-9s to the domestic fleet in 1HFY2014;
    • Cargo Services: While maximising its strengths as Japan's only combination carrier (cargo freighter flights plus passenger flights), ANA Cargo will serve as a comprehensive air logistics company:
      • More freighter aircraft will be added to its fleet, and ANA will work to make the freighter business profitable by expanding its network, improving aircraft utilisation and reducing handling costs;
      • Revenues from cargo carried in the hold of passenger aircraft will be maximised by improving the infrastructure at Haneda Airport, utilising new international routes and reforming domestic cargo sales and management systemsl
      • ANA will increase the proportion of high unit price cargo transported through its Okinawa hub by expanding overseas cargo sales and leveraging alliance with logistics firms such as Yamato Holdings;
    • LCC business: ANA HD will expand its LCC operations to capitalise on demand in the East Asian LCC market and bring these businesses to profit:
      • Vanilla Air's fleet will be increased from six aircraft to 10 by the end of FY2015 and its network will be expanded through the launch of services mainly to international leisure destinations such as Hong Kong and Micronesia;
      • Peach will expand its network, based on its success in the Kansai area;
    • Diversified Business: ANA HD intends to diversify its business portfolio to maximise group profitability. Each company under ANA HD will strive to be cost competitive and expand income from outside of the holdings by launching new products and services and finding new markets;
    • Airline Related Business (Strategic Investments): In order to leverage increased demand in Asia, ANA HD will make strategic investments, predominantly within the Asian region, to strengthen its business. The initiatives include:
      • Investment in the Myanmar-based airline Asian Wings Airways which is expected to be approved by the government in near future;
      • Considering additional investments in other high-potential Asian airlines with good network synergies with ANA;
      • Investment in Pan Am International Flight Academy in 2013. To capitalise on the demand for pilot training in Southeast Asia, ANA HD will open a new training centre in Bangkok;
      • Expanding our maintenance business in Okinawa to capitalise on demand for aircraft maintenance which is projected to rise dramatically in line with expansion of the airline business in Asia. Arrangements are being made with Okinawa Prefecture and other relevant parties to commence operations in FY2015;
      • Promoting investments in non-airline business field in purpose of raising ANA brand awareness and of creating new demand for air travel in the world;
  • Cost Restructuring to Improve Competitiveness: The carrier explained that it has "a current target of reducing costs by ¥100 billion in the period of FY2011-2014 and will achieve ¥86 billion by the end of FY2014. In addition to this, ¥50 billion in cost reductions will be targeted over the two years between FY2015 and FY2016 bringing the total reduction in costs over the six years between FY2011 and FY2016 to ¥136 billion. On completion of these reductions, unit costs are expected to be ¥1.5 lower than FY2011". It continued, "The additional ¥50 billion in cost savings will be achieved through productivity improvements and the implementation of a performance evaluation system to all companies under ANA HD to ensure that each is achieving world-class levels of cost competitiveness";
  • Management Targets for FY2014-FY2016: ANA aims to post record profit during the period covered by this mid-term management plan by linking top-line growth to greater profitability.

The carrier said, "The business conditions in which ANA HD operates are challenging, with the persistent weakness of the yen leading to increased costs and higher fuel prices and intense competition reducing unit prices. However, the Japanese government's fiscal and economic policies are expected to support a recovery in corporate performance and a sharp increase in inbound travellers with 10 million people visiting Japan in 2013." It continued, "ANA HD's objective is to continue to maximize group profitability, whilst ensuring tight management of costs. The company will also work to optimize its business portfolio, taking advantage of the expansion of international slots at Haneda Airport to broaden growth across Japan and Asia and the opportunities presented by the Government's goal of achieving 20 million foreign visitors to Japan in preparation for the Tokyo 2020 Olympics." [more - original PR]

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