As ANA's LCCs Peach & Vanilla merge, Qantas and JAL need to align strategy

In the early history of dual brand strategies in Asia airlines often took only a minority stake in an LCC. This half way house has proven strategically weak, since the lack of full ownership and control prevented the parent airline from using its LCC for strategic, integrated purposes. That was also at a time when conservative minds at the big two Japanese airlines were not fully convinced of the future for LCCs.

From a similar background, Singapore Airlines eventually paid dearly to take full control of Tigerair, and now All Nippon Airways will again pay a premium to increase its stake in Peach Aviation. All up, ANA is spending USD400 million, which values Peach at USD1 billion, but ANA may need to pay a further USD300 million for full control.

LCC subsidiary history also includes nuanced chapters where multiple brands, often overlapping, prevailed. As Japan's LCC market becomes more dynamic, with existing and forthcoming local and foreign operators, ANA is putting its house in order to compete more effectively.

Peach will take over the 100% ANA-owned LCC Vanilla Air. Peach will logically be the surviving brand from the merger, which is to be completed in 2019. That is a relatively quick time frame, given the Japanese market, but underscores the strategic urgency after such a long wait while ANA negotiated with Peach's other two shareholders.