First Eastern Investment reportedly invested HKD461 million (USD59 million) for a 33% stake in a JV Japanese LCC, in which ANA will hold 39% (The Standard, 13-Sep-2010). First Eastern Chairman and CEO, Victor Chu, stated the Kansai-based LCC will offer between five and 10 domestic routes in its first year of operations (reportedly including Narita, Fukuoka and Naha), with the routes to be short-haul sectors of less than four hours with ticket prices 50% less than present market levels. Mr Chu added that the carrier is also seeking to attract international passengers, especially from China. "The Chinese will be a driving force [in both Japan and the region] as their travels abroad become more frequent," he said. He said the number of Chinese visitors to Japan has surged more than fourfold in two years, adding that there could could be up to 4 million Chinese visitors p/a after visa requirements are eased. Mr Chu added that the carrier would lease a number of aircraft and while not disclosing a proposed break-even timeline, he stated the size of the initial investment of JPY15 billion (USD179 million) "is definitely enough" for five years of developing the Japan domestic market (Financial Times, 11-Sep-2010). Meanwhile, ANA President, Shinichiro Ito, conceded that it "can't rule out the possibility that the low-cost carrier will eat into ANA's profits" (Yomiuri Shimbun, 11-Sep-2010).
ANA LCC to have initial investment of USD179m
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Ryanair's 117million pax in 2016 tops European airline groups. The first time an LCC topped rankings
For the first time ever in Europe, in 2016 a low cost airline carried more passengers than any other airline or airline group, as Ryanair's 117 million passengers pushed Lufthansa Group's 110 million into second place. Ryanair had beaten Lufthansa itself, but not the whole Lufthansa Group. IAG's first full year of including Aer Lingus helped it to take third place from Air France-KLM. Europe's number two LCC, easyJet, was ranked fifth.
The big five can be expanded into a big seven to include Turkish Airlines and the Aeroflot Group, although these two had contrasting growth rates in 2016. A chasing pack of middle sized airline groups includes three LCCs (Norwegian, Pegasus and Wizz Air) and three legacy airlines with varying challenges to establishing sustainable profitability (SAS, Air Berlin Group and Alitalia).
Most of the faster growing airline groups in the top 20 are LCCs and the main growth drivers for Europe's big three legacy groups are their LCC subsidiaries. Just outside the top 20 are some fast growing legacy airlines in Eastern Europe, demonstrating the potential there. Nevertheless, unless there is a big merger or acquisition, Ryanair looks set to remain at number one for some time.
Norwegian Air part 2: long haul growth shows its strategic innovation, but increases debt burden
Norwegian plans to add US routes to its Edinburgh base, a development considered in part 1 of this report, adding to its growing list of European long haul bases. However, its Edinburgh-US routes will use new Boeing 737MAX-8 aircraft – its first deployment of narrowbodies for long haul. It has also ordered 30 Airbus A321neoLRs for long haul use. Narrowbodies open up new possibilities for routes between the UK (or other European markets) and the US east coast.
Norwegian also plans to add non-US destinations to its UK long haul network, with details expected during the course of 2017. Norwegian's flexibility to develop its long haul operations from the UK would be improved by the grant of a US foreign carrier permit to its UK-registered subsidiary, Norwegian Air UK.
Norwegian has had to surmount many obstacles to build and grow its global network – which may also include Latin America in 2017, when it will accelerate long haul ASK growth to 60%. However its rapid expansion, currently driven mainly by long haul growth, has led to a rapid increase in debt, and is likely to weigh on unit revenue. Norwegian's undoubted strategic innovation can only be sustained if it is financially successful.