All Nippon Airways Takes Latest Step to Entering Low-Cost Sector

Richard Maslen February 03, 2011

All Nippon Airways (ANA) has joined forces with Chinese investment company First Eastern Investment Group to establish Japan’s first low-cost operator. As expected following last year’s launch announcement, the two businesses have formed A&F Aviation which will own and operate the start-up carrier.

The new company, which will operate independently from ANA, will be incorporated during the second half of this year with Japanese investors holding a 66.7 per cent stake (of which ANA will hold a 39 per cent stake) and First Eastern the remaining 33.3 per cent share. The initial capitalisation of the new company will be ¥30,050,000, composed of ¥10,050,000 from ANA, ¥10,000,000 from First Eastern Aviation Holdings and ¥10,000,000 from other investors.

TOP TEN MARKETS FROM OSAKA’S KANSAI INTERNATIONAL AIRPORT (By O&D traffic)
Rank	Destination	Traffic	Operators	Average Fare ($)	ANA Share
1	Tokyo Haneda	1,196,938	NH / JL / 7G	201	46%
2	Seoul Incheon	914,380	NH / OZ / KE / 7C	285	11%
3	Shanghai Pu Dong	911,654	NH / JL / CA / MU	569	24%
4	Sapporo New Chitose	902,910	NH / JL	249	52%
5	Naha	881,641	NH / JL	277	48%
6	Taipei Taoyuan International	800,442	JL / CX / CI / BR	524	n/a
7	Seoul Gimpo International	666,996	NH / JL / KE / OZ / 7C	300	4%
8	Hong Kong International	660,894	NH / JL / CX / AI	575	18%
9	Bangkok Suvarnabhumi Int’l	412,780	TG / JL	664	n/a
10	Busan Gimhae	310,930	KE / OZ / BX / JL	249	n/a

Source: IATA BSP - Year Ending November 2010

The as-yet unnamed entity will be based at Kansai International Airport in Osaka and will fly a mix of international and domestic short-haul routes. As the table above illustrates there is a strong demand for flights within the region and the start-up could be expected to launch services on some of the lower yielding routes such as to Seoul Incheon or Seoul Gimpo International; its lower cost base enabling it to compete more effectively on price. It could also offer a complimentary product to the mainline airline to destinations that ANA wants to boost market share as well as serving cities not currently in the ANA network, although bilateral deals could restrict flights into some countries.

The start-up is expected to begin flights in the second half of ANA’s next fiscal year (October 2011 – April 2012) but as yet no decision has been taken on the type of aircraft it will use, although these will almost certainly be transferred from ANA. An executive of ANA simply confirmed that the start-up will provide “point-to-point operations using a single type with maximum seating per aircraft” and will “not fly under the ANA brand or under the ‘NH’ flight code”, securing its own Air Operator’s Certificate (AOC) instead.