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ANA nears decision on maker for 25-plane order

Bloomberg

ANA Holdings Inc., whose fleet is dominated by Boeing Co. aircraft, will soon decide on placing an order for 25 jets, pitting the newest wide-body models of Airbus SAS and Boeing against each other.

“It’s getting close to the time we need to make a decision,” President Shinichiro Ito said in an interview in Tokyo. He declined to elaborate on when the order will be made. “The key will be what plane matches our needs best.”

ANA choosing Airbus would mark a triumph for the European manufacturer in a country where Boeing has enjoyed a near monopoly for decades. The ties between the U.S. maker and Japanese carriers were reinforced as ANA and Japan Airlines Co. became the first operators of the carbon-composite 787 Dreamliner, when commercial flights started two years back.

The new planes ANA will order are to replace aging wide-body aircraft used in international flights, Ito said in the Sept. 4 interview. ANA, the biggest operator of Airbus planes in the country with 17 aircraft, will decide between the yet-to-be-made 777X model and the Airbus A350.

Boeing is marketing the 777X as a successor to its 777 jet, and CEO James McNerney has said it expects to have the aircraft in service around the end of the decade.

Airbus’ A350 had its maiden flight earlier this year and the first variant is set to enter service in 2014, with the largest model slated for late 2017. Airbus has said the A350-1000 will offer 25 percent better operating economics than Boeing’s 777-300ER.

France-based Airbus has been gaining market share in Japan recently as low-cost carriers lease its planes. The aircraft maker has yet to sell wide-body jets to either ANA or JAL.

ANA operates 17 Airbus single-aisle A320s, which it started flying in 1991. The airline has a fleet of 236 planes, with 197 of them being Boeing aircraft.

JAL, which has never bought a new Airbus plane, has a fleet of 214 aircraft.

Japanese carriers flew 43 Airbus jets at the end of 2012, up from 36 a year earlier, according to the Japan Aircraft Development Corp. ANA and its affiliate Peach Aviation Ltd. are the main carriers using the European company’s aircraft. In comparison, domestic carriers had 409 Boeing planes, excluding MD-90s, up from 397.

Skymark Airlines Inc., Japan’s biggest discount carrier, is currently the only Japanese airline that has agreed to buy Airbus wide-body planes, with an order for six A380s. The airline is due to start operation of its first double-decker next year.

Airbus is in discussions with Japan’s two biggest carriers about an order for its A350-1000, three sources familiar with the talks said in May.

Ito also said ANA is considering building a pilot-training facility in Thailand as rising travel in Southeast Asia spurs carriers to expand their fleets.

The base is part of ANA’s plan to expand Pan Am Holdings Inc., a pilot-training company it is buying. He didn’t give a time frame for setting up the facility.

“We’re looking at Thailand,” Ito said. “There’s demand for a huge number of pilots in Asia.”

Asian carriers will need to hire 192,300 pilots to keep pace with aircraft orders over the next 20 years, Boeing predicted last month. ANA has stepped up attempts to capture demand outside Japan, tapping into ¥174 billion it got from a sale of shares to purchase a stake in Myanmar’s Asian Wings Airways Ltd.

“It won’t be our last purchase,” Ito said. “Asia has great potential. We’ve had lots of offers. However, we’re not in a hurry.”

ANA agreed to buy 49 percent of Asian Wings for $25 million after restarting flights to Myanmar last year as the country’s moves toward democracy prompted the U.S. to ease sanctions. The carrier said in July it would pay $139.5 million for Miami-based Pan Am Holdings, the only remaining division of Pan American World Airways, to expand into aviation-related services.

“Both have promising business potential,” Ito said. “Myanmar is going to attract a lot of investment and it gives us a base to tap demand in other ASEAN countries.”

The carrier is also vying for more than half of the new 20 international slots at Tokyo’s Haneda airport that the transport ministry will distribute to local carriers for flights starting next year, Ito said.

JAL relisted on the Tokyo Stock Exchange last year following a trip through bankruptcy and a turnaround after it was supported by ¥350 billion of government-backed financing.

ANA’s operating profit margin was 7 percent in the year ended March, compared with JAL’s 13.8 percent, according to data compiled by Bloomberg.

“We can’t catch up with Japan Airlines finances and profitability by ourselves after the support it had under restructuring,” said Ito. “One of the few ways the government could help correct that imbalance would be to give priority over the new slots to us.”