Staff writer

Facing intensifying competition in both the domestic and international arenas, All Nippon Airways, Japan’s second-largest airline, will at the end of October become a member of Star Alliance, a consortium of international carriers.

“Participating in a global alliance is inevitable for an airline like us to survive,” said Kazuhisa Shin, an ANA executive vice president in charge of marketing and alliances. “Otherwise, our company would be left behind other airlines that are expanding flight routes worldwide.”

With the ongoing liberalization of global business, the formation of multilateral partnerships is a growing trend in the airline industry.

Star Alliance, led by United Airlines and Lufthansa German Airlines, includes Air Canada, Air New Zealand, Ansett Australia Airlines, Scandinavian Airlines System, Thai Airways International and Varig Brazilian Airlines. Mexicana Airlines, Singapore Airlines and Austrian Airlines are expected to join next year.

Other industry alliances include oneworld, led by American Airlines and British Airways, and Wings Alliance, headed by Northwest Airlines and KLM Royal Dutch Airlines.

The alliances aim to offer better service and reduce operating costs through collaboration. For instance, members offer joint frequent-flyer programs, through-check-in services and airport lounges.

They jointly purchase equipment ranging from aircraft and ticketing computers to blankets and coffee cups.

They are also promoting code-sharing operations, in which two carriers operate joint flights and sell tickets for them together.

ANA, which began international flights in 1986, will be able to better attract business-travel passengers by providing a better mileage system and convenient flight schedules after joining Star Alliance, Shin said.

It expects to get 5 percent of passengers on its international services from partner airlines and increase international flight sales by 10 billion yen yearly. The carrier earned 170 billion yen from international sales last year.

ANA has formed a 60-
member alliance project team.

“We need to spend some 7 billion yen for the first three years on necessary computer systems. But (joining the alliance) will bring us more in profits than the initial investment,” Shin said.

Since deregulation in the civil aviation industry accelerated in the 1990s, the major domestic airlines — Japan Airlines, ANA and Japan Air System — have been striving to become leaner, cutting personnel and operating costs and terminating unprofitable services.

Although the number of passengers flying with ANA, which occupies a 50 percent share of the domestic market, rose 2 percent on domestic routes and 11 percent on international flights last year, its revenues fell 2 percent and 4 percent, respectively, due to declining air fares.

ANA, which has not paid a dividend since fiscal 1997, sees Star Alliance as pivotal for rebuilding the company.

It decided to join in 1998, when Japan and the U.S. signed a transitional civil aviation agreement. Under the new accord, ANA became an incumbent carrier, which has unlimited rights for flying between the two nations and beyond to third nations. It also enabled Japanese and American airlines to conduct code-sharing operations.

ANA has just 8 percent of the limited number of landing and takeoff slots at New Tokyo International Airport, while rival Japan Airlines holds 26 percent, Northwest Airlines 13 percent and United Airlines 10 percent.

As a result of the 1998 agreement, ANA has increased its flights and code-share operations between Japan and the U.S.

JAL President Isao Kaneko said he is confident that JAL, the world’s fifth-largest international airline, can go it relatively alone with its bilateral partnerships with 11 international carriers.

“Our strategy has been working effectively,” he said. “I’m not denying the effectiveness of multilateral alliances, and we have been asked to join oneworld. But we need time to carefully examine the merits and demerits of joining a multilateral alliance.”

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