Business / Corporate

Dreamliner strategy hit and miss for ANA

by Keiichiro Otsuka

Kyodo

All Nippon Airways Co. is aggressively strengthening international operations with the 787 Dreamliner, but its heavy reliance on Boeing Co.’s high-tech plane appears to be a double-edged sword.

ANA adopted the Boeing 787 in 2011, becoming the first airline in the world to do so. It received its 50th 787 in mid-August, giving it 20 more than rival Japan Airlines Co.

Thanks in part to the new plane, ANA’s international passengers eclipsed JAL’s for the first time in the business year ended last March.

For ANA, the 787 is “a dream airplane” because the airline was allowed to file its own requests when the jet was still in development, said Senior Vice President Hideki Kunugi, ANA’s general manager in New York.

The fuselage was lightened using a composite material made with carbon fiber, which is also incredibly strong. This allows the cabin pressure to be set higher to more closely emulate conditions at ground level, increasing passenger comfort.

In addition, the 787’s fuel efficiency and cruising distance are better than conventional midsize planes — about 20 percent better than the Boeing 767, for example — making nonstop flights possible to Europe or the U.S. East Coast.

“With the expansion of our international routes, it was no longer possible for large aircraft like the Boeing 777 to be economically viable. The 787 enabled us to take customers to new markets that the 767 couldn’t do,” Kunugi said.

ANA, which launched regular international flight services later than JAL in 1986, adopted the 787 to take advantage of JAL’s 2010 bankruptcy, which forced it to accept a taxpayer bailout.

Ironically, ANA’s heavy reliance on 787s began to backfire in late August, about a week after it accepted delivery of its 50th 787, as engine defects caused it to cancel domestic flights. There also was a slew of cases in which the twin-engine 787s were forced to turn back when engine abnormalities were detected. All 50 787s are powered by Rolls-Royce Holdings PLC engines.

A probe conducted by ANA and the British engine maker found damaged parts in the engines’ interiors, prompting ANA to replace all of the engines and order massive flight cancellations.

JAL stands to benefit from the debacle because its 787 fleet uses different engines made by General Electric Co. of the United States.

ANA Holdings Inc., the parent of ANA, logged a record group net profit of ¥78.1 billion for the year ended March 31. While that was roughly double last year’s net profit, it was far short of JAL’s ¥174.4 billion for the same year.

“We are feeling a sense of crisis as we are nowhere near them in terms of profitability,” an ANA official said.

ANA is likely to face another challenge when JAL renews efforts to prop up international operations after government-imposed restrictions on opening new international routes are lifted at the end of next March.

The restrictions were imposed to ensure a level playing field because JAL used public money to get back on its feet.

Despite the engine fiasco and JAL’s imminent counterattack, ANA’s 787-based global strategy remains unchanged.

ANA opened a new route between Narita airport and Phnom Penh on Sept. 1. The Dreamliner is also likely to feature when ANA establishes routes between Tokyo’s Haneda airport and Kuala Lumpur on Oct. 30, and between Narita and Mexico City in February.

In the meantime, ANA is considering launching routes from Japan to Perth in Western Australia and to Southern Europe in the near future, with one source saying “the 787 would be a valid choice for them.”

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