• SHARE

The global coronavirus pandemic may not do much to change the long-standing, deep-rooted rivalry between Japan’s two major airlines, but it is forcing ANA Holdings Inc. to take a pause in its expansion strategy amid the specter of further financial strains.

With a record net loss of ¥510 billion ($4.8 billion) projected for the current business year through March, ANA’s struggles are raising the need to further streamline its international operations — an area in which the airline has been scrambling to obtain an edge over rival Japan Airlines Co.

“My biggest worry is ANA will repeat the mistakes made by JAL, which ended up going bankrupt, because it had become too big a company,” said Munenori Nomura, an industrial economics professor at Kwansei Gakuin University.

“First off, restructuring is something that a struggling company needs to undertake to survive a crisis. But if the future is still uncertain, just like now, the government may have to extend support before it becomes too late,” said Nomura, an expert on the airline industry.

For years, ANA has been scrambling for a bigger market share in fierce competition with JAL, which went bankrupt in 2010 but was revived with government support, including a ¥350 billion injection of taxpayer money.

ANA President and CEO Shinya Katanozaka ruled out the possibility of receiving government support similar to that extended to JAL a decade ago.

“We are not expecting it,” he said during a news conference Tuesday after the company announced its earnings outlook.

He also brushed off concerns about the financial standing of ANA and promised a return to profitability in fiscal 2021 with a shift to a new business model.

The use of public money for JAL raised questions about fair competition in the aviation industry, prompting the government to allocate more slots at Tokyo’s Haneda Airport to ANA in the following years.

ANA’s efforts to get ahead of JAL appeared to be paying off before the pandemic. In the business year through March 2019, ANA had 10.09 million passengers on its international flights and 44.33 million on domestic flights, outpacing JAL’s 9.13 million and 34.86 million, respectively.

The two airlines have almost the same number of domestic and international routes.

The year 2020 has been marked by an unexpected turn of events, including a one-year postponement of the Tokyo Olympics and Paralympics that had been projected to boost travel demand this summer and beyond.

The pandemic has also pounded global airlines. Flag carrier Thai Airways International Public Co. sought bankruptcy protection in May while Deutsche Lufthansa AG has agreed with the German government on a €9 billion bailout package.

As part of restructuring, ANA said Tuesday it will reduce its fleet more than initially planned by bringing forward some of its scheduled retirements, targeting Boeing 777s used for long-distance flights. The ANA group, including budget airline Peach Aviation Ltd., is expected to have 276 aircraft at the end of next March, down from 303 a year earlier.

ANA will receive ¥400 billion in subordinated loans from major banks, including the government-affiliated Development Bank of Japan, to strengthen its financial base.

Hajime Tozaki, a professor well-versed in the airline industry at J.F. Oberlin University, said the pandemic has become a “turning point” for ANA.

“There was already excessive competition. ANA had sought to get bigger and bigger, putting low-cost carriers under its wing,” Tozaki said.

“Despite some moving away from its expansion strategy, it will still want to keep its networks of international flights in anticipation of air travel returning to normal after the pandemic.”

Unlike ANA, JAL has taken a cautious stance on LCCs. It was only in mid-October that Zipair Tokyo Inc., a wholly owned subsidiary of JAL, began its first international flights.

With no immediate end in sight to the pandemic, the race for survival among airlines is expected to continue.

“What needs to be averted is a situation in which ANA and JAL are so fixated on each other that they only vie for the same share of the pie,” Nomura said. “It may take a while for international travel to recover … but it also means there is time to adjust to a new business style under the new normal.”

In a time of both misinformation and too much information, quality journalism is more crucial than ever.
By subscribing, you can help us get the story right.

SUBSCRIBE NOW

PHOTO GALLERY (CLICK TO ENLARGE)

Your news needs your support

Since the early stages of the COVID-19 crisis, The Japan Times has been providing free access to crucial news on the impact of the novel coronavirus as well as practical information about how to cope with the pandemic. Please consider subscribing today so we can continue offering you up-to-date, in-depth news about Japan.