Andrew Mollett/TOKYO
In an effort to reduce operating costs in the face of severe financial difficulties, All Nippon Airlines (ANA) is considering shifting part of its international route network on to its defunct subsidiary World Air Network (WAC).
The plan involves resuscitating WAC, which was suspended in August 1995 because of sluggish demand, and to staff it with foreign crew and pilots whose wages are lower than those of their Japanese counterparts. ANA says it will honour a 1992 agreement with its crew union which limits the number of foreign pilots to no more than 13% of the company's total. ANA hopes to restart operations in fiscal 1999, with the airline's headquarters being based in South-East Asia or the USA.
ANA is also considering taking over the management divisions of another subsidiary, Air Nippon, and then transferring certain routes to the subsidiary. "Its huge debts and a deteriorating operating environment means that ANA is in dire straits," says Douglas Hiyashi, airlines analyst at HSBC.
He estimates that the airline will post operating losses of some ´2 billion ($13.9 million) this year, compared to an operating profit of ´6 billion made in 1997.
"Losses are bound to widen over the next couple of years unless there is a sudden - and unexpected - upturn in the economy," Hiyashi comments.
ANA could face further problems should the country's banks re-assess its loan rates to the company. "ANA is a very highly leveraged company and its credit risk ratings are unrealistically favourable. Should they be adjusted to reflect the real situation, ANA could find itself swamped by its loan repayments," says Hiyashi.
The future looks bleak for the airline. Not only is its virtual monopoly on the profitable long-distance domestic routes being eroded by Japan Airlines in particular, but the Ministry of Transport's new policy of "use it or lose it" on the realignment of slots at Tokyo Narita means ANA may be forced to launch new loss-making services or run the risk of losing highly prized slots.
Source: Flight International
