All Nippon Airways believes it may soon be able to restructure its massive domestic network by dropping a significant number of unprofitable routes, a move barred until now under government regulation.
The airline says it 'understands' further domestic liberalisation, which has already seen an easing of fare controls and clearance for new airline entrants, will bring route deregulation, opening the door to a major rationalisation of domestic services to allow carriers to fly where they want, when they want. Many of the carrier's local services are currently flown 'under political pressure or as life-support lines' to small communities, says Koji Yamashita, ANA's managing director airport operations.
He says that only a third of ANA's 100 domestic routes are profitable, with the remainder either 'marginal or non-profitable'. The ability to shed some of the larger domestic drains on its finances would be a major fillip to the airline as it continues to expand aggressively internationally.
ANA's new corporate plan to 2001 foresees international growth of up to 17 per cent annually, while domestic expansion will rise at only 2-3 per cent a year. In capacity terms, the expansion will see international operations account for 50 per cent of ASKs by 2001, up from 30 per cent now.
Yamashita denies the carrier plans to axe all unprofitable routes but he adds management have already discussed which services could be dropped. A domestic clean-out will be a major contributor to cost reduction as well as freeing up valuable slots at Tokyo's congested Haneda airport, allowing them to be used for more profitable operations.
The new corporate plan projects that ANA's revenue will rise from US$6.9 billion in the year ended 31 March 1997 to just over $9 billion in 2001, with operating profits reaching $275 million.
Critical to the success of the plan is the outcome of long-running US-Japan aviation talks, on which ANA is relying to win more rights to the US for trans-Pacific expansion. Construction of a second runway at Tokyo's gateway Narita airport is also crucial. The airline's senior managing director corporate planning Yoshiyuki Nakamachi says he doesn't want to think about the consequences if neither issue is resolved.
ANA's latest strategic plan was released in late April, two weeks after a similar plan from competitor Japan Airlines. Both are renewing efforts to cut costs, increase productivity and lift service. The two big carriers are also revolutionising their corporate cultures by introducing annual salary reviews for senior management. The aim is to ensure executives gain promotion and pay rises on merit rather than through the traditional yardsticks of age and seniority.
But the two carriers are moving in different directions in terms of staff levels. JAL plans to trim staff by reducing the workforce by 800 jobs to 17,000 by 2000. ANA, on the other hand, plans to hire 1,150 new staff, taking the headcount to 15,810 by 2002.
The two carriers will focus network growth within Asia, targeting China in particular, although ANA also has plans for a number of new destinations in Europe and North America. JAL plans to get its new low-cost subsidiary JAL Express operating 'as soon as possible' on secondary domestic routes and is actively seeking commercial airline partners around the world. JAL has targeted total revenues of $11.6 billion for the year ending March 2002, 16 per cent up on 1996/97.
Source: Airline Business
